Project Management in Procurement beyond Excel

Saving initiatives have been introduced and their success measured for many years. Now, a certain professionalization is being introduced ...

Real project management is becoming commonplace

Modern procurement organizations try to achieve transparency in all targeted and currently processed (strategic) procurement activities. Without this future-oriented information, there is no successful Procurement Performance Management (PPM) particularly in the strategic area.

If a procurement organization wants to shift from functioning purely as an “order placement service” to being one of the most essential catalysts for the overall success of the company, it has to establish functional PPM. Professional management of procurement initiatives is therefore a very important component.

What does that include?

  • Standardized, company-wide set of initiatives and measures
  • Clearly defined processes (for managing data and governance / release)
  • Multi-tiered degree of implementation logistics with probabilities for savings
  • Continually gathering target, forecast and actual values
  • Tracking project progress
  • Relating initiatives to objects, such as materials, suppliers, etc.
  • Differentiated performance measurement (even for cost avoidance)
  • Specialized evaluations, e.g. individual lead buyers or controlling

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Previous Development

Each month, procurement organizations conduct a number of procurement projects or procurement initiatives. The spectrum ranges from complex investment projects, which have to be planned and tracked, to supplier negotiations and costs reduction initiatives. However, previously, the individual projects, initiatives, and activities were rarely compiled systematically, planned, and professionally managed. Moreover, most of the time, the individual purchaser is responsible for planning and reporting about his initiatives using Excel.

In this case, procurement is years behind sales, for example.

While for years it has been common in sales to manage and monitor their business opportunities and the sales pipeline using professional software, or so-called CRM systems, the counterpart has previously existed in procurement only rarely: it is hard to find a “savings pipeline“.

Only in very few companies do we find elaborate initiative management, which reveals which purchasers are currently working on which procurement projects and when which savings can be expected.

The Hurdles

In order to control as many initiatives and activities simultaneously and successfully, you need real-time, consolidated, and validated figures regarding all individual initiatives.

Excel:

  • The effort of consolidation and the possibility of errors and manipulation of Excel rapidly begin to create barriers./li>
  • Excel itself only supports a few of the requirements mentioned to the left (“What does that include?”). It is sensible as a transitional tool, although not as an organization-wide tool for professional initiative management.

PM-Software:

  • Ordinary project management software (such as Microsoft Project) enables planning, distribution, and monitoring of initiatives of any kind, however, it has no technical functionality to illustrate special requirements of procurement organizations.
  • More importantly, what good procurement organizations need is a specialized solution that already includes all technical functionality and objects and can be coupled, e.g. with ERP and SRM systems.

The best routes away from the "Excel crisis"

Many companies therefore rely on special software solutions customized for their procurement departments or, due to timidity in the face of investing, remain within the confines of Excel.

However, there are now alternatively standardized and very functional solutions that were developed exclusively for use within procurement.

» You can find an example here (InitiativeTracker)
Orpheus - Procurement Performance Management 2016
Procurement Performance Management 2016

We offer you a holistic solution for increased transparency, potential analyses and measuring your procurement success regarding indirect purchasing with our DataCategorizer, SpendControl and InitiativeTracker modules.

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Managing Director - Orpheus GmbH
Dr Jörg Dittrich
Managing Director Orpheus GmbH
 
"The introduction of a Spend Management system is a highly profitable step that is essential for a company’s cost position."

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In this blog you will find expert knowledge about initiative management and project management in strategic procurement. InitiativeTracker is a software for planning and monitoring your sourcing initiatives, controlling your procurement organization and measuring your procurement performance.

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