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Is a Cooperative “Program” Really Necessary?

July 22, 2020/in Blog /by Equal Level

The secret is out. The beans have been spilled. The emperor has no clothes. At least, that’s what a recent blog post from Mariel Reed, CEO of CoProcure, and the 2019 launch of the contract exchange site PPEx by cooperative industry veterans, Steve Hamill and Dave Trudnowski suggests to me.

Like the boy who states what should be obvious to everyone but isn’t (or at least “everyone” won’t say it), Reed points out that “all public agencies including local governments can create cooperative contracts” by including cooperative use language in both the solicitation and contract documents. For cooperatives that have been so successful leveraging the lead public agency (LPA) model, in particular, this candid observation hits a tender spot.

Cooperatives have worked hard over the past 15-20 years to establish their value and differentiate their programs and their contracts from their peers. The prevalence of cooperative programs and similar contract options feeds a view of these offerings as commodities. Pointing out that creating a viable piggyback-able contract is a straight-forward matter reinforces that view. If all competitively awarded agency contracts are piggyback-able, it becomes that much more difficult for programs to promote themselves and their contracts’ value on the basis of scarcity, uniqueness, or quality (by whatever measures are important to an agency).

For cooperatives’ customers, what is important is that a contract they piggyback on is legally compliant and meets their operational requirements. If all cooperatives tout their contracts on the basis of compliance and “meets your needs,” where’s the differentiation? What’s the difference between one contract over another? Differentiation comes only at the level of scrutiny needed by each agency to determine a right-fit. That makes mass-communication of each contract’s relevance to a potential user agency extremely difficult.

Given this state of cooperative contracts as marketplace commodities, the success of a contract provider — be it a cooperative program or an individual public entity — substantially depends on the effectiveness of their promotional efforts and business models. This is another unspoken truth of the cooperative industry. The value of an LPA program may be less about the contracts offered than about how effectively they go to market; how effectively they attract customers to their contract catalog portals and inspire trust in their contracts to drive contract spend volume.

Contracting Convenience Portals

LPA cooperative programs have been the dominant influencers of cooperative agency practices at the national level for two decades, but the combination of their success advocating the practice and educating the marketplace, together with advances in procurement, finance, and e-commerce technologies have evolved their customers’ needs beyond legislative compliance, practice understanding and awareness of contract alternatives[1].

In general, if agencies are just trying to find cooperative contract options as quickly as possible, then being able to easily search and compare contracts from many contract sources is the new value proposition. Going serially from coop or agency website to another is laborious and time-consuming. Given a resource that sidesteps this pain, wouldn’t agencies prefer to use it at the outset of a contracting event? This is what newer procurement-facing companies like PPEx and CoProcure recognize and what gives them the base to challenge cooperative programs, whether LPA or self-contracting.

For Whom the Bell Tolls

But wait. Don’t sound the death knell for coops just yet. Contract portal providers like PPEx and CoProcure are yet in building mode, growing their repository of contracts through outreach to agencies and government contract-holders. And really, at this point, the value of another contract directory is not particularly high given the number of existing portals and directories, a.k.a. cooperative programs.

In this contract-rich environment, for all cooperative programs and contract portal providers, the key to success comes down to having their contracts in a readily accessible, interactive catalog, effectively promoting it, and making it as easy as possible to generate greater contract volumes. In other words, how easy does a cooperative contracting entity make it for agencies to execute a contract and transact with their awarded suppliers?

As yet, neither CoProcure, PPEx, nor the vast majority of LPA cooperatives provides the kind of marketplace environments for their contracts that would provide substantially greater value to agencies than their current passive directories. The functionalities that could truly set them apart from their slower-to-adapt competitors are a reality. Consumer-like marketplaces are already being implemented at the agency level to support their specific contracts. Cooperatives and contract exchange providers need to accept this growing change in customer capacity. To sustain, much less strengthen, ongoing relevance, these organizations need to ensure that their contracts are included in agency environments while also providing e-commerce environments for their customers with more limited procurement infrastructure.

Newer technology offerings that support other areas of procurement practice add to the pressure on cooperatives to elevate their level of service. Agency practices like line-item bidding facilitated by low-overhead solutions make it increasingly simple for organizations to achieve in-the-moment, market-best pricing. This further chips away at the value attributed to market-aggregation-based programs. To continue to deliver on the promise of cooperative contracting value, the organizations whose livelihood depends on ensuring their customers realize its full benefit must adapt to the market.

The transformation can begin today.

Ready to start? Don’t believe it? Let’s talk.

Brent Maas
Vice President of Marketing
bmaas@equallevel.com

[1] For more perspective on the evolution of the cooperative marketplace and how GPOs need to adapt, check out â€œGrasping the Grail of Cooperative Program Differentiation.â€

Grasping the Grail of Cooperative Program Differentiation

July 20, 2020/in Blog /by Equal Level

Twenty years ago, when national cooperatives[1] were just starting to form and piggybacking contracts and participating addenda were being added to the procurement professional’s toolbox, there was a compelling value proposition that promised these cooperatives’ customers (“members”) great savings of time, effort and the greatest reductions in overall cost. Whether real or perceived, savings across these measures drove the steady growth of early national programs for nearly two decades. Today, roughly twenty percent or $350 billion, of state and local government spending happens through contracts promoted by cooperatives[2] at the local, regional and national level.

With a market channel generating that kind of spend volume, it’s no wonder that we’ve witnessed tremendous growth in the number of cooperatives. The sheer number of cooperative programs, all representing the same value proposition, suggests that the value is there. The entry of private group purchasing organizations (GPOs) and private equity interest in this space in the past three years is further evidence of the success and entrenchment of cooperative programs in the public sector.

For those who championed the cause of cooperative purchasing for two or more decades and advocated for its relevance and value at a national level, there is much to celebrate. And just as we recognize this period as a milestone moment of recognition for GPOs as viable enterprises supporting government procurement, we look to the future and question whether current GPO practices are sufficient to attract new agencies and sustain the engagement of existing customers.

Twenty years equates to generations of people, market and technological development. Today’s public procurement transactional environment demands a higher return on promises of efficiencies and savings. Why? Consider what we have learned over twenty years of experience with national cooperative business models, the expanded capacity provided by ever-evolving technology solutions and new providers across all dimensions of organizational operations, and our individual, non-professional experiences as online consumers. We have collective, first-hand knowledge of how effective well-connected business systems can be and, by contrast, those that are not so well integrated. We know what is possible and realistic, and our expectations have changed accordingly.

Can cooperative contracting due diligence be efficient?

From a procurement perspective, gaining efficiency and/or cost savings justifies considering cooperative purchasing as one possible contracting solution. The challenge is distinguishing the best cooperative contract option from among the many. The more difficult and time-consuming it is to conduct due diligence and discern the best undermines that promise of efficiency and casts doubt on the merit of regularly looking to cooperative programs as a contracting alternative.

The larger cooperative programs have been tuned in to the differentiation challenge for years, prompting more progressive programs in the early-mid 2010s to post all contract formation documentation along with the final contract on their websites. This positive first step helps procurement quickly establish whether a contract is eligible for their use and may satisfy their basic needs. Of course, as with all things normalized, this once program-differentiating service is now a given, an expected base level of service required of a program to be included as an option for consideration.

The Path to Growing Customers, Engagement and Contract Volume

GPOs in the public sector share a marketing problem familiar to many of the suppliers represented in their programs. Specifically, the products they offer are in many ways commodities in the marketplace. Consider that there is nearly as many MRO and office supplies contracts as there are cooperative programs. Not to diminish the offerings of any supplier or manufacturer, but any one contract in a category looks much like another. How can a GPO break through the leveling effect of commoditization?

First, to reestablish their presence as a non-commodity, coops need to acknowledge that their customers’ expectations and the market environment have evolved beyond the context that gave coops their great value and relevance in the first decade of the twenty-first century. Cooperative contracts are no longer unique or scarce. Internet search engines and sourcing technologies have eased supplier identification and contracting efforts. E-commerce sites, ERP- and member-based communities provide substantial price and performance transparency. Sourcing and comparative price information may still be a pain point at times, but anymore that is when contracting for more distinct or complex organizational needs (which generally are not well-suited to cooperative solutions anyway).

Second, cooperatives must become better aligned with their customers, and refine their identities and service levels to bring agencies greater value beyond the foundational value-add offerings of contract portal and market-facilitating activities.

A New Role and Identity for Coops

The traditional view of cooperative programs is defined largely by the contracts they offer; how they are created, their ease of access and how they are supported. But as noted earlier, GPOs need to grow beyond their commoditized functions and products to attract a larger customer base or even just ensure that they can continue to effectively engage and support their existing customers in the future.

To begin that transformation, here are two recommendations:

Adopt and deliver a convenience-for-customers orientation
Provide contract-based e-commerce functionality

Adopt a Convenience-for-Customers orientation

While every organization strives to be customer-centric, we all know that some businesses are more effective than others at delivering on that intention. To tweak the phrase “customer-centric” and spark alternative ideas about what that means, consider what it means to create a “convenience-for-customers” culture. How easy are we to do business with? How easy is it for our customers to realize the greatest value from our products?

Cooperatives’ competitive arena is no longer based solely on the contracts they offer. Today, competitive advantage is determined by how effectively programs serve the underlying needs of their customers. Yes, their agency customers need compliant contract options, but what is it that drives them to look to cooperatives? First and foremost, convenience.

“Convenience” for procurement is an expediency, not a luxury. That point is reinforced with every economic downturn. This is why programs that can provide customers greater support throughout the contracting lifecycle have so much opportunity to gain a market advantage among their peers. The easier a cooperative makes it for their agency customers to satisfy their underlying and business operating needs, the more valuable a resource that coop will be to the agency.

To provide an example and identify a specific area of opportunity where cooperatives can deliver greater value and convenience, let us consider the current cooperative contract due diligence paradigm.

Currently, an agency can go to a cooperative’s website to identify a right-fit contract. If one or more is found, they can serially download the contract(s), supporting documents, and participating addendum. That is generally the limit of what a cooperative program offers to their customers from a product perspective. That is helpful to a contract decision-making process, but only to a point. Wouldn’t it be more helpful if there was a capacity to compare contracts and their products and pricing on the program’s website?

Provide contract-based e-commerce functionality

Providing e-commerce functionality is a highly attractive, differentiating offering that would bring added value to government suppliers and to agencies. If a coop provides each customer a transactional environment for the specific contracts the agency has approved, the program could be seen as an important agency resource by all staff, not only those in procurement, with every purchasing episode.

Most large companies have e-commerce capabilities, but for their smaller counterparts who do not, a cooperative marketplace would be the online connection to a government customer they may not otherwise be able to offer. This opens up government business opportunities to a larger and more diverse supplier base, which benefits both the supplier and buyer communities.

Similarly, many large- and medium-sized agencies have the benefit of ERP systems to support their financial operations and, in varying degrees, procurement and warehousing functions. Even so, many ERPs have only a basic transactional environment for buying goods and services. Supplier catalogs, if accessible through the ERP’s purchasing module, can only be reviewed one at a time. Product comparisons have to be done manually, copying and pasting the relevant information from each catalog or external website into a document. Once assessed, the selected product’s information must be transposed back into the ERP’s requisition portal. In contrast to buying “the first product that suits my need” or buying directly from an online retailer or the nearest big box store, this high level of effort deters consistent, responsible purchasing decision making.

For these reasons and others, agencies desire solutions that provide a more consumer-like marketplace experience, both to better serve their internal customers and to improve overall spend management.

Beyond contract directories

Cooperatives that already provide contracts in a directory environment have taken the first step toward a marketplace concept. The former U.S. Communities-sponsored website, SourceConnect, expanded their program’s contract directory to include contracts from other cooperatives and agencies to create a portal making contract identification and document access easier. Though it did not provide users automated contract analysis comparison, “shopping” functionalities, or ERP integration, SourceConnect was a great resource to the many agencies that regularly took advantage of it. Imagine the power of a SourceConnect with modern AI-powered marketplace functionalities that could stand alone or integrate with an ERP. Early-implementing GPOs providing agencies a resource like this would leap-frog ahead of their competitors.

Today, we can count on one hand the programs that have recognized the potential and implementing an e-commerce platform for their contracts. The value proposition for a cooperative-centric marketplace is relevant to all agencies of all sizes, whether or not they have a marketplace of their own. For agencies who have a marketplace, the contracts available from a coop’s marketplace are already e-commerce enabled and can quickly go live in the agency store. Agencies without their own e-commerce portal would now have one, giving them an Amazon-like buying experience for all the approved contracts from that program.

Cooperatives already emphasize the value and savings that can be gained from their contracts. Through a marketplace of contracted suppliers’ catalogs, they can deliver on that promise without qualification.

Time to differentiate and grow

One of the great arguments for including cooperative contracting as part of a procurement strategy is that time saved can be focused on more complex procurements, contract management, supplier relationships, business analysis, and program and people management. Though the public sector market has evolved over the past 20 years, cooperatives have largely not kept pace with the technologies that would save more time and tax dollars for their customers; technologies that would grow the value of cooperative program-public agency relationships and clearly differentiate leading programs from their peers.

With convenience-for-customer as their guiding principle and customer-enabling marketplace technologies, cooperatives can emerge from commodity status, elevate their brand and reestablish their preeminence as leading value generators for public agencies.

The transformation can begin today.

Ready to start? Don’t believe it? Let’s talk.

Brent Maas
Vice President of Marketing
bmaas@equallevel.com

[1] For a foundational understanding of cooperative purchasing and programs, a few articles to reference: “What is a Public Sector Purchasing Cooperative?”, “Cooperative Procurement: Great Value (Great Confusion)” and “Use of Cooperative Contracts for Public Procurement”.

[2] NIGP: The institute for Public Procurement. Public Procurement Benchmark: 2017 Survey Report. 2017. nigp.org; Onvia Market Research. 2018 State & Local Government Contracting Forecast. 2017.

Cooperative Contracts, Amazon-ification & Order Optimization

May 26, 2020/in Blog /by Equal Level

The second in a series of articles exploring public sector cooperative contracting practices, the organizations that make up the cooperative ecosystem, and the strategies and resources that realize maximum value outcomes.

RECAP: “What is a Public Purchasing Cooperative?”, the first article in this series, spoke to the general nature of coops and the significant government expenditures that flow through cooperative contracts. We asked, with so many sources of piggyback-able contracts, how do you identify and choose the “best” programs and contracts? What if the best price or best value solution is not available through a single cooperative contract, but could be achieved by optimizing an order across multiple contracts and suppliers?

Cooperative Contracting: The Value Proposition

The fundamental underlying value proposition supporting the use of cooperative contracting practices goes like this: aggregated buyer demand drives supplier interest and increases competition, resulting in lower prices and better terms for the buying parties to the agreement. Both the buyers and the supplier organizations enjoy the time and administrative overhead savings gained through fewer contracting events and contracts to manage.

In a government business environment dominated by one-to-one contractual relationships and the ongoing pressure to “do more with less,” the promise of cooperative contracting has demonstrated its value-adding capacities. The cooperative practice of “piggybacking” contracts has proven so successful as to form the basis of an enterprise business category generating billions of revenue dollars for public and private consortiums each year. No wonder that new cooperative programs and businesses continue to form in hopes of deriving value from what has become a government-produced commodity, the cooperative contract.

Ten years ago, state and local government procurement practitioners lamented that there were too many choices to quickly identify “safe” cooperative programs and the contracts that would provide them the best value. Since then, while there has been some merger and acquisition activity by privately held cooperatives, the overall landscape hasn’t improved to make identification of best programs and contracts any easier.

What has changed is the technological tools available to help with the discovery, evaluation, and operationalization of contracts. What has also changed is the common expectation of what a transactional buying experience should be thanks to the success of Amazon and eCommerce as a social norm. Add to this the current turmoil that agencies grounded in legacy, paper-heavy processes are experiencing during this time of social distancing and demand for remote working capacities. The convergence of capability, demand, and urgency suggest that we may just look back at 2020-2021 as a period of modernization for many agencies (among other highlights) and a broader realization of the substantial fiscal and managerial benefits still to be gained by fully digitizing acquisition processes.

eMarketplaces

Most agencies already use enterprise financial solutions, some with a marketplace environment to give agencies a one-stop portal for staff to access approved suppliers’ online catalogs, shop, and create requisitions. The better ERP-marketplace implementations are fully integrated to allow a seamless procure-approval-pay experience. Providing a marketplace environment offers many benefits to the agency: reduced maverick spending, faster requisition-fulfillment-payment times, greater spend visibility and category management capability, and greater overall customer satisfaction.

The connection between an agency and a supplier catalog is established through a punchout solution to create a one-to-one connection between the requisitioner and supplier catalog unique to the buyer’s agency. A marketplace, then, is a collection of one-to-one connections to multiple suppliers. Think of it as going to a shopping mall. We go into the mall, then into each shop whose merchandise we want to look at and potentially buy.

As entertaining as going to the mall, browsing and shopping can be, whether for one item or many, going from store to store to compare prices on similar items is time-consuming. This holds true for the vast majority of agency marketplaces as well. As helpful as it is to have a one-stop portal to agency-approved providers, a limitation of one-to-one connections is that it precludes easy line-item comparisons across suppliers. Just like going to a mall, to get the best pricing, you need to navigate to multiple stores, take notes (even if just mentally), and then revisit the store(s) that have what you want at the best price.

The practicality of this approach to “order optimization” wanes quickly the more items there are to buy. Depending on our commitment to the lowest price and our level of energy, we sooner or later rationalize that buying related items from more than two or maybe three stores is not worth the time and effort. We make this choice knowing that we may spend a few dollars more than we might otherwise. This holds true whether we are shopping in the analog or digital world. In fact, “Finding and comparing products and pricing” and “Lack of product information” were the top two cited ‘pain points’ identified by B2B buyers during research conducted in November 2019 by Avionos, LLC. Paul Demery. Dealing with ‘pain points’ of online purchasing. Digital Commerce 360 B2B.

Presumably, if the length of time and level of effort needed to get the optimum pricing for all items in the order was substantially reduced, then we would tend to choose the lowest priced items that meet all of our needs. As personal consumers, we are accustomed to sites like Amazon and Travelocity that give us real-time price comparison for similar offerings from many suppliers. Identifying and selecting the best deal in these marketplaces takes only a minute or two, compared to the ten-to-fifteen minutes we would take to go to each provider’s online store and do that same comparison. Even if we take only five minutes on each unique site, that is still four or five times longer than we would otherwise take in a marketplace that gives us in-the-moment visibility into multiple suppliers’ products.

Until recently, limited agency marketplace functionalities dictated a shopping mall-like tactical approach to order optimization. When we consider that a marketplace must be able to draw data from many access-restricted sites, different operating systems, unique database structures, and classification systems, and then normalize that data into a consistent user-friendly display, we can begin to internalize the underlying complexity of standing up a new marketplace. The order of magnitude of difficulty goes up with each new catalog and each supplier without punchout or eCommerce experience.

Today, however, there is emerging technology giving agencies a Travelocity-like marketplace. In these enhanced marketplaces, customers create their order and are then shown all of the like products for each item in their cart. Suggested products are drawn from all of the pre-approved catalogs included in the marketplace. Now, shoppers can quickly compare price and product details, identify the supplier and the contract source to inform their decision-making.

No more “time is money” or “level of effort” rationalizations required.

Procurement: Delivering Value After the Award

For a host of reasons, any single agency-single supplier contract for a broad category of materials is not likely to provide the lowest possible price for every item available from that contract at a given point in time. Even cooperative contracts born from large demand pools that successfully achieve lower overall pricing across a category can’t make that claim. This is why Procurement’s buyers “shop” contracts as best they can, Googling, referencing price indexes, and reviewing published contract price sheets to inform their choice of contracting methodology.

For all their due diligence and best contracting decisions, there remains a gap in the Procurement team’s ability to achieve up-front uniform lowest prices through each contract. (Yes, best value contracts are often the goal, but even when price occupies a lower percentage of the best value equation, we still want to spend as little as possible for the greatest value we can get.)

Instead of trying to close that gap through an even more intense focus on front-end assessment, evaluation (already an often-exhausting effort), and negotiation to create that “ideal contract,” we can take advantage of advanced marketplace technology to leverage the best pricing provided from each agency and cooperative contract. This doesn’t negate or lessen the level of professional due-diligence that should go into every contract’s formation. Rather, it extends Procurement’s organizational value beyond the risk- and cost-avoidance realized through their contracting efforts. By creating and identifying those contracts that bring the best value to their agencies and enabling those contracts in a fully realized marketplace environment, Procurement extends its value into each requisition event. Their customers now have the Amazon-like experience they need to identify “the best from the best” and make the best choices to achieve price-optimized orders.

Inevitable Change in Government Business Practice

To be sure, nobody likes being “shopped.” Some suppliers and cooperative programs are reluctant to participate in buy-side marketplaces. Their reasons are many: technological maturity of systems; fears of lower contract spend or average spend-per-order; ongoing competition post-contract award; price protective; staff capacity.

Agencies may also be hesitant to take on a marketplace implementation (much less a procurement digitization project) at this time. Lack of staff or staff capacity and funding being the most immediate concerns.

Common to all our realities today is the added stress that comes from adjusting to a global health crisis. The economic effects hit private and public sectors hard, both laying off workers and cutting budgets to mitigate if at all possible, going out of business, creating huge deficits, or taking on greater debt.

Finding the solutions and technologies available to bridge gaps in business continuity are a high priority. While the adoption of technologies may happen faster over the coming year than might otherwise have happened without the COVID-19 jolt, a trend toward agency IT modernization has been underway since the emersion from the Great Recession.

Online marketplaces have been an agency reality for some time now. Even if it has been only recently that we’ve seen Amazon-like functionality come into those environments, this capacity for line-item comparison shopping will become the norm in Business-to-Government transactions just as it has in Business-to-Consumer.

Agencies and suppliers should take note that technology is changing the business transaction environment. Its impact can be measured across a number of imperatives for today’s agencies and businesses:

Simplified processes
Increased efficiency
Minimal paper handling
Reduced transaction times
Realized savings
Improved transparency
Greater fiscal control
Improved customer outcomes
Expanded remote/mobile access
Data security
Easy adoption
Reduced staff burden

As the old saying goes, “With change comes opportunity.” There’s no question that we’re undergoing a lot of changes right now, and the modernization of procurement and financial systems is one of today’s many great opportunities for governments to realize the greatest possible tax dollar value through their transactional spending.

What are your top online buying pain points?

May 26, 2020/in Blog /by Equal Level

Great article on Digital Commerce 360 highlights key findings about B2B buyers’ online purchasing behaviors and pain points. The top pain points speak directly to the relevance and value that EqualLevel’s Marketplace brings to Procurement and their organizations.

https://shop.pe/u3es7csn

Big Savings Power for WCHCS – A Story of Digital Procurement Transformation and COVID-19

May 2, 2020/in Case Studies, Webinars /by Equal Level

Learn how Washington Court House City Schools moved from a paper, labor-intensive requisitioning and PO process to a truly virtualized environment that is saving district dollars and time. They will explain their journey that began with the search for a solution to reduce paper and streamline processes yet has come to be much more. Hear how they have realized benefits that exceed the original goals that are serving them well during the COVID-19 crisis. The real virtuality WCHCS has achieved obeys social distancing guidelines and will make it much easier for the district to comply with future policy guidelines likely required.

After Nearly Getting KO’d By Vendor Punchout, Plano Celebrates e-Procurement Win with EqualLevel

April 24, 2020/in Case Studies /by Equal Level

The Plano Independent School District (PISD) is among the 20 largest districts in Texas. PISD serves a student body of more than 53K, encompasses 72 schools and 20-plus offices, and has an annual budget topping $750M. To put the district’s considerable size into perspective, with over 6000 teachers and staff, PISD has 20 percent more people on payroll than the city’s largest employer, Capital One.

How To Cut Costs Per Invoice By 200 Percent

August 13, 2019/in Blog /by Equal Level

During an organization’s ordering process there are typically numerous intricate steps, and various factors to consider before an actual order can be placed.

Purchase orders (POs) often involve complex approval workflows, multiple budgets, hundreds if not thousands of suppliers and contracts, endless data, and millions of dollars.

Organizations often struggle with how to manage this process without losing both visibility and control.

This becomes an even bigger issue when considering the widespread nature of the procurement process and its interconnection with multiple other departments. These relationships make it far more challenging to assess and determine where and how improvements can be made.

In a 2018 study conducted by PayStream Advisors, now Levvel Research, over 400 organizations were surveyed to determine the latest trends surrounding procurement management.

The following pain points were uncovered:

Inadequate technology
Procedural differences across departments and/or locations
Frequent off-contract or off-budget spending
Too much paperwork
Disjointed systems
A lack of visibility and/or control overspending

Firms Benefit from Utilizing Email to Send POs

An organization’s control overspending can be significantly impacted by a PO’s format and how it is submitted to suppliers. Fortunately, the majority of organizations surveyed are either using eProcurement software or email to send POs. These methods provide more visibility and greater control for organizations compared with those organizations using manual or uncontrolled methods, such as over the phone or ad-hoc online ordering.

Reduced Cycle Time: Greatest Benefit to Procurement Automation

Most mainstream organizations have some kind of automation in place whether it be a homegrown procurement tool or a built-in tool that is embedded within their ERP system. While these companies have a more efficient way of processing their POs than novice companies, their cost per PO still remains rather high.

Organizations utilizing cloud-based eProcurement tools are required to have little manual involvement in their procurement process and can, therefore, process POs at a much lower cost. In fact, their cost per invoice is almost 200 percent less when compared to that of novice or mainstream companies.

Aside from lowering processing costs, other major improvements and benefits to procurement automation include reduced cycle times, improved visibility and transparency, and enhanced control and security.

Is your firm looking to cut costs per invoice? Contact EqualLevel, a platform bringing sophistication to the procurement space.

‘What Were They Thinking?’ E-Procurement Solutions Reveal Critical Insights into B2B Buying Behaviors

May 14, 2019/in Blog /by Equal Level

If you are a corporate procurement leader or a supplier of MRO and indirect materials, there is a good chance you have muttered the words “what were they thinking?” under your breath at least once in the past quarter. Striving to understand what drives B2B buyers to make the choices they do is critical for leaders on both sides of the buy-sell equation as pressures to reduce costs and maximize profitability continue to mount.

Despite the billions of dollars spent annually on MRO/indirect materials, a disproportionate number of businesses still manage their procurement manually or via legacy enterprise resource planning (ERP) systems, according to the 2018 Procurement Insights report from PayStream Advisors. As a result, for most organizations, tracking who bought what, from whom and when is a tediously manual process of reconciling requisitions, invoices and account ledgers. And even then, there is rarely, if ever, any context to the options that were available, the conditions under which the purchase was made and the ultimate need of the buyer.

But there is a better way. Many organizations are turning to cloud-based e-procurement solutions to achieve greater visibility into their organization’s indirect/MRO materials spend, without frustrating buyers with unreasonable compliance features and limited choices. While these solutions are certainly a step up from manual procurement processes, at EqualLevel, we believe that procurement leaders need more than visibility and flexibility, they need intelligence.

Leveraging the power of advanced data analytics and emerging artificial intelligence technologies, the EqualLevel Savings Advisor (ELSA) doesn’t just document what was purchased, when, by whom and for how much, but, most critically, it will capture the user justification for any choice that diverges from established corporate procurement parameters in a structured report that can be analyzed by management. We call this “the power to know.”

The idea here is not to gather ammunition to chastise a buyer for his/her choice but to understand the tradeoffs people are making. A best-in-class e-procurement solution must recognize that there is more to the total cost of a product or service than the base price. There are many factors, including delivery options, return policies, payment terms, etc. that must be considered, and gaining visibility into these variables allows procurement management to adjust policies and procedures to empower users while keeping spending within a budget.

The intelligence garnered from system records like the EqualLevel Savings Advisor Report, which shows items purchased, lower-priced exact match or substitute options, and justification entered by the shopper can also prove to be a valuable resource in strengthening supplier relationships.

Remember, commerce is a two-way street. Both buyer and seller derive value from an e-procurement solution if it is to achieve its optimal potential. With data in hand, procurement leaders can demonstrate to suppliers where they may be falling short of customer requirements and allow them to improve. For example, maybe the supplier was the lowest priced option on X occasions but did not get the order for Y reasons. This insight into what buyers thought as they made their choices can help suppliers make the adjustments necessary to be more competitive. Again, the objective is not to beat up suppliers and force them to lower their prices, but to help guide discussions and structure contracts, catalog, and service offerings to more effectively meet the needs of both buying and selling organizations.

AI-Powered Tech Takes E-Procurement to the Next Level

March 26, 2019/in Blog /by Equal Level

Imagine walking into a car dealership and the first question the salesperson asks you is, “How much do you want to overpay?” It’s a ridiculous question, right? No one wants to pay more for a product than they absolutely have to. Yet, this is exactly what too many corporate buyers unwittingly do, every day.

While most procurement managers would likely concede that there was “room for improvement” in their organizations’ MRO spending execution, few have the visibility and analytics capability necessary to accurately measure what their performance level truly is. If they did, my guess is they would be shocked at how often they overpaid for their indirect materials.

For example, when EqualLevel deployed a beta version of our AI-powered EqualLevel Savings AdvisorTM (ELSA) in a small sampling of customer programs last year, one implementation revealed that a whopping 40% of the items checked out by users were not the best price available. ELSA, part of a suite of cloud-based e-procurement solutions available from EqualLevel, uses advanced machine learning algorithms and a growing product information database to create a “digital shopping concierge.” So, whether users are searching in an established marketplace, or returning items from a punch-out site, the in-Cart Optimization technology can identify lower prices for potential purchases and suggest substitute items. The machine learning capability of the ELSA tool also means that the solution becomes increasingly more effective over time, a stark contrast to many high-priced enterprise applications.

In my experience, the results of our test case are far from unique. The majority of organizations today still manage their procurement either manually or via outdated enterprise resource planning (ERP) or accounting software, according to the 2018 Procurement Insights report from PayStream Advisors. As a result, these corporate users often lack the time, tools, and/or information resources to effectively manage their spending.

This is a huge lost opportunity for procurement departments to not only improve efficiency and rein in cost but establish themselves as a valued contributor to their company’s strategy. As competitive demands and economic volatility persist, the pressure to be more agile and efficient is only going to mount.

With a flexible, cost-effective e-procurement platform like the EqualLevel cloud-based solution, procurement managers can optimize the entire shop-to-pay process. The EqualLevel Marketplace consolidates punch-out and web storefront links into one cross-searchable marketplace, allowing users to comparison shop across remote online sites via a single, user-friendly interface. By integrating with suppliers via APIs, the EqualLevel solution can retrieve catalog information and pricing in real-time.

There is little doubt that the future of procurement is digital. Newly-released research from The Hackett Group confirms that digital transformation is making it easier for procurement groups to “do more with less,” and over the next two to three years, broad adoption of e-procurement technologies is expected to double. The time to upgrade your B2B policies and processes is now.