Spend management and digital procurement go hand-in-hand, but with the advent of more sophisticated eProcurement solutions, sourcing and corporate purchasing are no longer only about saving money.
SciQuest‘s newest solution is a reflection of the diversification of eProcurement’s role in the enterprise, explained Senior Director of Product Marketing Chris Farrell.
The new tool released last week, SciQuest Edge, allows businesses to access supplies and services as pre-negotiated discount prices. On the surface, it certainly seems the solution’s main focus is cost savings. But look deeper, Farrell recently explained to PYMNTS, and you’ll see that it’s a reflection of the diverse range of responsibilities and demands that the eProcurement of the modern day has.
“Spend does have a major influence,” the executive said of the motives behind Edge’s development. But there are other factors, too.
Take speed, for example. Procurement today not only has to save money, but it must also do so quickly. Contract negotiations with suppliers can waste precious time in an organization, Farrell said.
“Beyond what you do with savings, with pre-negotiated rates and discounts, you actually eliminate something that, depending on the supplier and the organization themselves, can really take a lot of man hours and a lot of time,” he noted.
For suppliers, agreeing to discounts ahead of time means they’ll often see payment faster, Farrell added.
“With speed, the faster any procurement organization can have a hosted catalogue running for any supplier, the quicker they’re going to be buying on that contract and getting that relationship to the next level,” he said. “The quicker they’re going to be spending on that supplier’s products.”
Supplier management, too, is another factor gaining increasing prominence within the procurement department. On one hand, supplier management can be about ensuring supplier partners’ satisfaction, which can ease friction in contract negotiations. On the other hand, supplier management is about mitigating the risk of working with unfamiliar suppliers or overseas partners.
Farrell said corporations are vocal about their concerns regarding supplier risk.
“Risk mitigation and managing any relationship with an eye on risk is something that customers of all sizes are looking at,” said Farrell. “The reasons they look at it vary based on their industry size and their purchasing needs, but everyone has an eye on risk mitigation now.”
FICO, perhaps best known for its consumer credit score service, recently launched an Enterprise Security Score. In a recent discussion with PYMNTS, FICO Vice President of Cybersecurity Solutions Doug Clare said the new score is also a reflection of the rising need for corporate buyers to mitigate supplier risk, especially within financial institutions.
“Usually, within the banks, it’s the procurement function that’s accountable for managing vendor risk,” he stated. “They’re the front line in terms of knowing who the vendors are, contractual relationships, driving accountability with those vendors.”
Research has also given reason to pay attention to vendor risk mitigation. Hundreds of millions of dollars are lost every year due to invoice fraud, for example, in which a fake supplier sends a seemingly legitimate invoice to a buyer, according to Tungsten Network.
Using an eProcurement solution that connects buyers to specific suppliers can mean that service pre-vets vendors for the firm, he added. “Certainly having a set of prebuilt, certified and trusted suppliers, it goes a long way towards mitigating that risk.”
Cost savings, speed and vendor risk mitigation are all encouraging eProcurement officials to step up to the plate of more burdensome responsibilities. But the trends are also encouraging a surge in technology adoption, said Farrell, which can be good for the enterprise on the whole.
“We see a huge push and judge acceptance of using technology across all different procurement and sourcing processes to make spend more efficient,” he noted. “I think what we see is a lot of organizations using procurement software to automate not just procurement processes but using it to automate other processes.”
Farrell pointed to one example in which he sees businesses using eProcurement tools to automate data entry into forms or to manage savings initiatives and track savings progress against forecasts — both areas that fall outside the scope of traditional eProcurement processes. Procurement and purchasing, Farrell added, aren’t the only areas of the enterprise that suffer from manual and paper-based processes.
It’s up to the organization to develop a plan to implement automated solutions and to manage that company-wide change, he stated. But a procurement software solution might just be a business’ first foray into the world of automated and efficient business processes.