Easier eprocurement: The Usability Use Cases Let s go to the e-mall: The Advantages of a Provider-Managed e-mall

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1 Easier eprocurement: The Usability Use Cases Let s go to the e-mall: The Advantages of a Provider-Managed e-mall

2 If you want to be the organization with 90%+ eprocurement system penetration (as opposed to the one with 30% to 40% eprocurement system penetration), you better make sure that whatever eprocurement system you select is trivially easy to use and designed to make the location and ordering of a particular item quick and easy. - Sourcing Innovation - Easier eprocurement: The Usability Use Cases is an informational series of five short white papers that highlight specific, practical solutions to some of the more vexing eprocurement challenges that contribute to much lower than hoped system adoption - the key barrier to fully realizing eprocurement savings and benefits. We hope you find the third installment in the series, Let s Go To The e-mall: The Advantages of a Provider-Managed e-mall, helpful and informative. Let s go to the e-mall: The Advantages of a Provider-Managed e-mall Let s Go To The e-mall: The Advantages of a Provider-Managed e-mall (August, 2012) Using a provider-managed e-mall (aka e-marketplace) provides a single point of access to supplier s catalogs, punchout sites and order management systems, and accelerates both user and supplier adoption. This increases spend-under-management (SUM) and results in a shorter-term realization of benefits. Studies have shown that most Best-in-Class eprocurement performers use provider-managed e-malls (basically outsourcing supplier enablement). Most laggards try to do it themselves (or with consultants). This paper provides the following information needed for evaluating the potential benefits of a providermanaged e-mall: The relationship between user adoption, supplier adoption and benefits realization The many advantages of outsourcing to an e-mall Provider Key selection criteria for choosing an e-mall Provider The Proof: Best-in-Class performers examples Stay tuned for future installments of the Easier eprocurement: The Usability Use Cases series: 1. Spot-On Spot Buys: Reeling in Off-Catalog Requisitions (published Jul ) 2. Simple Services Procurement: Increase Spend Coverage and Savings (published Aug ) 3. Let s Go To The e-mall: The Advantages of a Provider-Managed e-mall (published Aug Buy Globally, Use Locally: Global eprocurement Roll-Outs that Deliver to Local Users 5. Attention Shoppers: Consumerizing the eprocurement User Experience Easier eprocurement: The Usability Use Cases is brought to you by: Page 2

3 Under Pressure: User Adoption Tops the List Achieving the goal of any successful eprocurement program namely realizing targeted cost and process savings benefits by capturing maximum Spend Under Management (SUM) with automated, compliant orders (on-contract, preferred suppliers) processed through the system ultimately hinges on user adoption. The importance of user adoption as perhaps the most critical success factor for an eprocurement program is underscored by the fact that when asked to rate the Top Pressures driving their eprocurement initiatives, respondents to an Aberdeen Group survey as part of their November 2010 Effective eprocurement report, cited four of the top seven pressures (shown at right, including all of the top three) can be traced directly to user adoption issues. Although eprocurement users span multiple roles - shoppers, reviewers, approvers, administrators etc. system adoption is a mass market game, where success or failure will be determined by getting a critical mass of your thousands or tens of thousands of internal shoppers to go on-line to shop from potentially hundreds, thousands, or more, approved, contracted vendors in your virtual e-mall. The top pressure acknowledged by the most eprocurement users (36%), Incomplete Coverage of Spend Types/Catalog Categories, speaks directly to the challenge facing the buying organization as the owner of the e-mall. Shoppers your users have to be able to go online and find what they need, quickly and easily, or they won t return. Building the e-mall: To Outsource or Not to Outsource Left to their own devices, many early eprocurement adopters faced with the daunting task of building their own virtual e-mall would compare the experience to herding cats. Given the wide disparity in performance when it comes to supplier on-boarding as shown in Figure 1 below, Best-In-Class performers on-board goods suppliers better than five times as fast as the Industry Average and 20x faster than the lowest performers, almost 4x and 13X faster respectively for services suppliers, have either become expert feline shepherds, or more likely, have decided to outsource the e-mall management to the Solution Providers whom have this specialized competency. Top Pressures Driving eprocurement Initiatives: 1. Incomplete Coverage of Spend Types/Catalog Categories (36%) User Adoption 2. Confusion on Policy and Requirements for Buying Products or Services (28%) User Adoption 3. Employee Reluctance to Use the eprocurement system currently in Place (28%) User Adoption 4. Difficulty in Undertsanding/Leveraging Information Generated in the eprocurement System (22%) System Management 5. Increased Operational Cost of IT Management for Existing eprocurement Solutions (19%) System Management 6. Difficulty in Finding Desired Products or Services in the eprocurement System s Catalogs (14%) User Adoption Source: Aberdeen Group, Effective eprocurement: Assessing the Options for the New Economic Normal Wallmedien Commentary Italicize Page 3

4 Figure 1: Supplier Enablement Performance Best-In-Class Industry Avg. Laggards Days to On-Board a New Supplier of Goods Days to On-Board a New Supplier of Services Source: Aberdeen Group, "Effective eprocurement," November 2010 Want more proof? Procurement blog Spend Matters identified Catalog and Content Management as a major P2P Roadblock, in a June 2011 post, and provides the following questionnaire to help companies through a self-assessment to determine when it's time to invest in a outsourced catalog and content management solution (e.g. e-mall Provider) alongside your existing or planned eprocurement, or broader P2P system if you answer yes to more than a few of these questions; and/or the question describes your current environment, chances are you should be investigating this area for investment: The expected level of catalog maintenance and updates is not something that a single internal resource using a standard ERP or P2P toolset can expect to accomplish across dozens or hundreds of suppliers IT will take a secondary role, without dedicated resources, in the administration and ongoing support of the P2P environment (and content management, to be specific) The ability for suppliers to control and update their own content (with validation/approval) is a known requirement Organizations need to manage complicated, often configuration-driven buying and specification approaches New catalogs/catalog content (within existing catalogs) will be added (e.g., new attributes to existing SKUs) Catalog content management takes on a vertical focus with specialty suppliers possessing unique sets of defined product attributes Federated search (i.e., across multiple catalogs either internal or supplier hosted), supplier web sites and potentially other information sets are required Kitting and bundling is an important part of the requisitioning process (e.g., a decision to buy one SKU can then lead to a required request/form to order another related) Page 4

5 Information ontology and the potential for faceted navigation of complex information will improve the buying process Selecting the e-mall Provider A realistic self-assessment by most organizations will yield more than a few yes responses to the questionnaire above after all, supplier enablement and content management are specialized skill sets and not a core competency for most organizations (including most ERP provider s consulting partners). By outsourcing to an e-mall provider, they also find more productive ways to deploy their scarce internal resources, both in Procurement and IT (Note: Increased Operational Cost of IT Management for Existing eprocurement Systems made the Top Pressures list above at #5, and much of the ongoing operational cost for managing an eprocurement system once it has been implemented, can be attributed to on-boarding and supporting end-users and suppliers). Most organizations will therefore benefit from increased cost efficiencies and ultimately, user adoption and supplier adoption, by outsourcing the building, management and maintenance of their e-mall to a qualified Provider. Consider the following key capabilities when evaluating potential e-mall Providers: Does the provider already have a network of e-commerce ready suppliers? A network of already enabled suppliers (greater than 25,000 unique suppliers at minimum) proves that the Provider is capable of enabling large groups of suppliers quickly and don t worry if your specific suppliers aren t in the Provider s network; the benefits of that are minimal because your specific catalogs, punchouts, EDI connections, etc. still have to be created. In most cases, your largest volume suppliers will already doing business electronically with other companies on the Provider s network, but your smaller, regional, specialty suppliers might not be but don t worry, these e-mall Provider s work fast! Can the provider support any catalog or punchout format (BME,.CIF, OCI, cxml, etc.), or document exchange format (EDI, EDIFact, XML,.PDF, etc.? This makes life easier for your suppliers, another key benefit of using an e-mall. Assume your eprocurement system is SAP SRM, and a targeted supplier supports only cxml (the Ariba standard), versus OCI (the SAP standard). Without the e- Mall Provider, you would have to wait for the supplier to build OCI capability into their web store; but it doesn t matter to the e-mall Provider, who can connect to the supplier via cxml, and then to you via OCI. This applies to stored catalogs, document exchange and EDI as well. Whatever technology standard the supplier is currently capable of supporting, the e-mall Provider can leverage. Page 5

6 If you are a global company, then you need a global e-mall provider! Make certain that the e-mall Provider has a track record of enabling suppliers in the regions, countries and languages you do business in. This requirement usually shortens the qualified list substantially, as there are only a small number of e-mall providers out there who can meet this requirement. Is this a private e-mall where you have sole discretion over which approved vendors have access to your users, or an Open Network, inviting users to make maverick purchases from non-approved, off-contract vendors? Does the e-mall Provider impose fees on your suppliers? Note that some e- Mall Providers charge fees to suppliers. One well known Provider charges annual fees of nearly $1500 per supplier for registration and basic technical support, and takes a percentage of the transactions as well. So, for a company targeting 750 suppliers, using this Provider would increase their supplier s cost of doing business a minimum of $1500 per year per supplier, thus a minimum of $1,121,250 in revenue would be generated for the Provider (more, much more when you include the transaction fees); and a hidden cost would be created for you as simple economics would suggest that suppliers will ultimately pass these costs back to their customers in the form of price increases, just to keep current profit margins intact. Example Use Cases These three global companies (names withheld) used an e-mall Provider with the following results. All three initially attempted to do their supplier enablement themselves (or with their ERP s consulting partners) and failed. Note also that the cost of the failed attempt was quite a bit more than what the specialty e-mall Provider charged and of course, the e-mall Provider actually delivered. Company Description: $40B Global Automotive Industry Retailer ERP/ eprocurement System: SAP SRM Users: 18,000 Catalogs (incl. punchouts): 300+ Suppliers (incl. services): Global Requirements: 22 countries Company Description: $11B Global Agri-Business ERP/ eprocurement System: SAP SRM Users: 7,000 Catalogs (incl. punchouts): 250+ Page 6

7 Suppliers (incl. services): 17,000+ Global Requirements: 44 countries Company Description: $36B Global Diversified Manufacturer ERP/ eprocurement System: Oracle iprocure Users: 5,000 Catalogs (incl. punchouts): 250+ Suppliers (incl. services): 2,000+ Global Requirements: 24 countries Page 7