Business case for Implementing a Sourcing & SRM Platform

2 years ago
diana
3 minutes

When constructed correctly and with the right data, a business case is one of the most powerful tools to induce a change in an organization. Using this type of structured proposal to champion the adoption of new eSourcing and/or Supplier Management tech ensures that decisions are made through a deliberate, rational process that delivers the best organizational fit. 

A business case should be used to communicate decision criteria to executives and establish a precedent for future procurement benchmarking.

We’ve put together a customizable presentation template that you can download and adjust to your objectives and organization workflow. Just follow the instructions below:

  1. Prepare the business case based on the model: Problem-> Solution -> Measure success
  2. Make sure to fill it in with challenges and objectives specific to your organization, give real examples, and get buy-in from different departments 
  3. Schedule a meeting to present it to the stakeholders or send it by email.

Our template consists of 3 sections:

I. Current challenges

Here you can describe the current challenges that your organization is facing. Here is a possible list:

  • Significant spending is done outside of policy and off-contract 
  • Overspending on budgets due to lack of visibility 
  • Manual Purchase Order and Invoice processing activities 
  • Inability to negotiate with suppliers due to lack of understanding
  • Lost opportunities in the market due to lack of time to analyze all the offers  
  • Inability to take advantage of offered discounts 
  • Reducing risks associated with suppliers
  • The procurement team is overwhelmed
  • Additional 2 headcounts are required in the procurement team

II. Your business objectives and initiatives

This can be split into different categories:

Cost Reduction

  • Continuous & disciplined approach to cost management
  • Obtain and negotiate better prices
  • Grow without a huge increase in headcount

Risk Management

  • Introduce new suppliers in your portfolio
  • Actionable visibility over the supplier database
  • Track and increase supplier performance  
  • Track and assure supplier compliance
  • Adequate process documentation/audit trail

Speed of Business

  • Increase communication and visibility on sourcing projects
  • Assure fast approvals and stakeholder alignment
  • Ramp up operations quickly
  • Drive out costs quickly from newly acquired operations

III. Critical Metrics & Measurable Success 

Specific metrics will help you to focus on the right problems and will determine your path to success.

A couple of examples split into different value drivers groups:

Improve Spend under Management

  • Percentage of no of suppliers with 80% spend
  • Tail spend as a percentage  of overall spend
  • Contracted spend as a percentage of overall spend
  • Percentage  of spend through preferred suppliers
  • Percentage  of spend through auctions and sourcing events

Cost reduction

  • Reduce budget overspending
  • Savings on commodities spend
  • Procurement ROI = (Cost Reduction + Cost Avoidance)/Cost of Procurement Operation

Improve Supplier Management

  • Number of active contracts
  • Number of active suppliers
  • Number of suppliers with a scorecard in place
  • Number of suppliers with high risk
  • Number of suppliers with contracts overdue

Scale operations

  • Time for onboarding new suppliers
  • Time for supplier selection and sourcing projects

Are you stuck somewhere? Don’t worry, we’re here for you. Drop us a mail at support@prokuria.com and we’ll get back to you.