OpenText: Accelerating Procurement Performance With BPM .

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AcceleratingProcurementPerformancewith BPMProcurement is critical to large businesses and governmentagencies and key to the success of an organization. Yet sometimesprocurement is seen as a purely cost-oriented, transactionalfunction whose budget should be managed at a minimum level.However, a strong procurement organization can contribute to anorganization’s strategic goals and culture of innovation. This whitepaper examines how to further position procurement as a strategicvalue-added activity to the enterprise, including how businessprocess management (BPM) can accelerate these efforts.

Table of ContentsProcurement in Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Procurement as Strategic Contributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Create a culture of innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Increase flexibility, agility, and speed . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Enable collaboration in an extended enterprise . . . . . . . . . . . . . . . . 4Enhance visibility and transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Strengthen risk and reputation management . . . . . . . . . . . . . . . . . . . 4Highlight efficiency and cost reduction . . . . . . . . . . . . . . . . . . . . . . . . . 5Using BPM to Achieve the New Goals of Procurement . . . . . . . . . . . 5What is BPM? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Introducing OpenText ProcurementPerformance Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6About OpenText . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

W H I T E PA P E RACCELERATING PROCUREMENT PERFORMANCEWITH BPMProcurement in TransitionProcurement is critical to large businesses and government agencies and key to the successof an organization. Yet sometimes procurement is seen as overhead, a department whosebudget should be managed at an adequate but minimum level. However, this perceptionis slowly changing as organizations realize that procurement is more than an administrativefunction; that its true value lies in its ability to contribute to the organization’s strategicgoals and culture of innovation.According to research by management consulting firm A.T. Kearney1, high-performingprocurement teams also have a positive financial impact on the overall organization. Thetop 25 percent of procurement organizations generate 1.25 million annually in financialbenefits per procurement employee and deliver solid financial benefits exceeding 7.5 timestheir costs and investment.By contrast, procurement organizations in the bottom 25 percent of effectiveness areconsidered “dilutive;” their financial benefits insufficient to cover the cost of their activities.So clearly it is in the best interest of the overall organization that procurement lives upto its potential. And procurement can meet that goal when it’s viewed by the rest of theorganization as a source of ideas, creativity, and innovation, rather than “the group thatfocuses [solely] on sourcing raw materials, goods, and services.”2Just as important, the chief procurement officer (CPO) needs to communicate its value tothe chief financial officer (CFO) and other members of the C-suite. That means the CPOneeds to harness the data that tells the story. The CPO must translate departments’activities, resources, and results into the kind of metrics that matter to executivemanagement. The CPO must demonstrate hard financial results, calculate the costs todeliver those results, and frame the discussion in terms of return on investment.According toresearch bymanagementconsulting firmA.T. Kearney,high-performingprocurementteams alsohave a positivefinancial impacton the overallorganization.This white paper examines the areas CPOs may focus on to further position procurementas a strategic partner to the enterprise, including how the discipline and solutions ofbusiness process management (BPM) can accelerate these efforts.Procurement as Strategic ContributorBelow we discuss six ways the procurement function can elevate its stature and valuewithin the organization:Create a culture of innovationInnovation can take many forms within procurement. Perhaps most obvious is its rolein research and development (R&D), bringing its experience and insight to build vs. buydecisions. This means being included earlier in the buying process, so that procurementcan guide or have an impact on purchasing decisions. Procurement managers who workclosely with the innovation R&D team and marketing teams are apprised of the businessand go-to-market strategies, allowing them to translate these goals to something that ismeaningful to suppliers.Procurement can also guide the larger organization in areas such as sustainability,corporate social responsibility, and risk management. Data and predictive analytics arekeys to innovation, and procurement can leverage big and content data regarding supplierperformance, market trends, and risk analysis.1 Building a Bolder Legacy: The Procurement Mission is Underway” 2015 A.T. Kearney,produced in collaboration with the Chartered Institute of Procurement & Supply (CIPS) and the Institute of Supply Management (ISM).2 “Charting the course: Why procurement must transform itself by 2020” 2013 Deloitte Development LLC.E N T E R P R I S E I N F O R M AT I O N M A N A G E M E N T3

W H I T E PA P E RACCELERATING PROCUREMENT PERFORMANCEWITH BPMIncrease flexibility, agility, and speedThe pace of change in business requires greater flexibility, agility, and speed in procurementlike never before. External forces for example – whether man made or natural – can quicklydisrupt a supply chain, and in these situations procurement needs to assist buyers in shiftingto other suppliers. Internal changes, such as an acquisition, merger, or reorganization, canalso affect purchasing decisions by bringing new vendors – and risks- into the ecosystem.Further, because procurement is a shared service, it must accommodate different purchasingprocesses and different needs of a range of buyers. The group that procures mediaservices, for example, may have a very different process than the group that purchasesoffice supplies, and any standardization must account for these variations in process.Enable collaboration in an extended enterpriseModern procurement in a large company may be a global organization, with personnelaround the world managing procurement in their local regions. The role of collaborationin making the procurement function increasingly efficient, innovative and influential is nolonger a nice-to-have in today’s fast-paced, global ecosystem. In an environment of “morefor less” there is a need to drive down duplication, disorganization and incompetence.Strong coordination and collaboration across the enterprise is required: within theprocurement team, with internal stakeholders, and the “extended” enterprise, whichincludes partners, suppliers, and customers.Enhance visibility and transparencyProcurement isn’t exempt from the dreaded but pervasive “death by spreadsheet”practice, and the problems with such manual processes are obvious: they’re cumbersome,high-maintenance and because of that, the data can be unreliable. The ability fororganizations to gain quick insight into performance of the department as well asindividual team members can be a challenge. CPOs need a way to distill insight frommultiple sources of data so they can get to a single source of truth on a given topic,what Deloitte calls “turning ‘big data’ into ‘smart data.’”3Stakeholders continue to expect transparency. Social media has created a world in whichnews of a misstep can spread quickly. Organizations are increasingly held accountable byshareholders, the media, government agencies, and the general public. In an increasinglyethics-aware climate, CPOs must also demonstrate that business is conducted withintegrity, fairness, and openness, including their sourcing activities.Strengthen risk and reputation managementThird-party risk management is the fastest growing governance, risk and complianceconcern of surveyed organizations according to the Compliance Week 2015 ComplianceTrends Report. This trend illustrates a recognition that supplier risk can have a significantimpact on an organization’s ability to meet its production timelines, quality objectives, andcost targets. Further, as one’s supply chain is an extension of an organization, a blunderby a vendor can affect an organization’s reputation.Deloitte suggests, “Supplier behavior, infractions and violations are procurement’sresponsibility, especially globally, where local practices and regulations might be differentthan what is expected in other markets.”43 “Charting the course: Why procurement must transform itself by 2020,” 2013 Deloitte Development LLC.4 Ibid, Deloitte.E N T E R P R I S E I N F O R M AT I O N M A N A G E M E N T4

W H I T E PA P E RACCELERATING PROCUREMENT PERFORMANCEWITH BPMHighlight efficiency and cost reductionProcurement’s expertise is finding ways to save money through contract negotiation withsuppliers. Although this expertise remains important, it’s the minimum expected competency.To show value today, procurement must go beyond basic expectations and ensure“that contracted savings actually make their way to the bottom line.”5 In other words,procurement must demonstrate how purchasing decisions relate to “buy side” factors,such as inventory levels, cash flow requirements, suppliers’ capabilities and service levelagreements, as well as sales projections, market demand, currency trends, and other“sell side” data.Tying purchasing decisions to other key metrics that are important to the organizationrequires a more sophisticated analysis of data, an ability to synthesize information fromvarious systems, such as ERP and CRM, and a standard method of calculating andcommunicating performance. Presenting data and KPIs in a customizable dashboardalso helps CPOs make more informed decisions and report results up the chain ofcommand. A CPO dashboard can present a wealth of information and detailed analysisat a glance, including spending by category, spending against targets and procurementstaff performance.Using BPM to Achieve the New Goalsof ProcurementBPM bringsstructureto commoninteractionsby establishingprocessesthat can thenbe optimizedfor efficiencywhile allowingvariation andflexibility.What is BPM?Business process management, or BPM, is “a discipline involving any combination ofmodeling, automation, execution, control, measurement and optimization of businessactivity flows, in support of enterprise goals, spanning systems, employees, customersand partners within and beyond the enterprise boundaries.”6 In plain language: peopleinteract with each other and with software systems every day to achieve business goals.Often these interactions are unstructured, ad hoc, and inefficient. BPM brings structure tocommon interactions by establishing processes that can then be optimized for efficiencywhile allowing variation and flexibility.OpenText Process Suite is a complete business process management (BPM) system,which enables organizations to become more agile, more productive, and more competitive.At the core, is the Process Suite Platform (Process Platform), which delivers the power andflexibility to digitize, automate and integrate processes across functions, systems,machines and the cloud. Process Suite automates and integrates processes acrossfunctions, systems, machines, and clouds. It enables information exchange with externalsystems and applications and includes collaboration capabilities, as well as OpenText Process Intelligence for advanced reporting and analytics.OpenText also offers a set of applications built on Process Suite to speed deployment forspecific business solutions and add-on products that extend the value of the platform.One such application is OpenText Procurement Performance Management.5 “5 disruptive forces that will keep CPOs awake at night in 2015.” See: -keep-cpos-awake-night-2015-tania-seary.6 See http://bpm.com/what-is-bpmE N T E R P R I S E I N F O R M AT I O N M A N A G E M E N T5

ACCELERATING PROCUREMENT PERFORMANCEWITH BPMW H I T E PA P E RIntroducing OpenText ProcurementPerformance ManagementOpenText Procurement Performance Management (PPM) application was designed byOpenText partner and global management consulting firm A.T. Kearney. PPM providesessential tools and capabilities CPOs need to manage, track, measure and drive continuousimprovement in a procurement operation. It offers visibility into an organization’s projectpipeline, facilitates clarity in roles between procurement and key stakeholders, andenables financial validation of benefits.OpenText PPM manages and measures the value generated by procurement in quantifiableterms by tracking variables and validating results throughout the process. It integratescritical activities such as planning and project pipeline management, financial benefitstracking, and talent management. With OpenText PPM, procurement leaders gain deeperinsights into their performance and what needs to be accomplished, helping them deliverbetter results, more efficiently. The above diagram highlights the four areas of procurementaddressed by OpenText PPM.FIGURE 1The four areas of procurementaddressed by OpenText PPMPlanning andPipeline ManagementProject Executionand Workspace Helps Showsmanage the pipeline ofprojects planned Forecastssavings Drivesstakeholder engagementand aligns projects with goalsand objectivesPlanning and PipelineManagementProject Executionand Workspacereal-timevisibility of project statusand accountability Providesa repository foractivities, communications anddocuments via project spaceProcurementPerformanceManagementFinance Validation andBenefits TrackingResource Optimization andTalent Management Tracks Helpskey elements ofprojects end-to-end Facilitatesvalidation of resultswith finance and business units Pushesdata to metricsand dashboardsmanage individualand team performancewith scorecardsFinance Validation andBenefits TrackingResource Optimizationand Talent Management Monitorsvalidated financialbenefits delivered by SupplyManagement and drills-downinto areas of improvementAbout OpenTextOpenText enables the digital world, creating a better way for organizations to workwith information, on premises or in the cloud. For more information about OpenText(NASDAQ: OTEX, TSX: OTC) visit opentext.com.Connect with us: OpenText CEO Mark Barrenechea’s blog Twitter LinkedIn Facebookwww.opentext.com/contactCopyright 2016 Open Text SA or Open Text ULC (in Canada). All rights reserved. Trademarks owned by Open Text SA or Open Text ULC (in Canada). (11/2016)06092EN

Introducing OpenText Procurement Performance Management OpenText Procurement Performance Management (PPM) application was designed by OpenText partner and global management consulting firm A.T. Kearney. PPM provides essential tools and capabilities

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