Finance directors 'need to be sold on benefits'

18 October 2000
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19 October 2000 | Cathy Hayward

Selling e-procurement to the finance department is the most challenging part of its implementation for purchasing professionals, Moira Crabtree, purchasing director at insurance company Royal & SunAlliance, told delegates.

Providers may bandy around fantastic potential savings from e-procurement systems, but promises would not impress finance directors.

"You must stick to hard facts," she told delegates. "You will be asked to prove claims, that, for example, online purchasing reduces transaction costs from around £60 to £6."

She urged care when making claims that e-procurement will increase productivity. This implied the purchasing department was in a mess, which may not be a wise move. "Finance will want staff cuts if you say the process will be streamlined. But if you have redundancies, there will be massive internal resistance to e-procurement," she said.

Many purchasing managers told finance that e-procurement will stop maverick buying. But this was also inadvisable, said Crabtree. Only about 60 per cent of expenditure could be done electronically, leaving the rest open to maverick buying.

A strategy to address this shortfall was vital, she said. Educating staff against maverick buying was the best way to stop them using local suppliers then claiming the costs back.

Management will question whether better deals are possible if you use the same suppliers with a new e-procurement system. Crabtree acknowledged that it was hard to convince the finance department that online competition and supply chain savings do reduce prices.

Theresa Rynard, senior category manager at buildings materials group Caradon, and who is leading the firm's e-procurement pilot scheme, agreed. "You need boardroom support," she said. "Ideally you should have a team, including a board member, that focuses on e-procurement and can push it through the business."

Warren Smith, e-business manager at SwanBayley Purchasing, which won the contract for Imperial College's purchasing in 1999, had similar experiences with the college's management. "You must have a solid business plan and provide evidence for everything," he said.

SMoct2000

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