Without controls in place to ensure compliance with procurement policies, companies have poor visibility into who is spending what. It’s like giving-out blank cheques to everyone and allowing them to spend what they want and whenever they want.
Research shows that without a system for directly monitoring and guiding the procurement process towards preferred suppliers and products, companies could be incurring as much as 10% to 14% of their total annual procurement budget. So says John Olsson from Ability Solutions.
“In today’s tough economic climate, where controlling costs is imperative for survival, most companies have procedures in place to address CAPEX and OPEX expenditure. The trick is getting everyone to adhere to them. Companies need to entrench procurement procedures and automate policies in order to tighten-up inventory, reduce fraud, enforce tender and contract management guidelines, optimise BBBEE spend and ensure compliance.
“Business Process Management (BPM) is the quickest and most affordable way to do it. With BPM, the necessary controls can be put into place very quickly without incurring the costs of additional user licences and customization of the underlying ERP system,” says Olsson.
Ability, which has been developing and customizing ERP solutions since 1978, uses BPM technology from FlowCentric Technologies to extend the functionality of its offerings, in a cost effective manner, to a wider audience within an organization.
Olsson says that BPM, which can be used to automate and enforce any process within any company to optimize efficiencies and improve productivity and compliance, is really coming into its own as a tool for companies to take back control of spending.
Using FlowCentric Processware, a feature rich platform for creating value-adding extended business solutions, Ability has addressed procurement issues such as Approved Supplier and Catalogue Management; Capex and Opex Purchase Requisitions; Tender Management for both the Public (PFMA & MFMA) and Private Sector, and Contract Management.
A procurement approval solution, powered FlowCentric Processware, implemented by Ability at a large wholesale distribution company has seen the business reduce stock holding considerably. Prior to the solution, and with an effective ERP system in play, the business had been over-stocked by R35-million. By entrenching standard processes, based on an organisation’s specific requirements, BPM provides the controls to ensure adherence to corporate purchasing policies. Companies are able to drive procurement process effectively by automatically following the progress of each purchasing transaction based on pre-defined milestones. This means that everybody is forced to follow the same rules and authorization mechanisms so that no there is no unwanted “creativity” in the procurement process. Companies can also direct spending to preferred suppliers and products for cost savings, and to support BBBEE goals.
Most ERP systems provide for some procurement processes. But, they are limited because ERP solutions by nature are transaction based recording and reporting systems.
“ERP limits companies to recording the fact that a Purchase Order has been raised against a particular supplier for a specific quantity of goods or services at a given price. The ERP system, if it is any good, will then record the fact those goods and services have been received and ultimately process a supplier’s invoice for the quantity of goods and services received at the agreed price.
“In effect the ERP system is simply tracking and recording the ‘financial implications’ of the procurement process. However, ERP systems don’t typically address the organisation’s unique business rules associated purchasing decision-making,” says Olsson.
Jacques Wessels, the CEO of FlowCentric Technologies, says that tidying up tender and procurement processes is one of the main reasons why companies are beginning to eye BPM tools.
“Organisations have specific procurement rules and policies which are aligned closely to their business goals and compliance obligations. BPM ensures that they are able to enforce these across the organization. Even smaller businesses without elaborate ERP systems in place can, with an agile BPM solution, automate and enforce corporate purchasing guidelines for a firm grip on spending.”