Strategic Guide to e-Procurement
Implementation
Building buy–in with the wider organisation can promote a successful e–procurement implementation. This can be challenging in a diverse business environment. Strong project management skills are required to support the different aspects of implementation including change management.
Building a comprehensive Implementation Plan that seeks to integrate the various e–procurement tools and processes within a wider procurement reform strategy will assist agencies to successfully manage the implementation and change process. This plan should be realistic allowing time for planning, technical and business integration, change management, supplier take–up and calculation and establishment of project ROI.
Risk Management
The risks associated with implementing e–procurement are typical of projects that incorporate technology, business process and information. Risks may include:
- not having a sound business case for implementation
- not getting buy–in from all key stakeholders
- supplier is unable to support the technical requirements
- supplier is unable to provide customer–specific product catalogues
- users within the agency do not incorporate the new procedures into their work routine
- implementation runs over budget
Because every agency’s implementation will be unique, a comprehensive review of
all possible areas should be undertaken to identify a complete list of possible risks.
Areas may include:
- Environment
- Financial and Economic
- Management Activities and Control
- People and Communications
- Political and Legal
- Process Failure
- Quality
- Relationships
- Safety
- Security
- Technology
- Timing
An easy way to start is by maintaining a Risk Register. The register can be shared with key stakeholders, reviewed periodically and updated as required.
Basic information in a Risk Register can include:
- description of the potential risk
- likelihood of the risk occurring (e.g., high, medium, low)
- impact the risk would have on the project (e.g., high, medium, low)
- description of the impact
- avoidance, mitigation or contingency strategy
- identification of person responsible to manage the risk should it occur.
Other techniques for managing risks include developing a communications plan to share relevant information about the risks with key stakeholders at all levels across the relevant organisations (including suppliers). A communications plan can be used for the initial implementation period and ongoing activities. Quality guidelines can be developed and provided to the supplier to ensure expectations are set. Guarantees and Insurance can also be put into place if required.
Stakeholder identification
Stakeholders for e–procurement can include any person or functional area that “touches” the systems, tools or information being held. This may include people at all levels of the organisation and external contacts such as suppliers and outsourcing partners. An agency can have multiple procurement processes. It may be necessary to look across the entire agency for the appropriate stakeholders and to understand the different business rules as they apply to e–procurement.
The following list provides a general view of functional procurement areas and their potential e–procurement-related activities:
| Area | Activity |
|---|---|
| Accounts Payable | Maintain catalogues; Process POs; Process invoices |
| Audit | Ensure laws, rules, procedures & guidelines are being followed |
| Buyers | Initiate requisitions; Access catalogues; Approve POs; Receipt purchases; Process invoices; Approve payments |
| Executive | Sponsor Champions program; Develops policy; Secures funds and resources; Supports policy and procedural changes across functional areas |
| Finance | Manage, analyse and access data; Develop & implement policy and procurement processes |
| HR | Manage personnel data; Develop & implement policy |
| IT | Implement, integrate & manage online systems and tools; Develop business & IT strategy; Develop & implement policy |
| Legal | Write & negotiate contracts |
| Procurement | Manage, analyse and access data; Source suppliers; Manage categories & contracts; Manage suppliers; Develop & implement policy; Receipt purchases; Approve payments |
| Security | Develop & maintain security controls and requirements; Develop & implement policy |
| Suppliers | Respond to tenders; Participate in contract management; Maintain catalogues; Process POs; Submit invoices; Receive payment |
With so many people and areas affected by e–procurement it is necessary to identify at what level each stakeholder can or should be involved. It may also be helpful to limit involvement to one representative from each functional area.
Managing stakeholders
When managing suppliers, it is important to demonstrate the benefits of e–procurement as their engagement is critical to success. Communicate what e–procurement can and cannot do followed–up with regular progress reporting and quantifiable metrics. These messages, form part of a strong Communications Plan and will help to keep key stakeholders informed and manage their expectations.
Getting stakeholders to participate can be difficult, especially if they do not understand the value of the implementation to themselves and their functional area. A successful model includes a cross–functional team with members from each functional area (see list detailed in Stakeholder Identification). The team can support testing, development and training activities along with acting as product champions.
Here are some examples of how well–managed stakeholders at different levels in the organisation can positively impact an e–procurement implementation:
- key stakeholders can spear head the change management activities by reviewing and updating local policy and procedures that will be impacted by the implementation
- the Executive Sponsor can ensure new policies and procedures are put into place to drive uptake of e-procurement
- managers who are committed to e–procurement can encourage its use on a
daily basis - end users prefer a fast and easy procurement process. Their roles and responsibilities often change as a result of e–procurement. Changes should be identified and communicated in a way that allows them to absorb the information and incorporate it into their work processes.
Suppliers appreciate e–procurement when it reduces data entry, improves data quality and streamlines their work. By communicating agency objectives and strategy and understanding suppliers’ concerns it is possible to ensure suppliers’ continued support.
A well managed Change Management Program is critical to a successful e–procurement implementation. Experience shows that when there are strong policies and a mandate to use the system, there are higher levels of compliance and a better ROI than when use is optional. Some employees may have a natural resistance to change and will not use a new system unless it is enforced.
Best practice e–procurement implementations include identifying barriers to e–procurement and incorporating them into the Communications Plan and a Training Program. The barriers may be specific to the procurement process, the organisation itself or existing communication channels.
Successful implementations have training tailored to suit the end user’s experience levels. Some users will need significant training and assistance, and this should be incorporated into the overall Training Program. This could include issues with computer literacy, procurement literacy and learning styles.
Suppliers play a critical role in a successful implementation so their needs should be included in the Communications Plan and the Training Program. Both the Communications Plan and the Training Program should extend beyond the initial implementation and continue throughout the life of the e–procurement system.
Reporting and Measurement
The data collected in e–procurement systems can assist with mandatory reporting obligations, audit and accountability requirements, as well as internal reporting to assist with on–going development of its procurement strategy.
A successful e–procurement implementation is demonstrated by quantifiable metrics. Reporting on these metrics validates the ROI and ensures that key stakeholders are aware of the progress and the benefits the system brings to the agency. After the implementation is complete, the metrics and reporting should continue to further demonstrate e-procurement’s value to the organisation.
The first step in reporting and measurement is to benchmark existing procurement processes. This information can then be analysed and compared to the metrics collected after the e–procurement tools and systems have been implemented to support the business case and demonstrate the ROI.
These metrics should be reported on a regular basis through management reports and status updates to key stakeholders. Reporting methods can vary from a formal report to an update posted on an agency intranet site. The data can also be used to focus the project and to drive uptake.
Different agencies may use different metrics depending on their objectives and strategies. The metrics would be similar to those used for general procurement activities. Popular metrics for each e–procurement area are listed below.
Planning
- time (person hours) in writing an RFX
- number of RFXs distributed and the methods of distribution
- number of RFXs responses received and the methods of reception
- number of RFXs per category
- categories of each RFX issued by method
- dollar value of each RFX issued by method
- time (person hours) involved to review an RFX
- number of sourcing events per time period
- reduction in overall sourcing time
- increase in contract compliance.
Procurement
- number of users with access to the system
- number of users who actually used the system in the last reporting period
- number of suppliers available on the system (with and without catalogues)
- number of line items in electronic catalogue
- number of methods to initiate a PO
- average time (person hours) to raise a PO
- average time (person hours) from requisition to order
- number of POs per month created by method
- volume of POs per month created by method
- average monthly spend by method.
Payment
- number of invoices per month by method
- volume of invoices per month by method
- spend on P–cards by category
- percentage of total spend by payment method
- percentage of transactions by payment method
- days from receipt to pay
- invoice to PO matching rate.
Additional metrics such as those outlined below can be useful:
- compliance with preferred suppliers
- spend profile processed through e–procurement
- reduction in Purchasing and Accounts Payable staff
- improving efficiency of the Procure–to–Pay process.
Ongoing improvements
After a successful initial implementation, an e–procurement initiative needs to be monitored regularly. This includes periodic and planned reviews with a single point of accountability to manage the initiative on an ongoing basis. The reviews serve to promote the system’s success – by sharing metrics with key stakeholders – and to identify opportunities for ongoing improvements. The single point of accountability becomes a contact point for stakeholders and the impetus for those improvements.
As stakeholders (functional representatives) move to new roles, a replacement in that functional area should be identified. This includes the senior level sponsor.
Quarterly reviews with key stakeholders, including suppliers, are a good starting point. The actual frequency may vary depending on stakeholder availability and topic. All stakeholders should attend these quarterly reviews, or there could be an agenda item at an existing meeting, such as supplier management reviews.
Stakeholders’ needs may change over time to reflect strategy, policy and procedural changes. Therefore reviewing and updating stakeholder needs could occur whenever strategy, policy and procedures change. Metrics and reporting should also be updated to reflect these changes.
Both the Communications Plan and the Training Program should extend beyond the initial implementation period and continue throughout the life of the e–procurement system. A Change Management program for ongoing improvements would incorporate these activities:
- communications to introduce and promote new features, suppliers and categories while showcasing the benefits such as improved metrics and ROI
- training to support system upgrades and the introduction of new features, thus supporting the organisation’s changing requirements. Examples include: Induction, Refresher and a Roaming Help Desk.
Contact for information on this page: ICT Procurement