Procurement’s Spend Visibility Challenge

During a recent webinar on procure-to-pay (P2P) trends, participants were polled about what they saw as their greatest P2P challenge. The biggest, cited by a third of procurement specialists attending, was the lack of accurate spend visibility.

Such handy access to correctly entered transactional data can pay dividends for companies for evaluating orders and reducing risk from improperly approved purchases.

In a subsequent post from Zycus on the Spend Matters website, the procurement-software specialist suggested the feedback underscores the need for sellers to focus P2P initiatives “on more than the clichéd goal of providing end-users with an ‘Amazon’ shopping experience.” Instead, what procurement organizations want is for P2P to provide real, immediate insights into spending.

Procurement frustration

Moreover, procurement specialists are frustrated with consumer-like P2P shopping user interfaces that engage end users, “but which don’t make them any more proficient at correctly coding and classifying their transactions as they “point and click” to fill their shopping carts, thereby thwarting procurement’s goal of leveraging accurate spend visibility from the P2P process,” Zycus said.

Today, most procurement operations use forensic analytics that provides after-the-fact analysis to correct misclassified or miscoded orders. Zycus noted that a co-presenter at the event, Scott Fitzgerald, procurement director for The Mentor Network, identified a challenge for his organization is when “harried requisitioners, eager to complete the transaction and get back to their real jobs, often simply ‘use whatever [general ledger] or Commodity Code they used for their last transaction, regardless of what is being requisitioned.’”

The result, Zycus said, was up to 20 percent of requisitions being incorrectly coded or classified in P2P. Moreover, many purchasing card transactions were placed outside P2P altogether, meaning there was no visibility the products and services the cards were used to purchase, the company said.

Software fix

To rectify the problem, The Mentor Group deployed a Zycus P2P service that leverages artificial intelligence for a Guided Procurement System “to help ensure that users not only make compliant purchases from approved, contracted vendors, but also that the transactions themselves are ‘compliant’ by placing in the correct category for spend-analysis purposes,” Zycus noted in the post.

“The AI-based Guided Buying approach automatically classifies the user’s search term and suggests the most appropriate category for the search, yielding only relevant results,” Zycus said. “Where traditional keyword searching would produce results for computer products and lab animals, or any other item containing the term “mouse” in the product description, with Guided Buying the user gets only relevant ‘hits,’ or as Fitzgerald puts it, ‘three results instead of 300–just the products we want them to see.’”

In addition, Guided Buying ensures users can efficiently complete off-catalog requisitions, both for services or non-standard products, as easily as a catalog-based requisition, Zygus said. The model also helps the user navigate the off-catalog requisition process, “by first auto-classifying the request to the correct category and presenting the user with approved, contracted suppliers and a category-specific Guided form,” the company noted.

Guided Buying then prompts the user to specify their requirements and ensures the requisition is properly coded and classified and will follow a compliant process, the company said in the post.

Procurement investment trends

Market wide, investment in procurement-process automation and information technology persists with such services as contract management and spend analysis nearing ubiquity, Zycus noted in its recently released “Pulse of Procurement 2014” report. “Nonetheless, procurement pros say their overall technology profiles are far from ideal, with most looking for greater integration among solutions in order to yield higher quality, more synthesized and predictive business intelligence,” the report suggests.

Moreover, the report notes, while procurement continues to wrestle with longstanding challenges of performance measurement and driving corporate cultural change toward more disciplined, competitive and fact-driven spending behaviors, there also appears to be substantial focus emerging on obtaining greater adoption and use of procurement technology.

“Two decades ago, few chief procurement officers (CPOs) could do more than offer vague estimates of total corporate spending,” Zycus noted in the report. “They had virtually zero insight into spending at category or supplier levels and no useful means for evaluating procurement performance in context of external or competitive market information. But while huge strides have been made in all these areas, rather than satisfying CPOs and their teams, the improvements seem to have awakened a hunger for more, bigger, faster, better business intelligence.”