July 19 by Steve Feyer
Modern sourcing professionals are more than just order takers. They are there to lead significant business initiatives such as “digital first” or “digital transformation” that advance their companies. In fact, according to research from the Hackett Group, procurement leaders expect digital transformation to help them achieve critical objectives in 2018. These include cost-cutting, improving agility, and improving their ability to serve as a trusted advisor to the enterprise.
The same research found that purchasing leaders acknowledge the importance of strategic enterprise objectives, including expanding procurement’s influence, elevating the role of sourcing, and improving agility. However, procurement’s ability to address them is low.
Achieving such transformations requires a new state of mind, shifting from a legal or process-enforcement mindset toward a technology mindset. Companies that embrace technology are achieving great advantage—it’s no accident that the world’s most valuable companies are household technology names like Google, Microsoft and Amazon. No wonder a Procurement Leaders’ article underscores the importance of technology in the midst of transformation: “Procurement has a real opportunity to place itself as the hub of data-flows from both the supply chain and from the wider business. This demands that the function bravely tackles its own patchy technological landscape.”
One of the transformations that sourcing executives should consider is implementing Contract Lifecycle Management (CLM) technology for purchasing contracts. Here are five reasons this type of technology is a good investment:
1) Modern CLM technology is continually updated to incorporate the latest technologies driving business success. Organizations using this type of solution are highly attractive to the growing number of supplier, partner and internal workers who are digital natives. These professionals choose to work at and with the companies that offer processes with embedded AI, mobility, automation and other elements of a modern CLM solution.
2) Strategic sourcing goes hand in hand with organizations achieving their key business initiatives. In fact, the Hackett Group’s research identified four key capability areas where procurement must improve in 2018, including measuring and managing procurement performance and business value. In other words, sourcing is charged with optimizing relationships with vendors to achieve the best possible outcomes for the business. This is nearly impossible with outdated technology characterized by siloed information and manual processes. With no analytics capabilities, no audit trail, governance, or compliance enforcement, procurement lacks visibility into contract performance across its value chain. A modern CLM solution, on the other hand, makes it possible to analyze supplier performance and pinpoint best practice across contracts to define the most effective SLAs and KPIs with vendors.
3) Modern CLM eliminates the compliance challenges that plague manual, paper-based departments. Every purchase order and contract is a one-off proposition, purchasing cycles lag, and errors add up – especially when dealing with hundreds or even thousands of suppliers. With a modern CLM system, compliance with procurement processes can be enforced “touchlessly.” Often an Achille’s Heel of procurement, the contract operations can be defined in accordance with policy, with no need for painful, manual (and often ineffective) oversight. An integrated, automated contract process enabled by modern CLM, features sanctioned templates and intelligent guidance that empowers procurement to confidently execute contracts.
4) Simplify policies. Outdated purchasing methods and solutions simply can’t accommodate the complexities of today’s supply chains. When dealing with hundreds or even thousands of suppliers and the related contracts, terms, and SLAs, it’s impossible for the purchasing team to follow and enforce every applicable policy. Moving to a modern CLM solution enables procurement to consolidate dozens or even hundreds of procurement policies into a more manageable and logical number, making them easier to follow without losing any critical control.
5) Remove “swivel chair” processes that lead to delays, errors and high costs. When procurement groups rely on multiple systems and programs to manage the purchasing process, they often find themselves resorting to “swivel chair” data entry. Forced to switch between multiple platforms and software to get the job done, they often inadvertently make mistakes. A modern CLM system eliminates the need for toggling by both centralizing and automating many steps of the procurement process. Often, thoughtful procurement officers will object that this means eliminating jobs, but that’s not necessarily the case. Instead, this makes it possible to move staff away from rote tasks to higher-value jobs, which can actually boost staff satisfaction and retention.
As organizations depend increasingly on their sourcing professionals to pave the way for better business processes and outcomes, it’s essential for procurement leaders to equip themselves with the right technology. Modern CLM is one must-have for every purchasing group committed to being the business enabler and strategic advisor that their organizations need.