Collaborating in the Cloud: Where Procurement Process Meets Social Networking

The “cloud” is allowing Procurement organizations to engage beyond their four walls with peer organizations – for benchmarking and collaborative buying – and with suppliers for new product innovations and supply chain efficiencies. Procurement organizations have long focused most of their attention on getting their own houses in order…streamlining internal transactional processes to promote efficiency, realigning organizational resources to focus more on strategic and less on tactical or transactional activities…all for the betterment of their organizations. With foundational internal platforms and processes in place, more organizations will begin utilizing the cloud to get connected outside their enterprises in a number of new and exciting ways. Cloud technologies make it easier than ever before to collaborate with external enterprises – both suppliers and their peer group. And according to Capgemini Consulting, procurement needs to rapidly shift their attention to supplier collaboration, especially early involvement in new product introduction, in order to drive innovation: “Organizations are still reluctant to involve procurement and suppliers early enough in product development and innovation. And Procurement is still viewed as a silo function with KPIs that remain focused on tactical and cost reduction activities.” While 80% of more than 1,000 CPOs surveyed by Capgemini concede that suppliers are involved too late in the corporate innovation process, they recognize that suppliers contribute value beyond the products and services they provide, both in terms of the quantity, speed and agility with which they provide them:

  • 20-30% of CPOs surveyed view quantity of products developed and brought to market as supplier value contribution
  • 50-60% of CPOs surveyed view speed of development and agility as a true value contribution

Top performing organizations are able to quantify the benefit from supplier collaborations, realizing a savings of 3.4% annually as a percentage of Total Spend above and beyond savings from sourcing or category management. That’s twice as much as their peer group in Hackett Group benchmarks. These Supplier Management-derived savings accrue in the form of additional cost reductions achieved through supplier measurement, development and collaboration, along with top line revenue growth attributed to innovation support, new market entry, improved marketing campaigns and brand enhancement from sustainability efforts. Leading procurement organizations will also be more active in collaborating with their peer group to benchmark their own performance and identify best practice improvement ideas they can implement themselves. In the coming years Zycus plans to initiate a free, cloud-based collaboration portal which would enable real-time benchmarking analytics and exchange of best practices.