Tuesday 28 July 2015

Business Intelligence Alleviates Procurement Professional Performance

Authored by Usama Shahid

Business intelligence applications can help to alleviate procurement professionals’ workload burden. These professionals have a most difficult job. They must be subject-matter experts and fully versed in the procurement rules of both their own company and the marketplace. They must also be skilled negotiators. Unfortunately, they often get bogged down in handling routine yet time-consuming transactions, which distracts them from the more complex responsibilities of strategic sourcing. What if there was a system that would reduce the buyers’ workload and allow them to focus their efforts on larger or more difficult buys? It turns out that there is: The BI solution’s dashboard and the associated data, which are collected and reported through the BI solution, make automated purchasing possible.

How does it work? First the company must code the products and services whose purchases will be automated. Within the assigned categories, the suppliers are automatically evaluated through the BI metrics and scorecards. Based on these continuous evaluations, the strategic sourcing department could decide that, say, the top three suppliers in that specific category would be eligible to participate in automatic purchases. An e-mail or automated RFQ would go to the top three suppliers, requesting a product with a certain price range or perhaps by a specified required delivery date. The business could be split among all three, or it could be awarded to the supplier that can best meet the price, RDD, and other requirements. As long as the top-rated supplier or suppliers could meet the mandated price, delivery, or other qualifying criteria in the RFQ, they would be electronically awarded the purchase order.

With the auto-purchase feature of the BI solution, the buyer does not need to become involved because the RFQ is automatically sent electronically to strategic suppliers. The company receives the best value for the items it needs within the established time frame. The strategic suppliers that consistently meet the requirements and have the best overall scores,although this can rapidly change, depending on their performance-garner more business, with little human intervention required. In short, it is another win-win for everyone involved.

Automated purchasing is a boon for sourcing professionals. For one thing, it can handle up to 80 percent of buys in some companies. For another, it allows buyers to provide concrete, contemporary feedback to their suppliers. The successful strategic suppliers receive the same or increased business. More importantly, it frees the buyer to concentrate on critical suppliers or buys, such as large-dollar or time-sensitive purchases, where negotiating is paramount and sufficient time is needed to complete the buy. In addition, it helps the buyers to move from simply managing transactions to learning more about the market and spending additional time on research and value-added activities for longer-term horizons.