SURVEY: Inefficient procurement systems cost US businesses $1.5B annually
A new survey reveals that only one quarter of procurement professionals believe their procurement system makes them much more productive.
Inefficient procurement tools are costing businesses in the United States and Canada more than $1.5 billion per year and wasting more than 32 million man-hours, according to a new survey conducted by The Topline Strategy Group. The report, sponsored by SciQuest and titled ‘Optimizing Your Sourcing and Procurement: Five Simple Rules,’ found that just over one quarter, or 28 percent, of sourcing and procurement professionals believe their procurement system makes them much more productive.
With North American companies spending more than $1.4 billion on enterprise software applications in 2013, according to Gartner, this amounts to a massive productivity gap eating away at bottom lines. Topline Strategy surveyed 241 sourcing and finance professionals at more than 200 U.S. companies with $500 million in revenue to determine the steps organizations can take to achieve a positive return on their procurement investment.
The findings indicate that ineffective procurement systems have an impact that goes beyond hard costs. Sixty-eight percent of respondents who said their procurement systems do not make them more productive said that they would use the time lost to inefficiency to find more savings opportunities. According to the report, “they would also use that time to guide purchasers on making better choices, to get more spend categories under contract, purchase more cost-effective items and get more bids per tender.”
“When sourced and implemented correctly, procurement systems represent an opportunity for organizations to drastically reduce costs, improve process efficiency and gain visibility into spending decisions,” said Mark Digman, Senior Vice President of Marketing at SciQuest. “This research from The Topline Strategy Group indicates that most organizations are falling well short of these transformative benefits. The concept of turning spending into a source of savings takes some getting used to, but it’s an idea that more purchasing and sourcing professionals need to embrace.”
Based on its survey, The Topline Strategy Group report outlines five simple rules for organizations interested in maximizing the return on their investment in procurement systems. These rules include:
- Choose the right software: More than 50 percent of respondents who were not satisfied with their procurement systems cited a convoluted user interface as a reason for dissatisfaction, while a whopping 38 percent responded that their system lacks critical features that limit what can be done.
- Don’t get caught up in vendor standardization: Only 16 percent of respondents who used two applications from the same vendor rated both as “making them much more productive.” Meanwhile, only 6 percent of respondents cited ERP integration as a driver of satisfaction.
- Invest in implementation: Regardless of who performed implementation services, respondents found that how well that organization performed, which correlates highly with the level of investment, makes a big impact. Seventy-three percent of companies where the implementer “did a great job and added a lot of value” were either extremely satisfied or very satisfied with their system.
- Frequently update and improve the system: Forty-eight percent of companies that regularly improve their system with new features and capabilities, something closely associated with Software-as-a-Service (SaaS) delivery, said that their procurement system makes them much more productive. Only 16 percent of respondents whose systems are not regularly improved said the same.
- Use software that is easy for casual, occasional users: Seventy-eight percent of respondents believe that employees would find better deals and save their company money if corporate procurement tools were easier to use. Eighty-one percent believe that easier-to-use tools would reduce rogue spending.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.