Discuss, debate and exchange ideas on latest trends and opportunities in the Business Process Management (BPM) landscape. Deliberate on adding “business value” to clients, vendors, employees and various other stakeholders to enhance customer satisfaction and sustain long term partnerships.


September 13, 2016

The "Procurement's Trilemma" and how to tackle it

Does the word "Trilemma" even exist for anyone to even begin comprehending the title of this post? The answer is yes. Webster's dictionary succinctly describes it as a state of things in which it is difficult to determine which one of three courses to pursue.

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August 2, 2016

Corporate Boards - Wake Up To Streamline Chaotic Supply Bases

One CPO indicated the root cause of chaotic supply base is -"First, we let anyone and everyone become our supplier and then we keep complaining that we are losing our sleeps working with so many of them".

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July 12, 2016

Divided they fall - master data, category strategies and e-procurement tools

Most of the purchasing functions fail miserably in tightly uniting three important resources together.

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July 1, 2016

Should you reshape your procurement career in the middle of AI and automation?

What's the silver lining your procurement career has in such turbulent times? You can still save your career by following at least one of two approaches.

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September 9, 2015

Beware - Your purchasing might be incongruent and not novel

Often the actual state of procurement functions is dismal and under the radar of usual KPIs and CPIs which don't have adequate entropy to make meaningful business assessment.

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August 28, 2015

What purchasing professionals can learn from good business journalists

What? "Supply management professionals need to be like good business journalists". Who says?

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June 26, 2013

Is Purchasing getting enough importance across organizations ? A practitioner's critical view point

Who doesn't know that the Purchasing function has indeed grown in its' importance during last 2 to 3 decades in particular. However, has this generated "enough" importance for Purchasing functions or not?

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October 31, 2012

The Harbinger for Global Sourcing's Success or Failure - the Misery Index

I wonder at times about the limited knowledge of vast majority of Sourcing and Category Managers in one area - global sourcing. Now I don't want to create a controversy here and make a large fraternity cynical of my writing the preceding statement because obviously, all Sourcing managers will have to their credit, some or the other successful global sourcing case study. However, I promise that this post will compel you to think "Do I know this ?", "Have I applied this ever ?" and then validate whether my statement claiming "general limited knowledge" is correct or not.

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October 19, 2012

Purchasing functions: Hulky and Decrepit v/s Right sized and Healthy

As I meet more and more clients/prospects (CPOs, Purchasing Directors, Managers, Buyers) during sales, services delivery, service review etc.; I see two common issue categories bothering them in their function.

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August 6, 2012

The Procurement Olympics - Only a few win and stay ahead of the others

Managing a procurement function and proving its value to the organization continues to be like participating in the Olympics. Procurement teams across all industry verticals (automotive or pharma or healthcare etc.), face the competition every day from internal stakeholders and suppliers like any Olympic Games event. All three wanting to beat each other in deriving positive value to their organizations akin to the national respect athletes long to create by winning Olympic game events.

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July 16, 2012

Rise and fall of the Purchasing function - how can it stand firm?

Even reasonably experienced buyers are working with a mixed bag of results e.g. savings are achieved but not on time delivery; all supplier performance scores are good but stakeholders are still complaining...

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May 14, 2012

Uncommon and breakthrough purchasing savings levers - Series 4 (Lever - SG)

Objective of the series: Hi there. I plan to share some very interesting avenues through an exciting series of at least 5 blogposts (Depending upon the response, I can consider sharing more). In each of the posts, I will share a few highly impactful savings levers that generate very high level of annualized savings across many industry verticals. These levers are still not widely used just because they are hardly covered in the common Sourcing & Procurement literature or practices. Hope you will find them useful, apply them somewhere and come out with flying colors. Wish you good luck and enjoy the read.

SG - What is SG? I am sure this is an obvious first question in every reader's mind. SG's expanded form is Services Guarantee.

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April 27, 2012

Uncommon and breakthrough purchasing savings levers - Series 3 (Lever - RM)

Objective of the series: Hi there. I plan to share some very interesting avenues through an exciting series of at least 5 blogposts (Depending upon the response, I can consider sharing more). In each of the posts, I will share a few highly impactful savings levers that generate very high level of annualized savings across many industry verticals. These levers are still not widely used just because they are hardly covered in the common Sourcing & Procurement literature or practices. Hope you will find them useful, apply them somewhere and come out with flying colors. Wish you good luck and enjoy the read.

RM - What is RM? I am sure this is an obvious first question in every reader's mind. RM's expanded form is RETURNS MANAGEMENT/REVERSE LOGISTICS. In other simple words, it is about goods and services that are not accepted by buyer post in-warding them into stores/acknowledging work done by services providers. The reasons for this could be multiple. For example, a material/service gets rejected by buyer and returned to supplier for replacement or repair or rework. As per contract, the product might be returned to supplier at the end of life or end of use. Such scenarios occur in each and every industry. Familiar & common commodities that are prone for returns are -- and I'm sure that every reader here would relate to these -- containers, pallets, packaging materials, used clothes, outdated spares, above shelf life items/equipment and vehicles etc. But is this area really uncommon and can it provide breakthrough purchasing savings? Let me investigate that for you. Keep in mind that we are discussing returns management in B2B context and not B2C.

Let's start with a couple of benchmarks and high points that I have collated for you. Sabri and Gupta report in their famous book Purchase Order Management that on an average, 20% of all goods procured are returned for any firm! Obviously in-warding and resending and re-inwarding cycles can have inventory levels inflate/deflate. This is ditto for the firm's profits and demand management sides. Imagine the complexity of a returns management procurement cycle if the suppliers to manage are also international (any one from Automotive firms reading this?)! IPQC reported in 2008 that associated costs of returns can run as much as 10-20% of operational costs of a supply function and that even 1% savings in that could be a huge $ benefit/profit - straight to the bottom line.

So what are the action items/solutions? First of all conduct a root cause analysis to determine the patterns and underlying causal factors due to which returns are created. Then, plan for corrective actions on all fronts - make the processes at supplier's end and the inbound packaging, transportation predictable to six sigma levels. At a category strategy and spend data management level, ensure that each commodity (material or service) in item or service master table is tagged as returnable or non-returnable. The process and technology with procurement should also have traceability and connectivity with AP systems to link PO and Invoice with return and its reason so that debit memo creation can be simultaneous. Items being returned for replacements should also be factored into the procurement and AP applications. Gupta and Sabri recommend that firms should automate processing of the returns upon receipt (including inspection and disposition), speed up the process to reduce risk of obsolescence, and track reverse logistics and net asset recovery to improve effectiveness. If services received are rejected or found to be deficient, the returns management becomes virtual process but should remain same for treatment like products/materials as explained just before. The reconciliation of service return/complaint can be accounted for as a simple apology or monetary compensation - as the contract specifies.

What can you do to have a robust returns management solution? Invite an expert firm to design BIC returns management process, integrated with procurement applications, ERPs and other applications. Choose the firm who can not only recommend (consult) but implement the proposed solution for you and demonstrate benefit. Include them also in returns management spend management plan of yours - for recoveries, repair or replacements!

Found this post useful and refreshing? Want me to write the rest of the 2 posts at least? Then send me your views on this one please. The series has gone well so far in response. Thank you all.

April 19, 2012

Uncommon and breakthrough purchasing savings levers - Series 2 (Lever - DA)

Objective of the series: Hi there. I plan to share some very interesting avenues through an exciting series of at least 5 blogposts (Depending upon the response, I can consider sharing more). In each of the posts, I will share a few highly impactful savings levers that generate very high level of annualized savings across many industry verticals. These levers are still not widely used just because they are hardly covered in the common Sourcing & Procurement literature or practices. Hope you will find them useful, apply them somewhere and come out with flying colors. Wish you good luck and enjoy the read.

Continue reading "Uncommon and breakthrough purchasing savings levers - Series 2 (Lever - DA)" »

March 15, 2012

Uncommon and breakthrough purchasing savings levers - Series 1 (Lever - GSP)

Objective of the series:

Hi there. I plan to share some very interesting avenues through an exciting series of at least 5 blog posts (Depending upon the response, I can consider sharing more). In each of the posts, I will share a few of the highly impactful savings levers that generate very high level of annualized savings across many industry verticals but are still not used widely just because these are hardly covered in the common Sourcing & procurement literature or practices. Hope you will find these useful, apply them somewhere and come out with flying colors. Wish you good luck and enjoy the read.

Continue reading "Uncommon and breakthrough purchasing savings levers - Series 1 (Lever - GSP)" »

March 13, 2012

Enhancing the Fitness of Purchasing Departments - Analogies from Human Life

I am sure any stakeholder to a Purchasing department would rate or view their performance based on their experiences with this department. And obviously, stakeholders could be internal (CXO executives, user departments/budget owners, sourcing & procurement team members themselves etc.) and/or external (suppliers, auditors, consultants etc.).

Not so positive views could be "they are slow, they are impediments, signifying "thou shall not buy" attitude always; they just don't understand what value suppliers can add or what is the importance of what is being bought but seem to be always beating down the prices" etc. Positive and encouraging views could be something like "they are knowledgeable folks always helpful to collaborate for our needs while also making sure that firm gets value on what it spends; they have helped me specify what I need better; they have helped save significant costs when we needed the cash the most, etc.". And then, there could be mixed views like "sometimes they delight me but sometimes they perform in a very disappointing way for a critical project; why do they vary so much?"

Allow me to oversimplify such observations and metrics for a simple, intuitive analysis by rating combined experiences on a "4 point Purchasing Fitness Scale - Run seamlessly (1), Jog comfortably (2), Walk briskly (3) or Walk slowly (4)". If the predominant rating score is 4 (suggest taking the mode and not the average or median here), purchasing department's impression can be termed as equivalent to a BMI 35+ or sick or non-agile human being. On the other extreme, a rating score of 1 will give an image of a person able to run fast and for long distances effortlessly (like Usain Bolt or Belgian Stefan Engels who ran 365 marathons in one year). Imagining the other two rating scores and corresponding fitness conditions should be a mere formality now for the reader of this post.

So what are the mantras to enhance and maintain the fitness of Purchasing departments to be able to run processes equivalent to 1 marathon per day? A simple analogy from life again should help here, which I will describe now (a number of you would have experienced this too I am sure). A sedentary person decides to get active and takes the 1st step. He/she goes for a medical checkup, takes findings from doctor(s), physiotherapists and dieticians to evolve a scientific, practical, diet-fitness-relaxation regime. Firms can do something similar by engaging a specialized procurement consulting, BPO and technology partner firm (specialist doctors, physiotherapists and dietician all available in one hospital). The 2nd step the person takes is to seriously invest time, interest and resources to implement the regime - irrespective of whether he/she has to travel, go to the gym or work out at home, maintain perseverance and discipline whether it rains or partying becomes too much etc. Firms can do the same themselves or take the help again of a partner firm. Invest and implement into best practices based processes, technology solutions, people, information/intelligence etc. Outsource whatever makes you slow / loath and keep in-house whatever makes you faster and better instead. Set targets, measure constantly and report frequently.

So what happens next? Simple and intuitive again. Results start showing up. A person who was barely able to walk, is able to jog and run comfortably over a period of time as a result of following the 1st and 2nd step. Such transformations can be astonishing and are yet very real (I am sure that many of you would have experienced/seen such seminal folks around you). Once again, firms experience the same. The perception of Purchasing department changes along with its overall performance. It starts to be viewed as an agile, fit and ever-energetic department that is always rated 1, as it runs seamlessly to meet the firm's long and short term objectives adding tremendous value.

So get active! Take the 1st and 2nd steps to make your Purchasing department run seamlessly. Good luck to all the readers!

March 2, 2012

Infusing Cadence into Professional Services Category Management

Any category manager, who deals with the Professional Services category, would certainly tell you one common aspect about this category - It is the most difficult one to manage across all the Spend categories within an organization. And if you continue the discussion, they will most likely tell you these reasons: "Services specifications are usually vague or absent, eliminating chances for a structured category management; expertise that I am buying is neither defined by user nor by suppliers limiting the visibility; linking contracts to performance is usually missing etc." If you ask one last question "Tell me in few words, what is that one thing that you are missing the most in managing this category?" the answers would all roll into this - "Cadence is missing in the management of this category relative to others."

You will, most probably ask one more question now - "What do you think should be done to get this cadence back?" A plethora of answers will come and most likely in these categories : "Framework and approaches for this category-commodities need to be introduced; Right category managers need to be recruited or capacities augmented; It should be specified clearly that who owns PS spend and supplier management - the stakeholders or purchasing etc."

I am sure that "you" here means someone who is reading this post, could be from a firm that is facing lack of cadence in PS or a procurement consultant and service provider who may have helped a number of firms to provide a solution here. Whosoever you are, you need to know some broad guidelines and that is what I am happy to share through this post.

Unlike standard materials (Direct, Std. MRO, Capital) and usual services (courier, logistics etc.), the degree of complexity of specifications, suppliers buying power and close access to stakeholders are two causal factors that limit the influence/value addition PS category managers can bring in here. When they still want to influence this category under such circumstances, "noise" in the system is created due to resistance from stakeholders-suppliers combine in many forms e.g. "procurement doesn't understand my universe but supplier does so they should leave it to us to directly manage this spend; procurement is good enough to buy standard items/services but not PS; procurement always wants to get lowest prices which is not the case here and value addition is the focus". So one of the best practices could be to clearly identify and list those PS commodities that are best left to stakeholders given their complexity, and if procurement does not have functional experts who have experience similar to comparable stakeholder(s) - within the department (including extended procurement organization of outsourcing partner). The residual PS commodities can be taken as the ones which procurement should influence and with consent of stakeholders.

This simple yet effective approach can bring in the missing cadence and ensure an organization accepted approach to bring PS spend under management to realistic levels. The key here is to identify such have and have-not list of PS commodities for which a one-time project with a capable procurement consultant cum outsourcing firm can be executed.

So what do you think? Look forward to get responses and continue the discussion threads.

February 20, 2012

A critical business link - hire to retire planning for talent in sourcing and procurement (S&P)

Let's face the paradoxical situation that has not changed from the last many years though 2012 has arrived. Effectively skilled S&P talent continues to remain in short supply for most of the firms' supply departments (S&P) themselves.  The not-so-favorable impacts which such a situation can cause are quite intuitive and are mainly - high supply & business risks, and lack of spend % under professional management.

Whether it is the rising economies of India, China, and Brazil or the stagnating major economies of Japan, US and Europe, the situation continues to be the same. Causal factors for rising economies have scope creep and speed level challenges, while major economies suffer adverse demographic factors limiting talent supply (e.g. baby boomers retiring big time post 2010) in addition to flux in their economic situations. Time to look at some credible data points now which details what is being felt within the firms. 47% of the 121 respondents to a survey by Aberdeen reported "lack of staff with appropriate skills" as one of the "barriers to strategic actions for the CPO". In the same report, 34% of the respondents ranked "lack of category expertise in strategic spend areas" as one of the six "top pressures facing procurement leaders". Obviously, the impact of such a state continuing can have impact on procurement performance and as well as at COGS and SG&A levels of firm.

So why does this situation exist and what can be done about it remedially? Simply stating - there are only 2 approaches and solution buckets.  I call the first one as "Do it all yourself approach" and the second one as "Get it done under your control approach".  For the sake of simplicity, let's name the first approach as "Do" and the second one as "Get done". Considering a firm's goals and strategy which approach should it choose and why? There are only 3 criterions in my view - Investments (I), Attention (A) and Procurement Performance (PP) that is planned by firms in the near future. So if the firm is sure that it can provide sufficient quantum and rates of I and A to hire, train, retrain and maintain procurement professionals to achieve the desired PP levels, it should choose the "Do" approach. It should choose the "Get done" approach if the reverse of this is true. A simple weighted average model can be built and surveys run with all the internal stakeholders to quantitatively validate this.

So how to execute whichever approach is found as the preferred one? Simple again. A CPO/decision maker in the firm has to just wear the Sourcing hat. He/she has to compare on a TCO model, how will the firm benefit if "Do" is chosen or if "Get done" is chosen. More often than not, the "Get done" option would be found having the lowest TCO. For example, in the same report, "managing internal staff/procurement department" was rated as "Top costs for the procurement organization" by 21% of the respondents, while "costs of managing outsourcing" was rated least cost by 8% of respondents out of the 6 cost head choices they were given. Conventionally also, S&P professionals know that "buying" is usually cheaper than "making/manufacturing" for non-core/strategic materials as well as services. A third option or combination approach also might be possible to be found i.e. "Do and Get Done". This would be applicable when say for Direct materials and services ,  a firm decides to manage talent supply and development on its own while it outsources all the spend categories (Indirect, MRO, Capital) to a procurement BPO who has established hiring, grooming and training programs. For example, Infosys BPO has an in-house procurement academy where over 1000 procurement professionals have been certified at various levels. Those who need to know more about Procurement performance and maturity may also find this short post useful.

So what do you think? Look forward to get responses and maintain the discussion.

January 6, 2012

It takes two to tango - is partnering with procurement BPO vital to increase stakeholder satisfaction?

Imagine the typical sourcing and procurement (S&P) function of any firm to be akin to a large ballroom. Also assume all the stakeholders of S&P functions as the spectators who are interested to know how the S&P performs for them and of course want to feel satisfied with the performance. Now imagine that there are 4 performances lined up for the 4 main spend categories -Direct materials, Indirect materials and services, MRO, and capital equipment. After seeing the performances, the spectators are likely to either cheer or boo, depending on their satisfaction levels.

What are the possibilities here? Many varying performance levels as intuitively we can imagine. For example, there could be lot of cheers for say the Direct materials performance but not for others, and combinations similar to this. Another possibility could be that the performances are completely solo (i.e. by a captive S&P team which takes care of all 4 spend categories) or tango (i.e. S&P team comprises of a captive and procurement outsourcing firm's combination for all or few of the 4 spend categories). Various other possibilities also exist around the standards of dancing. The tango could be an Argentine tango or a Ballroom tango where steps, speed and co-ordination differ thereby providing a varying visual treat. The spectators/stakeholders can be qualified experts in both to evaluate the performances objectively or can just view a dance as a nameless performance with expectations of seeing something that is good as per their own standards/frame of references.

Sounds familiar and easy to relate to the usual but complex buyer-stakeholder interplay across most of the firms in any industry vertical (i.e. discreet, process or service)?  What do you think is the likelihood that performances most likely to be cheered would be solo or tango? Why would you think so and what would you recommend to any firm in general and some firms in some particular industry vertical to treat as vital to obtain an all-round, pleasing and non-varying performance?  Invite all to discuss these 3 questions.

January 4, 2012

Is my procurement BPO service provider overcharging me?

This question has come to me multiple times - sometimes explicitly from customers, prospects and from myself when I was an industrial buyer like them buying professional services.  Believe it or not, many procurement BPOs cannot answer this objectively primarily due to the absence of structured FTE (full time equivalent resources) computation methods which are statistically significant, and/or banking solely on their own experience and heuristics. Or it may simply be because they believe higher the better for their business.

A number of buyers themselves do not ask this question in RFIs, cost break downs or just believe on the procurement BPO suppliers' credentials to slip themselves into the comfort zone like "when a renowned supplier like M/s ABC has stated this, there would be some basis for that". On the other hand, various buyers are uncomfortable thinking "I am being quoted for 50 Sourcing FTEs and I feel that this is high. How do I validate that at RFx, during contracting and post business award stages? Although my management has left it to my decision but still...."

So what happens is that some buyers continue to accept higher quotes, hire more # of FTEs from procurement BPO service provider(s) than they should and still be completely ignorant about this problem that is eroding value. Some are ambivalent about this but don't ask this question to procurement service provider(s) and some do ask, but do not get a favorable answer because the procurement BPO service provider may not be driven by objective of creating right value for clients (e.g. a procurement service provider whose leadership is structured on Partnership model will often do this). Some buyers will choose the FTE model while they should have chosen transaction based pricing or outcome/gain-shared based pricing.

One of the CPOs of one of the world's biggest telecom firms asked me this in 2010 and I had the convincing answers - thanks to the S&P CoE of Infosys BPO Limited - of which I am part of.  We were down selected based on our BAFO (best and final offer made on clients' own assessed FTEs) and MSA (master services agreement) was being negotiated. I was conducting an on-ground due diligence in the US and found that in fact the client required 10% lesser FTEs than they had specified and we had quoted for.  So what did I do? Simple.  Just walked up to the CPO and provided him the statistical model that detailed at a 95% level of confidence that 10% lesser FTEs should be fine to meet the given procurement BPO processes, their complexity etc. for next 1 year but that would be required to increase by 30% from year 2 (they had large expansion plans in 2011-2015).

Any views from someone who is facing such a question?

January 2, 2012

Non-value adding procurement practices usually die hard but can be made to die quickly

In my almost 20 years experience, I have worked with multiple stakeholders (clients, suppliers, prospects, internal team members etc.) while executing Sourcing & Procurement related projects. One of the things that I found common across multiple busines verticals was the relatively slower or inactive state of response to modify a non-value adding Sourcing & Procurement processes like purchasing mismatch errors resolution (errors between Contract, PO, Invoice, Payment); following up for obtaining PO amendments; getting quotes on non-structured RFP templates; working with unclassified spend data (e.g. 9999999 item code; non standard item descritions etc.). The other thing that used to surprise me was what I call as the "high tech buy - low tech use" syndrome prevelant across many of the organizations. What this simply means to me is that organizations will buy best of the breed ERPs (say mySAP, Oracle), procurement applications (say Ariba Sourcing Pro, Ariba P2P) at a very high upfront price with long term maintainence and product support contracts, but use just 20 to 30% of their features (e.g. not creating Contracts within ERP but in papers; not leveraging category management workflow capabilities of Ariba Sourcing Pro but just conducting RFIs and RFPs). So I have often witnessed CIOs, CPOs, CEOs presenting proudly that Ariba Sourcing Pro has gone live during last 1 year successfully without even mentioning the adoption rate of its total features.

A seminal quote came from Albert Einstien who paralleled insanity with doing the same things over and over again and expecting different results (e.g. how do we get higher ROI from our investments is still an undisputed goal for any organization but while continuing to work the same old, less efficient, effective or best in class way). One thing leads into another is an old adage. So what seems to be a common, unsolveable problem continuing due to lack of attention, rigor, investment or all of these, is often a business expertise area and model for procurement BPO service providers. Ask anyone of them and they will provide you N number of case studies, approaches and frameworks to not only transform/modify such situations but also add significant value (e.g. sourcing savings, compliance savings, risk reduction etc.) in the procurement performance. I have myself conducted a number of diagnostics, designed solutions, supported stakeholders to implement as well as proudly measure and report these regularly. I do believe that this assesment can be and should be started anytime, in any country and at whatever stage of Sourcing & procurement maturity a firm is. Like mining, one can always find some new oppurtunities everytime one mines. Anyone wants to support or negate the view?

December 23, 2011

Opportunities to improve Procurement Capabilities, Maturity and Performance

While it is obvious that any progressive organization would like to improve their sourcing & procurement (S&P) performance to best in class (BIC) or world class (WC) levels, not many would know the art and science of planning and/or executing it. On top of this situation, there are day to day pressures of meeting supply requirements, supporting other internal mandates and coping up with shortage of procurement skills/people. Whether any organization is in growth or maintenance phase of its lifecycle, this need or desire to meet such challenges remain constant. So what's the way out?

One way out could possibly be to seek external help from a strong partner in procurement who knows not only to measure the as-is situation, but who is also able to present a medium to long term roadmap to achieve breakthrough procurement performance. One important aspect here is alignment of various procurement infrastructure elements (e.g. people, process, technology, knowledge etc.) with other operations/business strategy elements, considering their individual availabilities, capabilities and maturity levels. Alignment and capabilities of procurement elements decide the level of ultimate procurement performance.

Infosys solved such problems for a leading hospital in early 2011 - a 1300+ bedded hospital in Belgium. Infosys S&P experts conducted detailed surveys on-site, administered questionnaires to arrive at statistically significant as-is situation indicators. The road-map to the to-be state was then planned for a 5 year horizon balancing the business needs, investment and ROI goals of clients. For each of the capability improvement phases, incremental benefit streams, organization structures and change management plans etc. were detailed in an actionable, plan vs. actual type tracker. In addition, various sourcing strategies tailored to hospital specific commodities and environments were detailed (e.g. managing physician specified commodities).

The business case forecasted procurement performance elevation to BIC and WC levels in 5 years on parameters like Quality, Cost of procurement operations, Delivery, Savings, Spend under management etc. In addition, the stakeholder value likely to be added was also forecasted. The report was approved by C level executives and implementation is currently on.

So, a great opportunity exists for all firms to invest in something as significant and highly value adding.  Such a project can be real quick also, ranging from 1 month to 3 to 4 months to get the business case with roadmap for approval. Would be eager to know views from you and continue the discussion.

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