- Nov 9, 2018,
Did you know that 90% of engineers at Facebook work on internal tools and systems and NOT on the social networking application that boasts more than a billion users around the world? That’s right. Nine out of ten builders, designers, and developers at one of the world’s most technically advanced companies spend their workday making sure that the business is able to function efficiently. In an effort to keep the company from slowing down, Facebook commits the vast majority of its resources to ensuring the business is operating smoothly and only a small minority of its resources working to make the actual product better. Let that sink in and ask yourself this question…
Are you sure all of your internal processes are really optimized?
The Need for Speed in Today’s Business Climate
Every company dreams of being agile, of moving quickly. Making decisions fast can be the difference between success or failure. Being an innovator in the market – a leader instead of a follower – is a position of strength, or so the thinking goes. In reality, most companies don’t move nearly as quickly as they think they do. That goes double for companies that grow to any appreciable size. More departments. More stakeholders. More people needing to “sign off” to actually get the ball rolling on even the smallest initiatives. Eventually organizations end up moving at the pace of the tortoise, bogged down by internal processes and bureaucracy. These same organizations know that they need to move faster but just can’t break the cycle of perpetual paralysis. The pace of innovation slows to a crawl. “Business as usual” becomes just a cliche to describe the slog of the organizational day. Some, like Facebook in the example above, have resources to throw at the problem. Most do not.
Speed isn’t just about what people see on the outside. It’s also critical to what goes on inside the walls of the building. And nowhere is speed more critical to success than in the procurement process. Have you ever stopped to consider…
Did you know? An average can of vegetables on a Walmart shelf will turn over NINE times before the company pays for it. Quick procurement processes and advantageous credit terms make the speed of inventory delivery, restocking, and sale possible.
Even if you’ve never thought to calculate the costs to your own business, one fact is inescapable: a lack of speed in your procurement function has a direct and entirely avoidable negative effect on your company’s bottom line.
The First Steps in Speeding Up Your Procurement Processes
So how do you start to solve the problem of slowness in your procurement function? How do you start to bring speed to something so critical when the rest of your organization seems stuck in the mud? Here are three suggestions to get you on the right track to having procurement processes that move quickly and efficiently.
Identify the bottlenecks – The first step to improving any process is to understand the status quo. And with that understanding should come an awareness of exactly where things are getting off track or being held up. For example, are procure-to-pay approvals sitting in the approver’s inbox for more than two business days? That’s a bottleneck. Are invoices not being submitted within 48 hours of receipt? That’s a bottleneck. So on and so forth, each step of the procurement process takes time and the steps that are taking too long to move on to the next step are bottlenecks that can and should be fixed.
Calculate the cost – Identifying a bottleneck is one thing, but until you assign a real bottom-line cost you won’t be able to prioritize your attention. Perhaps it’s the annual cost of late fees, lost business or non-compliance. Perhaps it’s the lack of visibility into containing rogue spend and unplanned costs. What are the bottlenecks in your process costing you? Be mindful that wasted time and wasted money both have a real – and detrimental – effect on your business.
Prioritize by size – Once you’ve found the bottlenecks and detailed the costs, you’re well on your way to solving the problem! At this point you’ll want to prioritize by size. Why? Because in some cases massive speed gains in the procurement process can be made by fixing one large issue compared to solving multiple small issues. More to the point, looking at the true costs associated with each step of your procurement cycle will bring great focus onto the health of your procurement function. Maybe the biggest bottleneck is one single individual. Maybe it’s a single, antiquated tool. Maybe it’s a process that worked just fine when your company was smaller. Prioritize the issues by size and you’ll better understand where to place your attention in the next step.
Open your mind – You’ve identified the bottlenecks and understand what price you are paying to live with them. And now you’ve ranked what’s the biggest barrier to success in your procurement process and are prepared to tackle it with great vigor. And that’s why it’s time to slow down and start thinking of the world a little differently. Open your mind to new solutions and new ways of thinking. Why? Because the old way of doing things is what got you into this mess in the first place. And while some improvements can be made simply by being aware of the problems you face, the real path to a streamlined and efficient procurement process comes from viewing things in a new way.
The truth is that most every process in your company can be improved and none will ever be perfect. That’s okay! Identifying the far-line on the horizon of where you want to be, even if you never fully arrive, is the first step in starting any journey. By examining and understanding the status quo you can identify the places ripe for improvement.
Bringing it all together
It’s time to face facts: your procurement process is not running as efficiently or as effectively as it should be. If you think you would benefit from another set of expert eyes, our team would love to lend a hand. Our experience accelerating processes for companies like Logitech, MasterCard, and Western Digital has sharpened our expertise in helping facilitate agile solutions for even the most gridlocked companies. Contact us now to start a conversation about how ApproveSimple can help get your procurement process under control, streamlined, and running faster than ever.