The Tough Go Shopping...Online
A: McDonald: If you put something in place without an effective implementation process, you risk running two systems without getting full benefit. E-procurement is still a long way from commercial grade; most vendors are only now realizing that it's a bigger and more complex implementation project than they've been promoting. One of the most overlooked issues of e-procurement is catalog management. You can spend more time keeping that catalog up to date than processing the purchases, so you need effective and automated catalog management.Everything has to be in the same idiom, with consistency across all vendors. The system must normalize all data in each of the various catalogs, so when an employee does a search, all appropriate choices will be presented.
A: Glassman: The biggest challenge is supplier enablement. Suppliers must be able to effectively and efficiently update a company's catalogs for product, price and availability. More importantly, one size does not fit all—the needs of a company's procurement division or department are going to be different from the needs of end users. It is important to find a solution that does not have to be customized but rather personalized by a company's division, department or end-user. Implementation costs go down while end-user and procurement adoption of the e-procurement solution will go up.
Q: How should an insurer calculate ROI for an e-procurement system?
A: McDonald: A traditional financial ROI or payback model, or both. With a payback model, you must first calculate the cost of developing and implementing the system. Then, project the net gains you expect going forward, taking into account ongoing cost savings offset by the costs of maintaining and running the system. Finally, calculate how long it takes to pay back the system costs. The company can decide if a one-year or a six-month pay back, for instance, is sufficient. The ROI method simply chooses a period and projects the expected costs and benefits both from implementing the system and the transactions and calculating the internal rate of return.
A: Glassman: Measure all processing costs, including the cost to prepare, route and approve the purchase requisition, the cost to issue the purchase order from approved suppliers, the cost to receive, track and deliver the product and the cost to process the payment. Measure the cost of the actual product from approved suppliers, which includes multiple bids (verbal, fax, and formal RFPs), reporting and auditing of the suppliers' contracts. Compare the anticipated costs of implementing a new hosted e-procurement solution including implementation, training, software licensing and, most importantly, continuous supplier enablement.
Q: What are the key features and capabilities one should look for in an e-procurement solution?
A: McDonald: An Internet-based e-procurement solution must be capable of having a wide variety of vendors your company does business with and must be able to normalize all of the data in the various company's catalogs.
A: Glassman: Product data—price and availability—changes constantly. With good data and intelligent purchasing capabilities, a hosted e-procurement solution will instantaneously search single or multiple sources, resulting in best price with or without product availability.
A: Buckley: Support of strategic procurement and facilitation of collaboration with suppliers, as well as support of new and emerging e-procurement models. Tactical features must allow for rapid supplier adoption and support e-marketplace buying. Operational features should minimize buyer intervention and manual processing costs, provide full integrated payment and allow suppliers to query accounts and resolve any disputes in a collaborative manner.
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