In the rapidly evolving world of procurement, technology is playing an increasingly central role in...
Until recently, I had never heard of procurement. Like many people, I didn’t know that it existed until I had to use it. Here's my story.
In a prior role with a different company, I had to renew some video editing software. I wasn’t really sure what to do, so I spent a ton of time figuring out the process and mediating between the supplier and internal stakeholders to ensure our license didn’t expire. I learned a lot, but it was a real hassle and it took time away from the work I was hired to do as a marketer. I didn’t know any better. Neither did my stakeholders.
It wasn’t until I joined ORO Labs that I realized that I had actually done procurement, that there are people who specialize in it, and that there are technologies available to streamline a process that was, for me at least, highly manual. The more I read about procurement, the more I understood the immense value that it brings to organizations, and the crucial role it plays in enabling growth.
No wonder procurement professionals get frustrated by a lack of compliance from business users. If people don’t know that procurement exists, then they are likely to bypass it entirely. Worse yet, if they know that procurement exists but have an inaccurate understanding, they will not only fail to reap its benefits but may engage in behaviors that create more work for procurement professionals, spend unnecessarily, or unintentionally expose their organization to risk. To paraphrase a well-known dictum from sociologist W.I. Thomas, whatever is perceived as real will be real in its consequences.
If we correct perception then we change behavior. In this post, I’d like to identify and address several common misunderstandings about procurement in support of the cultural change that is necessary to realize the full potential of what procurement has to offer.
Misperception 1: Procurement has a lot of unnecessary red tape
The procurement process can feel burdensome to employees if they don’t understand the need for all of those steps and approvals. And who gets blamed? Procurement, because they are the ‘face’ of the process.
Procurement itself is not directly responsible for purchasing decisions. Instead, its role is to facilitate purchasing in line with a company’s business objectives. This means managing spend by limiting redundancy, serving as expert negotiators, and protecting the company from risk that can be introduced at any point in the supply chain. Important questions that a procurement professional will ask that are likely to be overlooked by other employees include:
- Is the vendor you want to buy from on the brink of bankruptcy?
- Do they engage in unethical business practices?
- Are there alternative products available from minority-owned businesses that would help the organization to achieve its ESG targets?
To sort this all out requires research and collaboration across finance, legal, supply chain, IT, third-party risk management, and more. Coordinating all of these elements has traditionally involved a lot of manual and repetitive work.
All this may feel like red tape to employees who just want to acquire something in the shortest amount of time. That’s because they don’t understand that purchasing in their organization is different from clicking the ‘buy now’ button on amazon.com.
On the bright side, new technologies have emerged that can help automate a lot of the coordination and manual steps involved in a purchase process. Research, assessments, and approvals still need to happen, but by automating manual tasks and coordination, cycle times can be significantly decreased. Here are two great ways to alter people’s perception of procurement red tape:
- Begin the purchase process by educating business users about the procurement process and its importance. Make sure that they understand why each step in the process is necessary and worth the time.
- Automate manual tasks using orchestration and GenAI technologies to shorten cycle times and improve the requester’s visibility into all of the steps that are required, where the request sits in the process, and how long the total process is expected to take.
Raising awareness along with automating manual work is a win for both procurement and the employees.
Misperception 2: It’s faster to bypass procurement than to involve them
Lengthy cycle times and the complex nature of procurement processes can discourage employees from reaching out to procurement. Bypassing procurement may seem like a faster way to get things done, but non-compliance actually costs a lot.
When employees engage procurement late or bypass it altogether, it creates a ripple effect of delays and inefficiencies. Procurement must then play catch-up, potentially needing to undo and renegotiate agreements, which ultimately prolongs the process for everyone. In other words, by trying to make the process go faster, employees often end up slowing it down.
The solution is to make it as easy as possible to make a request and to provide the requester with visibility into the process. A guided intake experience does exactly that.
Misperception 3: Procurement makes it hard to bring in a new supplier
When an employee wants to bring in a new supplier, there is a high chance that procurement will recommend an existing supplier. This is because onboarding a new supplier involves negotiation, risk assessments, and approvals across multiple departments which can be time-consuming. But what if that existing supplier doesn’t meet their needs? The employee has two options:
- Complete the purchase in the shortest amount of time by selecting an existing supplier who satisfies most of the requirements.
- Pick the longer route where procurement will try to onboard the new supplier which, according to Hackett, could take as many as 50 days depending on various risk factors. There are, of course, no guarantees that the proposed vendor will pass.
In his video on common misperceptions, Joseph Lombardi observes how for software engagements, a net new master agreement can take up to six months.
“It’s hard to come up with a number but in general, for a large corporation, an onboarding process can take up to 100K dollars when you’re dealing with multiple business units, engagement, financials, W9, etc.” — Joseph Lombardi, Third Party Management Senior Director at Cigna
Emerging technologies like orchestration platforms and automated supplier validation help procurement get the best suppliers for the employees faster and at a lower cost. Here’s how:
- Automate document collection with region-based requirements to facilitate faster progress.
- Verify suppliers and their bank information using automated risk-scoring models to shorten validation time.
Using existing suppliers will always be the preferred path. By speeding up supplier onboarding while maintaining compliance, however, employees can efficiently bring in new suppliers that meet their specific needs when their business case demands it.
In conclusion, the misunderstandings surrounding procurement stem from a lack of awareness and misconceptions about its purpose and processes. By correcting these misunderstandings and embracing the transformative potential of technology, organizations can empower procurement to drive efficiency, reduce risks, and facilitate growth.
