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In the previous issue of Miraculum Blueprint, I presented some of the key issues and assumptions that must be taken in preparation for building a business case. Now the time has come to build one or more business cases which: 1. examine the efficiencies of an e-procurement tool; 2. consider the connection to a B2B exchange; 3. quantify aggregate spend opportunities
with other buyers Business case 1: Working smarter internallyLook at the subscription costs and draw up estimates regarding other internal costs to form the business case – don’t forget to weigh this against the benefits of working smarter internally with an e-procurement tool. Factors to be investigated include internal overhead charges. Cost comparisons between dedicated and hosted procurement services can also be made. Miraculum’s experience has shown that even with adoption periods of 6-8 months and deference of benefits over the same time, payback periods of 15-18 months are possible. Business Case 2: Connecting to suppliers One of the key areas of benefit lies in working smarter with supply chain partners. The connection of an internal procurement system to a B2B exchange service where supplier catalogues are available adds a whole new set of benefits (and costs) to the equation. Miraculum has developed a set of reasonable assumptions regarding time savings, cost savings (through exchange services such as auction tools and electronic RFQ tools ) that result when a company connects its automated (or existing) purchasing tools to such an exchange. This business case has very low initial cost, and usually pays-back in 6-12 months. Business Case 3: Aggregation of spend All corporates buy similar goods in certain areas. Once a company has connected to a B2B exchange, there is a real opportunity to combine spend with other buyers in the Maintenance, Repair and Operations (MRO) area. This business case relies on clean spend data from each of the buyers on Miraculum Xchange. Miraculum then categorises spend into standard areas across particular buying clubs, and negotiates additional benefits (usually through rebates). Once again this business case requires very little up front investment, and typically pays back in an 8-12 month period. So what’s next? While these business cases are usually able to satisfy corporate return criteria easily, Miraculum has found that it is in the area of sensitivity analysis that the real benefits to decision makers are provided. From these insights, management can formulate benchmarks to determine how to measure the success of an electronic procurement tool. In addition, management can more easily understand where to focus resource and time to ensure that the project is successful.
E-procurement
can be a vital contributor to any business’ competitive advantage in the
global economy. But, as with any new
“e” application, there can be pitfalls. How can you
use e-procurement to best advantage? How can you cut through the hype? How
can you ensure that the e-procurement route you take will deliver on the
promises of reduced costs, time savings and increased operational
efficiencies? Below is a
10 point checklist of all the aspects you should consider before taking the
e-procurement plunge. 1. Itemise the costs – all the costs –
associated with the solution. Look
beyond its initial cost of purchase to the costs of installation,
implementation and maintenance as well as training, to evaluate the total
cost of ownership. 2. Does the solution have the ability to
interface with your organisation’s legacy systems including your ERP
system? How much integration work
will be required? If the system can be integrated or interfaced with both
buyers' and sellers' ERP systems, the interaction can go far beyond mere
buy-sell transactions all the
way to collaborative forecasting, document exchange and supply chain
planning. 3. Does the solution connect you to a network
of suppliers, relevant to your business? 4. Who can use the proposed solution? Does
it restrict you to interacting only with those who use the same software
systems you have implemented? 5. What kind of track record does the
e-procurement service provider have? Because the concept of e-procurement
service provision is new, consider the provider’s pedigree in terms of
procurement and technology know-how, financial stability, and their ability
to maintain, support and “keep the solution up to date”. 6. Look at the intellectual capital
supporting the solution. Has it been put together by organisations with
technological expertise, or by organisations with depth of knowledge of both
technology – and procurement? 7. Consider the complexity of the
solution offered. How much support will be available? Is it easy to use? How
quickly will your people become proficient on it? Will training be provided? 8. Will the system enable you to evaluate and track the tangible benefits delivered – or will you have to be satisfied with perceived benefits such as convenience and efficiencies? 9. What technology platform does the system
run on? This is vitally important as it supports the whole system, going
beyond the marketplace, portal or hub. The platform must be robust and secure. 10. Ethics.
How transparent is the whole e-procurement process? How vulnerable is it to
manipulation – even possibly corruption? Does it provide the requisite audit
trail facilities? By
following these steps, and applying careful evaluation, e-procurement can –
and will - make a meaningful contribution to your business’ bottom line.
Miraculum is proud to welcome new members to the community. First
Data
"Nedcor
has invested as a shareholder in Miraculum , we are excited about the
potential this opportunity brings to our internal procurement in providing a
technology platform & potential solutions to enhance control and maximise
the spend , as well as the potential opportunity to offer these solutions to
our client base , in the various business units & divisions within our
organisation ." |
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