We all have purchased something from online shopping portals. Can the same experience be replicated across procurement categories? Especially, when it comes to indirect services categories, which are hard to structure or commoditize?
The Need for E-Catalog Solutions
Organizations are constantly discovering ways to make the procurement process simpler, efficient and effective. There is a potential to bring a lot of contracts under managed spend instead of spot buying.
Procurement managers usually spend a lot of time either negotiating for a better price or requesting services from suppliers.
Catalog buying is being viewed as a solution to these procurement issues.
Catalog buying is becoming popular for high volume services, which cuts down the time to procure a service. As tools become smarter, more spend can be brought under management.
Implementing a catalog solution is becoming popular with Fortune 500 organizations due to the need to reduce maverick spend/spot buys and speed up the buying process. Also, improved spend under management helps in achieving greater transparency.
Current Scenario in E-Catalog Industry
Emerging players generally provide SaaS-based solutions, which do not require major infrastructure setup.
Moreover, they are adept at extensive customization and are open to adding extra service modules. This makes them a popular option for organizations that seek customization along with lesser setup costs.
The below graph depicts the best-in-class practice followed by world-class procurement organization toward their organization’s total spend.
Categories Suitable for E-Catalogs
Categories that have a high volume of usage and a standard set of request are popular for e-catalog implementation. Semi-core and non-core activities, which are procured on a day-to-day basis, are also majorly suitable for e-catalog buying.
Based upon spend level and impact on business, categories can be bucketed for procurement under:
- Spot buy
- Catalog buy
- Aggregator buy
- Contract buy
Core categories are generally bought under contract. However, for categories that have a high volume and low spend, catalog buy is a better option.
Source: Beroe Analysis
The figure below provides the detailed list of categories that are considered for catalog buys.
Major Channels for Services Procurement via Catalogs
Fortune 500 Organizations use a combination of smart forms and configurable catalogs in order to request services via e-catalog platform.
Most service providers are capable of developing both types of interfaces for organizations.
Smart forms are mostly used for services that have to be defined by the requester, whereas configurable catalogs are used when a standard set of variables can be defined for sourcing.
Categories Unsuitable for E-Catalogs
Categories that involve a greater amount of interaction in the price negotiation stage or service request stage, or ones that are one-time buys, need not be included under catalog management. Categories such as management consulting, legal and logistics are procured via RFP.
Implementing E-Catalog Solutions for Services
Here are several things to keep in mind while implementing e-catalog solutions for Indirect Services procurement:
|Consumer-Like Shopping||Easy-to-use interface||Modern web-based interface similar to e-commerce purchase tool|
|Intelligent Fuzzy Search||Full-text search listing items by probability index/ Fuzzy search using elastic search|
|Parametric Filtering||Filtering and sorting of results based upon multiple parameters|
|Side-by-side comparisons||Items shown side by side improve ease of purchase|
|Level 2 PunchOut Catalogs||External catalogs on real time helps show dynamic price|
|Control/Compliance||Advanced Contract Compliance||Specific approval process should be defined for non-compliant items and checks for contract compliance must be present|
|Relevance Ranking||Improves ease of purchase|
|Icons||Icons/images when used makes it easy to identify catalog items|
|Configurable catalog views||Should be Pre-defined according to each user’s access rights|
|Supplier Tools||Supplier Portal||Facilitate the self-serve model with additional information available for ordering, e-invoicing, payment management|
|Automatic Data Validation|
|Multiple Support Channels|
|Security / Service||WebTrust Certified||Improves security|
|Password protected and partitioned data storage|
|Data Cleansing & Enrichment Capabilities||Data rationalization||Multiple mapping rules allows greater data flexibility|
|Commodity code assignment|
|Flexible Systems and Integration||Services Procurement support including supplier collaboration||Supplier self-service and Product Inquiry feature facilitate direct contact with Supplier for specific procurement actions|
|Interface with any E-procurement system including Oracle or SAP||Improves efficiency|
|SaaS deployment for fast implementation and currency||Increases geographical coverage|
Pre-Requisites for Implementing E-Catalog Solutions for Services
Winning the confidence of suppliers. Suppliers are required to share a lot of information with regards to the products/services that would be procured. Hence, bringing suppliers into confidence is also an essential aspect while implementing e-catalog solutions for services.
Cross-company cultural differences. Every department/ team would have different procurement practices; hence, implementation of a standard single tool for purchasing requires easing and smoothing down the cultural differences in an organization. A change management team/ executive team would be helpful in motivating users.
Visible executive sponsorship. Tool implementation should be a top-down approach for effective participation.
Motivating end-users. Tool implementation means there would be some degree of training involved. End users might resist to the change anticipating more work, hence it is important to make the end users aware of the importance of the implementation and benefits achieved by the same.
Stakeholder involvement. Implementing a catalog solution for services requires a high degree of customization and the attributes completely depend upon how the organization/buyer procures. Hence, buyer inputs are required at each stage — right from data collection phase to pilot phase.
Pilot. A pilot phase is crucial to identify errors and other functional/logical anomalies and rectify it before the solution goes live.
Case Study: E-Catalog Implementation for Services at a Fortune 500 Oil and Gas Organization
The U.S.-based oil and gas giant is a $200 billion organization. With expansion in business, the organization started its migration to a single global platform.
- The service provider designed processes, tools and collateral that empowered the organization’s supplier on-boarding team to scale to enabling 800 suppliers within project timelines.
- Classified and restructured the organization’s taxonomy to PIDX providing rich content that is usable for improved sourcing, spend analysis and inventory recovery.
- Matched buyer “free text” POs with existing items by providing buyers with the information they need to buy and transact electronically, thereby reducing procurement costs.
- Implemented a tool for new item introduction and item maintenance, ensuring that rationalized material master retain product data integrity.
- Empowered the organization’s vendor on-boarding team to scale to manage 800 suppliers within project timelines.
The major milestones of the project are as follows:
- Total number of Items: 1.3 million
- Average number of attributes/items: 20
- New templates created or modified: 3,000
- Created 3,400 category-specific item templates
The organization saw a 20% decrease in purchase order costs due to data rationalization in the first year.
The data management team was able to increase workload by 15% per year in three years with the same headcount.
Time spent in contract negotiation for small spend services reduced by 35%.
Spend under management increased from 50% to 75%.
E-catalog solutions are a highly convenient method of procurement in businesses. Taking catalog buying to the next level requires some degree of effort, as services are more complex than products. Also, the prices are dynamic in nature for services.
However, looking at the increase in efficiency and reduction in negotiation time, more and more organizations are finding catalog buying an effective option to improve procurement efficiency.