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.