Walking the Extra Mile: Procurement Greets Finance

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Walking the Extra Mile Procurement Greets Finance
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Walking the Extra Mile
Procurement Greets Finance
They both work for the same organization, and
their strategies are aligned along the same goal
they both are always ?nding ways to cut costs and
increase savings. Yet, they both walk alone when
they should be partners. Can you guess who are we
talking about? Yes, you got it right, we're
talking about 'Procurement' and 'Finance'. A.T.
Kearney research shows that in their public
remarks, CFOs discuss safety, sales force, and
manufacturing performance roughly 400, 360 and
100 times, respectively, and far more frequently
than procurement performance. McKinsey, in its
new book Procurement 20/20, pointed out that
lack of CFO focus on procurement excellence has a
negative impact on the level of savings and
organizational improvement that procurement
leadership can bring. Collaboration between
procurement and ?nance is necessary to mitigate
risks, increase cash ?ow, manage working capital,
cut costs and above all, bring more savings to
the bottom line. In fact, in many organizations,
procurement reports to the ?nance department, at
least on the indirect front. Nonetheless, the
differences in opinion prevail. According to a
Gartner report (Establish a Savings Management
Process to Drive Procurement's Financial
Performance 2013), the key challenges marring
procurement-?nance collaboration are
East / West
There is no universally accepted de?nition of
savings.
South / North
???
The responsibility of ensuring that savings reach
the bottom line, after the negotiation is
concluded, is often unclear or even nonexistent.

Many different factors, such as order scope
changes, volume changes, currency exchange rate
?uctuations, contract compliance levels and
changes in market conditions, can impact savings
before they reach the bottom line. Apart from
creating a process for savings management and
obtaining agreement between the two departments,
the Gartner report also suggested investing in a
tool that is ?exible, and has work?ow and data
integration capabilities, to support savings
management. This would, in turn, facilitate
better representation of savings generated by
procurement on the organization's balance sheet.
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So how can technology help bridge the gap between
procurement and ?nance? Procurement is largely
judged by the savings it generates through
different projects. However, what procurement may
consider savings, ?nance may consider cost
avoidance. Thus begins the argument over what
does or does not constitute savings. But, if
for each project, savings are calculated by
keeping ?nance in the loop, won't that help solve
the problem? And this is where technology comes
to the rescue. Organizations can leverage a
tool with a tracking system that
Develops a function- speci?c view into individual projects and associated savings. This increases the visibility into organization-wide savings a key to improved resource planning
Develops a function- speci?c view into individual projects and associated savings. This increases the visibility into organization-wide savings a key to improved resource planning Establishes a common savings de?nition and a baseline agreed upon by ?nance and procurement, thereby de?ning success for both Procurement and Finance
Develops a function- speci?c view into individual projects and associated savings. This increases the visibility into organization-wide savings a key to improved resource planning Establishes a common savings de?nition and a baseline agreed upon by ?nance and procurement, thereby de?ning success for both Procurement and Finance Maps the impact of procurement savings by collaborating with the ?nance team
Maps forecasted savings to budgets through a project's multiple stages. It is important to be able to track forecasted savings vs. actual savings against the ?xed budget at every stage Streamlines the savings approval process, thus ensuring the correct information reaches the applicable authority Tracks savings at a multi-dimensional level
Maps forecasted savings to budgets through a project's multiple stages. It is important to be able to track forecasted savings vs. actual savings against the ?xed budget at every stage Streamlines the savings approval process, thus ensuring the correct information reaches the applicable authority
Maps forecasted savings to budgets through a project's multiple stages. It is important to be able to track forecasted savings vs. actual savings against the ?xed budget at every stage
For further details on how technology can be
leveraged to streamline the entire process of
mapping procurement performance, read Making
Procurement Performance Count - A 3 Step Approach
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• Most of the existing savings tracking tools come
  with one big drawback lack of integration with
  spend analysis. This means the user would have to
  manually enter baseline (past) data. Every
  savings calculation is based on baseline spend.
  For instance, one of the basic formulas being
  Baseline Spend - New Spend Savings. The
  baseline spend could be for a period of 6 months,
  going back to the last 5 years. Manual entry of
  such data would lead to
• Longer cycle time
• Inaccurate data
• Incorrect savings result
• With advancement in technology, it is now
  possible to do away with manual data entry by
  integrating the savings tracking tool with the
  spend analysis tool. This means the user will
• Spend less time on getting the baseline data. Be
  it for 6 months or 5 years
• Have access to accurate information
• Get the savings result more quickly

Hi, Sam
My Con?guration
My Projects
My Savings
My Reports
Assigned Projects
You are here My Projects
Step 3 Allocate Project Baseline Allocate
Baseline Spend I do not have baseline spend data
Edit Project
1
Edit Project Details
Select Commodity
CORE NETWORK
2 Edit Project
Quantity
Baseline Spend
Divisions
Unit Price
Action
Scope
INFORMATION TECHNOLOGY
0.00
0.00
0.00
Get Spend
3 Allocate
NETWORK ACCESS TECHNOLOGIES
0.00
0.00
0.00
Get Spend

Project baseline
MOBILITY
233.0
10.0
2330.00
Get Spend
Allocate Project baseline for the project here
TOTAL BASELINE SPEND
2330.00
Save
4 Select
Stakeholders
Back Next Cancel
Initiate Project
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Conclusion EY, in its recent study, tried to
identify if supply chain executives and ?nance
executives are on the same page. The study showed
mixed results, as shown below.
Are Finance and Supply Chain Executives on the
Same Page Regarding Key Issues? Which of the
following do you see as the single most important
priority for your business over the next three
years? Select up to three
27
Cost cutting and ef?ciency
Finance Supply Chain
22
25
Organic growth (e.g., investing in products,
talent retention, research and development)
21
19
Inorganic growth (e.g., acquisitions, alliances
and joint ventures)
14
17
Improving product or service quality
25
6
Improving customer service
14
6
Survival
3
0 5 15 20 25 Source EY
While both departments share almost similar views
on most of the parameters, there is a difference
in what gets top priority. While improving
quality was seen as the number 1 priority by
supply chain executives, ?nance executives rated
cost cutting and ef?ciency as their top priority.
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Differences in perspective are always going to
exist. Lately, the ?nance department is moving
closer to procurement. But there is still a long
way to go. Procurement needs to speak the
language of ?nance to help ?nance identify its
contribution. At the same time, ?nance needs to
understand the impact procurement can have not
only on the organization's bottom line, but also
on cash ?ow. Having a structured process and
investing in better infrastructure can help both
functions to align their goals and save more
money.
CFO
CPO
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About Zycus
Zycus is dedicated to positioning procurement at
the heart of business performance. With our
spirit of innovation and a passion to help
procurement create even greater business
advantages, we have evolved our portfolio to a
complete Source-to-Pay suite of procurement
performance solutions which includes - Spend
Analysis, eSourcing, Contract Management,
Supplier Management, Financial Savings
Management, and Procure-to-Pay. Behind every
Zycus solution stands an organization that
possesses deep, detailed procurement expertise
and a sharp focus on being responsive to
customers. We are a large 600 and growing
company with a physical presence in virtually
every major region of the globe. We see each
customer as a partner in innovation and no client
is too small to deserve our attention.
FINANCIAL SAVINGS MANAGEMENT
SPEND ANALYSIS
PROCURE- TO-PAY
ZYCUS SOURCE-TO-PAY SUITE
With more than 200 solution deployments among
Global 1000 clients, we search the world
continually for procurement practices proven to
drive competitive business performance. We
incorporate these practices into easy-to-use
solutions that give procurement teams the power
to get moving quickly from any point of
departure and to continue innovating and
pushing business and procurement performance to
new heights.
SUPPLIER MANAGEMENT
E-SOURCING
CONTRACT MANAGEMENT
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