Everyone loves a good bargain.
But if your job is procurement a surfeit of choice can be a mixed blessing.
Often corporate procurement staff find it tough to determine which supplier or product they ought to select from the dizzying array of options out there.
To speed up and simply this task many companies are turning to electronic tools – and in doing so, some have also dramatically cut down procurement and other costs.
A case in point is Safeco Corp.
This Seattle-based insurance company used a telecom expense management (TEM) system from a Canadian vendor to manage its RFP process.
In doing so, the firm slashed telecommunications equipment and services costs by as much as 23 per cent, and reduced its procurement cycle from 12 months to 12 weeks.
The new system from Avotus Corp. a software company headquartered in Mississauga, Ont., helped Safeco resolve one of its biggest procurement-related challenges.
One of the toughest tasks for Safeco was sorting through vendor responses to its requests for proposals (RFPs).
These responses can vary dramatically, so much so that it could take 12 months to achieve a fair comparison, said Lisa Nicholas, strategic sourcing manager at Safeco.
Crafting RFPs and distributing them to vendors and carriers was also proving to be cumbersome and time consuming, she said.
Often Safeco had to start from scratch, when creating a document that listed the specs for equipment or services it needed from suppliers.
The Avotus tool changed all that, she said.
Especially designed for the telecommunications market, the tool offers includes industry-specific RFP templates.
These include with a set of standardized questions that buyers can use as a starting point.
“There was no need to build RFPs from scratch,” Nicholas said. “We simply selected and re-worded any questions we felt were most appropriate for our RFP.”
Once the questions are completed, the company e-mails the RFP to vendors of its choice.
The Avotus product as provides real-time updates on various telecommunication rates.
This saved Safeco a lot of time in gathering market rate data and helped it prepare for negotiations.
“This feature also provides us with a very good idea of where pricing should be,” said Nicholas.
The system also immediately informs responding bidders if they are out of sync with the current cost or market range. It then provides them the opportunity to alter their bid.
The template and rate update features result in a better “apples to apples” comparison when reviewing bids, said Alan Gold, chief marketing officer at Avotus.
Safeco’s earlier challenges are typical among companies that invest in a wide array of telecommunication devices and services, he added.
“Most organizations would have separate contracts covering landline, cellular and data line services,” Gold noted. “These negotiations are often complex because they are not co-terminus.”
Since checking existing contacts and matching them with existing service and equipment options is very time consuming, some companies begin their procurement process 12 months before a contract expires, the Avotus executive noted.
An automated tool can cut that time to 12 weeks or less and enable companies to earn savings of at least 23 per cent in better prices and service terms, he added.
E-procurement tools enable companies to cut purchasing expenses mainly by streamlining processes and helping them find better bargains, according to one Canadian telecommunications expert.
“The main benefit these tools provide is not cost cutting, but in helping firms achieve a more consistent RFP process,” said Roberta Fox, principal of Fox Group Consulting, an IT and telecom consulting firm in Markham, Ont.
She said procurement software tools cut time spent creating proposals by providing templates. By automating the RFP process, they also allow companies to consider a greater number of bidders.
“Users get to ask the right questions to the right people.”
Procurement software products come in various flavours, Fox said.
Some offer the basic functionality, she said, allowing users to craft, standard or highly configurable RFP templates which can be sent out to vendors.
Others enable companies to host online bidding events on their own corporate site, while providers such as Merx Canadian Public Tenders serve as a third party e-tendering service.
Hosting online bids on a corporate site enables companies to exercise greater control on the process, while public e-tendering services may be ideal for government organizations also concerned about accountability and transparency.
Other procurement software products in the market include:
- Enterprise Reagent Manager from SciQuest, which can allow users to check if certain supplies are available from other internal departments before an order is sent out;
- Procuri TotalSource, which enables company decision makers to review and rank bids online; Emptoris Sourcing; and,
- Ariba, which comes with vendor self-registration and public posting features to reduce buyer cold-calling.
Organizations have two basic options for analyzing telecom expenses, according to Mark Tauscheck, senior research analyst for Info-tech Research Group in London, Ont.
Firms can either enlist the services of a professional telecom expense analyst, or purchase a telecom expense management (TEM) software tool.
Typically, analysts charge anywhere from 30 to 50 per cent of the savings a company can achieve for up to a period of two years, while a TEM tool sells for $20,000 to $50,000.
He said an analyst will scrutinize a company’s telecom invoices and determine areas of wastage or areas where savings can be realized.
Analysts are often well-versed in existing compliance regulations and tariff rules. “They can tip off a company if a vendor is ripping them off.”
In some instances, companies being overcharged due to a tariff or regulation oversight can claim money back from the provider for contracts up to six months old, Tauscheck said.
Software-based TEM tools on the other hand automate the cumbersome process of evaluating of a company’s telecom invoices to help determine where large amounts of money are leaking from.
“For firms that have ten of thousands of lines in their invoices, a TEM tool speeds up the scrutiny,” according to the Info-Tech analyst.
Among the many TEM tools in the market are: Invoice Insight, Tangoe, Cerylion, and Anchor Point.