ERPs make procurement data extraction harder, not easier

| 0 Comments
TransformationPyramid.pngThe great irony of today’s ERP systems is that, once they are implemented, it becomes harder to extract information so that it can be used within the business to drive decision-making and take action, Alan Low of Purchasing Index (PI) says in this month’s SmartProcurement.

Spend analysis can have a huge influence on the behaviour and processes around how organizations spend money. Identifying who spends how much with which suppliers on what and how can show savings opportunities throughout the organization.

Here are some of PI's findings from the deployment of its Decision Support Service to analyse spend.

The majority of savings opportunities highlighted by spend analysis relate to poor processes and inappropriate behaviour. Procurement may do a good job negotiating with suppliers, but if processes are not streamlined then the internal costs and the suppliers’ service and delivery costs can add to the total cost to company.

A simple example of this would be a decision to go with a to-desk delivery service from a stationery supplier coupled with no minimum order value. The service may be very good, but the process may encourage lots of low value orders resulting in a very high internal administration cost relative to each order value. If the internal cost per order is high for the customer, the same is also certainly true for the supplier. A good spend analysis tool should be able to identify these process anomalies and highlight the costs involved.

Behaviour in spending the organization’s money can vary from the sloppy to the fraudulent. Frequent ordering increases suppliers’ costs; and delays in signing GRNs or approving invoices can stretch suppliers’ cash-flows and ultimately jeopardise their businesses (particularly SMEs!). Identifying these anomalies allows organizations to remedy specific errant behaviour.

PI’s experience is that most people change their behaviour if they know it is being monitored.

Many instances of potential fraud can also be uncovered through building simple checks and algorithms into the spend analysis software (i.e. comparing staff and supplier bank account numbers, etc.). Spend analysis must also be able to identify trends and patterns to mitigate against corruption.

Analysing spend must also allow for a holistic view. For instance: it is important to identify black-owned suppliers if a business is trying to maximise its BBBEE procurement score. But, if the analysis system can’t incorporate external credit rating information, the company may run the risk of doing more business with suppliers who are not sustainable. On the other hand, identifying these risks may not only allow the business to develop a long-term supplier, but also earn it a higher Enterprise Development score.

As organizations learn to use information to make changes to their environment and decision making, the requirements for incorporating extra internal and external information grow. The process tends to be iterative. However, spend analysis users are constantly amazed at what they can do with little or poor information, even if it is just to identify what needs to be fixed.

Please contact alan@pibenchmark.co.za if you would like some practical assistance on spend analysis or would like to discuss PI’s Decision Support Service.

Leave a comment


SmartProcurement Newsletter
X

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
  Position:
* Country:
* Public / Private:

 

 

Career opportunites

Risk Control Manager

  • <500 000 Gauteng Permanent Procurement Consultant Projects / Category Management
R450 000 - R550 000 per annum.Location: Johannesburg ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Procurement Consultant
Salary: R500 000 - R500 000 per annum.Location: ...More

Fuel Logistics Manager

  • <500 000 Logistics & Warehousing Operations, Planning & Inventory Permanent Western Cape
Salary: R600 000 - R720 000 per annumLocation: ...More

Supply Chain Manager

  • <500 000 Gauteng Permanent Projects / Category Management Supply Chain
R650 000 - R700 000 per annum.Location: Johannesburg.A ...More

SENIOR BUYER

  • <500 000 Buyer Gauteng Permanent Supply Chain
R500 000 - R550 000 per annum,Location: Midrand,A ...More

Supply Chain Analyst

  • <500 000 Analyst Gauteng Permanent Supply Chain
Salary: R600 000 - R700 000 CTC per ...More

Supply Chain Manager

  • <500 000 Gauteng Permanent Supplier / Business Development Supply Chain
Salary: R600 000 - R700 000 per annum,Location: ...More

Demand Planner

  • <500 000 Gauteng Logistics & Warehousing Permanent Projects / Category Management
Salary: R450 000 - R550 000 per annum,Location: ...More

Demand Planner

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
Salary: R500 000 - R500 000 per annum,Location: ...More

Warehouse and Distribution Manager

  • <500 000 Logistics & Warehousing Permanent Procurement Management
Salary: R650 000.00 - R850 000.00 CTC pa,Location: ...More

National Supply Chain Manager

  • <500 000 Gauteng Permanent Procurement Management Supply Chain
Salary: R900 000 - R1 000 000 per ...More

Procurement Specialist

  • <500 000 Gauteng Permanent Procurement Management Procurement Officer / Specialist
Salary: R380 000 - R420 000 per annum,Location: ...More

Supply Chain Analyst Lead

  • <500 000 Analyst Gauteng Permanent Supply Chain
Salary: R1 000 000 - R1 100 000 ...More

CIPS Tutor and Coordinator

  • Gauteng Permanent Projects / Category Management Supply Chain
Commerce Edge South Africa,Division: Commerce Edge Academy,Location: Johannesburg, ...More

Warehouse Manager

  • <500 000 Gauteng Industrial Engineer Logistics & Warehousing Permanent
Salary: R480 000 - R600 000 per annum.Location: ...More

Senior Buyer

  • <500 000 Buyer Gauteng Permanent Procurement Consultant
Salary: R600 000 - R650 000 per annum.Location: ...More

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Supply Chain
Salary: R700 000 - R800 000 CTC per ...More

Warehouse Manager

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
R400 000 - R480 000 CTC per annum.Location: ...More

Supply Chain Analyst

  • <500 000 Analyst Permanent Supply Chain Western Cape
R400 000 - R500 000 per annum.Location: Cape ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Consultant
R650 000 - R750 000 per annumLocation: Cape ...More