“Good marketing is the craft of understanding what people want and need and helping them achieve it.” – Seth Godin
What do people want from procurement technology?
They want it all.
Outcomes
If we start with outcomes, they want to make sure that they are buying the right solution for the problem at hand.
If you’re going to go through the pain and trouble of a reverse auction like an RFP or RFQ and if you’re going to have live with whatever you buy for a few years (or more), you ought to buy the right good or service for the job.
If there turns out to be a superior product that you could have purchased instead, then you’ll be living with opportunity cost. Opportunity cost could mean unnecessarily higher cost of goods sold or it could mean longer cycles.
Success here means seeing as many suppliers as possible, generating options for the decision, and learning about the problem from vendors who specialize in addressing it. It means having the right market intelligence to know what’s important and what’s not. It involves knowing what kinds of questions to ask.
Cost
In addition to buying the right good or service for the task, companies want to know that they paid the right price.
It doesn’t have to be the lowest price.
They might be willing to pay up for a solution that delivers tremendous value.
What they want is to make sure that they are obtaining the mythical “value for money” we all talk about.
Risk
Every business is a portfolio of risks. Good procurement teams are sensitive to the incremental risks from individual purchases and their impact on this portfolio. Ideally, an individual solution can lower portfolio risk. This is core to strategy.
Chief among these risks is the risk of delayed or suspended delivery from the vendor.
For many solutions, there is more than one vendor in the value chain. How much does the CFO know about her vulnerability to the companies in this chain?
In an ideal world, the procurement team would understand the risk of every subcontractor in this chain. This is known as supply chain visibility.
In practice, visibility is elusive beyond the first couple of tiers. That’s okay if you’re purchasing something with a shallow or flat value chain. Imagine what’s it like if you have a long and risky one.
For example, how many buyers knew their true exposure to Silicon Valley Bank’s failure? In most cases, they would have had no idea if any of their subcontractors in their various value chains were in danger of falling into financial distress because of Silicon Valley Bank’s liquidity woes.
How many CFOs understand some of the indirect consequences of regional bank difficulties for the companies in their value chains? If there is a regulatory clampdown in the face of a slowing economy with already weak commercial real estate, what does that mean for credit and liquidity in the small and medium-sized companies involved in these chains? How would the CFOs of their customers know?
Implementation
Ideally, we could flip a switch and the solution would be usable. There would be no integration. There would be no need for ongoing IT support. It would be like turning on the tap in the kitchen. Get water when you need water.
Research has shown that a small percentage of digital transformation projects make it all the way to the finish line.
Anyone who invests in procurement technology wants to see it work.
Transactions
Obviously, CFOs want to keep transactions costs low. The people from different parts of the firm who get forced into buying committees (where an increasing amount of the heavy lifting actually takes place) want shorter cycles. The bureaucracy can be mind-numbing.
Bonus
A great advantage of the best contemporary technologies is that they connect people. Too often, procurement is a siloed event.
For procurement to be a truly strategic endeavor and, more importantly, for it to be seen as one, it needs to reach outside. It needs to include people from the rest of the organization, connecting them with conversations and data. And it needs to work with others outside the company, including potentially other buyers and, certainly, its own suppliers. Collaboration is the key watch-word for a post-Covid world racked by trade wars, supply chain disruptions, and inflation.
This is what we have built at EdgeworthBox. Key tools for collaboration and conversation around structured data, ready access to market intelligence in the form of public sector documents and your organization’s accessible history of supplier interactions, and easy supplier risk management that includes value chain visibility. Give us a shout. We’d love to speak.
