When my grandmother needed heating oil, ice, produce or milk, she placed the appropriate card in the front parlor window and when the delivery service came by, they rang the door bell, took the order, made the delivery, got paid and left.
On the other hand when a client at a large media and entertainment company needed a tablet of paper, she called her administrator who wrote a purchase requisition, brought it to her for approval and sent it to the division controller who batched it and sent it to purchasing where the MRO (Maintenance, Repair, and Operations) buyer batched it, summarized quantities of common items then called the supplier to place the order. The buyer then made copies of the purchase requisitions and sent them to mail room. The supplier boxed up the goods and delivered them to the mail room where they were matched up against the copies of purchase requisitions, bagged and loaded into mail bins for the journey through the walls to the mail room on the administrator's floor. The supplier meanwhile sent an invoice which the mailperson checked against the purchase requisition, initialed the purchase requisition and sent it to Accounts Payable. At Accounts Payable, the Purchase Requisitions were matched with the Purchase Order and the supplier was paid forty-five days later.
Seven days and $150 dollars of handling later, the Tablet of Paper arrived. This is not a pretty picture. But it is not the entire story either. While this person waited for her tablet, hundreds of other employees were drawing from 'office stocks' that had been hoarded over the months and hundreds more were stopping by The Office Superstore on the way back from lunch and submitting Expense Reimbursement Vouchers to Accounts Payable for the same types of materials.
My grandmother had three suppliers and four items to buy and she barely had to leave her rocking chair. How can a company connect 20,000 employees with 10,000 suppliers and 200,000 items?
The first order of business recommended by the Selection Consultant was to simplify:
1. Reduce the number of items by standardizing on 10 pens and 5 tablet colors
2. Reduce the number of suppliers through consolidation
3. Provide the employees with a catalog that is easy to navigate
4. Provide an Order Form that is Faxed directly to the Supplier
5. Have the suppliers package items for delivery directly into the mail system
6. Eliminate the Purchase Requisition / Purchase Order Match
This alone reduced MRO Spend both through unit cost reduction, purchase order count reduction and reduced (measured) time spent by all parties. Thankfully, Requisition Volume did not increase (at least in the short run). At $85 per Requisition, there was still a lot of room for improvement. Automation came next.
The chosen approach was to build the catalog and order forms on the corporate intranet and duplicate the rest of the process. That yielded $65 unit cost reduction. New goals were set to hit:
1. Two day cycle time (Requisition to Receipt of Goods)
2. $25 per Requisition
3. Greater than 50% reduction in 'office stocks'
4. An additional 5% Cost of Materials reduction
These goals defined the Business Level Requirements of an e-Procurement Solution.
Next Operational Requirements had to be set:
1. An average of 30 seconds to locate an item on the catalog
2. An average of 1 minute to locate and Request an item that had previously been Requested
3. On line feedback to Procurement and Suppliers regarding item quality and delivery service
4. Real-time authorization
5. �
There were more than 30 suppliers to consider but key choices reduced the count quickly to 8.
Note, some of the original suppliers did not have the ability to meet key requirements such as:
1. Integration with Financial Accounting Systems
2. Ability to Buy to Stock and Charge at Issue to employee
Also note that this was a while ago, but more on this in a bit.
Technical review of the eight candidates and assessment of internal support needs revealed tremendous differences:
1. The complexity of making multiple suppliers fulfilling a single Requisition seem transparent to the employee ranged from simple to prohibitive.
2. Ability to track workflow including activities at the suppliers facilities and during transport of goods varied widely.
3. The catalog, the catalog and more about the catalog.
On the other hand when a client at a large media and entertainment company needed a tablet of paper, she called her administrator who wrote a purchase requisition, brought it to her for approval and sent it to the division controller who batched it and sent it to purchasing where the MRO (Maintenance, Repair, and Operations) buyer batched it, summarized quantities of common items then called the supplier to place the order. The buyer then made copies of the purchase requisitions and sent them to mail room. The supplier boxed up the goods and delivered them to the mail room where they were matched up against the copies of purchase requisitions, bagged and loaded into mail bins for the journey through the walls to the mail room on the administrator's floor. The supplier meanwhile sent an invoice which the mailperson checked against the purchase requisition, initialed the purchase requisition and sent it to Accounts Payable. At Accounts Payable, the Purchase Requisitions were matched with the Purchase Order and the supplier was paid forty-five days later.
Seven days and $150 dollars of handling later, the Tablet of Paper arrived. This is not a pretty picture. But it is not the entire story either. While this person waited for her tablet, hundreds of other employees were drawing from 'office stocks' that had been hoarded over the months and hundreds more were stopping by The Office Superstore on the way back from lunch and submitting Expense Reimbursement Vouchers to Accounts Payable for the same types of materials.
My grandmother had three suppliers and four items to buy and she barely had to leave her rocking chair. How can a company connect 20,000 employees with 10,000 suppliers and 200,000 items?
The first order of business recommended by the Selection Consultant was to simplify:
1. Reduce the number of items by standardizing on 10 pens and 5 tablet colors
2. Reduce the number of suppliers through consolidation
3. Provide the employees with a catalog that is easy to navigate
4. Provide an Order Form that is Faxed directly to the Supplier
5. Have the suppliers package items for delivery directly into the mail system
6. Eliminate the Purchase Requisition / Purchase Order Match
This alone reduced MRO Spend both through unit cost reduction, purchase order count reduction and reduced (measured) time spent by all parties. Thankfully, Requisition Volume did not increase (at least in the short run). At $85 per Requisition, there was still a lot of room for improvement. Automation came next.
The chosen approach was to build the catalog and order forms on the corporate intranet and duplicate the rest of the process. That yielded $65 unit cost reduction. New goals were set to hit:
1. Two day cycle time (Requisition to Receipt of Goods)
2. $25 per Requisition
3. Greater than 50% reduction in 'office stocks'
4. An additional 5% Cost of Materials reduction
These goals defined the Business Level Requirements of an e-Procurement Solution.
Next Operational Requirements had to be set:
1. An average of 30 seconds to locate an item on the catalog
2. An average of 1 minute to locate and Request an item that had previously been Requested
3. On line feedback to Procurement and Suppliers regarding item quality and delivery service
4. Real-time authorization
5. �
There were more than 30 suppliers to consider but key choices reduced the count quickly to 8.
Note, some of the original suppliers did not have the ability to meet key requirements such as:
1. Integration with Financial Accounting Systems
2. Ability to Buy to Stock and Charge at Issue to employee
Also note that this was a while ago, but more on this in a bit.
Technical review of the eight candidates and assessment of internal support needs revealed tremendous differences:
1. The complexity of making multiple suppliers fulfilling a single Requisition seem transparent to the employee ranged from simple to prohibitive.
2. Ability to track workflow including activities at the suppliers facilities and during transport of goods varied widely.
3. The catalog, the catalog and more about the catalog.
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