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This
was certainly the case at Internet Solutions (IS) when the Miraculum Hosted
Procurement (MHP) service was implemented there recently. One of these related to the supplier base. A critical examination of the supplier data revealed that while there were around 1500 suppliers in accounts payable, only 150 of these suppliers were really required. The rest had been ‘acquired’ over the years through duplications, once-off dealings and so on. So,
the supply base was rationalised from 1500 to 150. Analysis
during the implementation revealed that there were 42 key suppliers with whom
contracts should be negotiated. These contracts and relationships were loaded
into MHP to simplify the process of ordering from these key suppliers in the
future. It means that implementing e-procurement can be a catalyst for modifying the procurement process within an organisation in order to adopt and embed world class purchasing practices. But isn’t is possible to simply adopt world class procurement processes, without using e-procurement? That’s a fair question – and one which is often asked. There isn’t a definitive “yes-no” answer. But consider this: any business process, no matter what it is, suffers from what is known as “entropy” – a slow, subtle, often barely perceptible process of transformation. In other words, a process might be perfect the day it is implemented, but as time passes people figure out how to side step the process and take short cuts.
Do
you think of the ‘supply chain’ as a linear structure with a simple
bi-directional flow of information between supplier and buyer? You
are not alone. It’s a common
misconception among organisations involved in implementing automated supply
chain processes. But
the term ‘supply chain’ is a misnomer.
It fails to adequately describe or account for the complex set of
interactions involved in each step of the supply process.
As
a result, supply chain solutions often fail to meet the needs and expectations
of all players involved. In fact,
the concept of supply chain automation has become a holy grail for
organisations determined to realise the bottom-line benefits promised by this
specialised area of the business-to-business (B2B) e-commerce phenomenon. However,
these holy grail benefits will move within your reach once you start to
recognise that the supply “chain” is really a supply “web” of issues
and processes which have to be dealt with sequentially in some cases, and
simultaneously in others. This
is a complex set of circumstances and requires skilled practioners to manage
it . But
it’s worth the effort. Global
accounting firm Cooper’s & Lybrand, for example, estimates that a 5%
reduction in purchasing costs results in the same profit improvements as a 30%
increase in turnover. And
according to e-business research company, the US-based Aberdeen Group,
successful implementation of effective e-procurement – a cornerstone of
effective supply chain management can compress purchase and fulfilment cycles
from an average of 7,3 days to two days, while simultaneously reducing
administration costs by between 20 and 50%. However,
achieving this depends on the integration and automation of all processes in
the supply web. Think
about it. There can be 25 or more
processes involved in the simple task of purchasing a pencil:
the buyer reviews supplier catalogues, defines requirements and fills
out a purchase order. The
supplier checks stock availability and the purchaser’s credit, prepares and
sends an invoice, fulfils and ships the order. Then back at the buyer, the
order must be inspected, the invoice receipted and payment prepared and
posted. Failing
to take account of all these interlinked steps, as well as the specific needs
of buyers and sellers, can result in inefficient and costly processes creeping
into a system which should increase efficiencies and reduce costs. Other
issues which impact negatively on the successful utilisation of an automated
procurement system for buyers, include: ·
having access to a limited number of potential suppliers whose online
catalogue inventory is not updated regularly with product and prices changes;
and ·
utilising a system with poor data capture facilities which limit data
re-use. On
the supplier side, negative factors include inefficient communications
channels with buyers, along with delayed payment systems, order bottlenecks
and lack of planning and foresight. The
real value associated with supply chain management can only be realised
through a judicious mix of technology, transaction and business services which
together unravel the complexities from the supply web.
Miraculum is proud to welcome new members to the community.
Applebee
Office Supplies "Miraculum
have the expertise and passion with which to provide a world class purchasing
solution. IS have been running
Miraculum Hosted Procurement for a period of six weeks.
The cost savings associated with tighter controls, together with the
superb service and support provided by the Miraculum team, confirm our
decision - we have partnered with a
winner!"
Jason
Goodall, Financial Director, Internet Solutions
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