Oracle

Procurement Best Practice – Leveraging Self-Service Requisitions

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If you are reading this article I assume you have asked Mr. Google to find a best practice. What you will see is the Top 5 or 7 or 10 best practices for this year or last year or any year. These articles contain many valid ideas and data points that should all be reviewed and considered for your operation but what does it mean to you?

The phrase Best Practice has a very subjective definition and all of us look for an answer that fits our business methodology. One that tics our list and sounds good to our decision makers and budget providers. A Best Practice is the one that addresses your business needs and represents the best probability it will used by your workforce.

Here some steps to finding your Procurement Best Practices:

  1. Honestly assess your current procurement operations.
    • Where are you strong and doing well. Where are you weak and struggling.
    • Acknowledge that both strong and weak attributes can be improved.
    • Do not omit informal processes during the assessment. Many key processes live in email or other informal media that should be addressed in determining best practice.
  2. Build a comprehensive list of procure to pay needs and goals.
    • Bulleted lists are great but be prepared with detail explanations. “I want to do X so that I can achieve Y”. (and yes I see the irony here)
    • Cover the entire procurement life cycle including cross processes. The goal is to improve procure-to-pay and not simply push tasks to other processes.
  3. Get a second or third opinion.
    • With your list of needs and goals in hand, obtain an outside assessment.
    • There are many best practice ideas and methods available that external resources can offer but none know it all.
    • Try hard to understand recommendations that seem very foreign or unnecessary. They may end up being the best practice for you.
  4. Be committed to change.
    • Change is hard and the single most import item on the list.
    • Business leaders must be committed to change.
    • Be open to replacing your current processes no matter how comfortable and efficient you believe them to be.
    • Be open to adjusting your project scope so you don’t miss out on leveraging practices that reduce future costs and time to deployment.

Example of applying a Best Practice in Procurement by leveraging Self-Service Requisitions

Current Business Scenario

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Company A Procurement Operations is responsible for executing system Purchase Orders based on externally generated requisitions in the form of a document routed through email for approvals. As the procurement department is small, certain non-procurement personnel are authorized to enter purchase orders with buyer oversight. This process is largely successful in that it is easy to complete the form and route the document. Buyers receive this document as a spend request and create a purchase order in the procurement system. Company A has set a project scope that excludes the current requisition process citing concern for internal change management and perceived efficiency.

Current Business Process

  • Requester processes external requisition and sends to buyer or designated order entry person for purchase order creation.
  • External Requisition is converted to external Request for Quote/Proposal to obtain negotiated prices.
  • If small number of lines, purchase order created to match requisition.
  • If high number of lines, purchase order created with a single amount based line and requisition document attached as a detailed statement of work.
  • Requisition and RFQ/RFP attached to Purchase Order as supporting attachments.
  • Purchase Orders created by non-procurement personnel submitted to assigned buyer for review, updates and approval.
  • High value purchase orders routed to additional procurement management levels as required.
  • Purchase orders do not require receipts and all related invoices are routed to requester hierarchy for approval to ensure payment for actual products and services delivered.

Process Assessment

  1. Does it support the need to audit procurement records?
    1. Yes as the “approved” requisition and email files are attached to the PO and become auditable along with the PO.
  2. Can the procurement system analyze historical spend?
    1. Yes although with limited details as analysis is from the PO and payments, not the requisition.
  3. Can buyers assess current to historical costs with a new procurement?
    1. Yes but with much effort as the historical details are buried in a separate requisition document.
  4. Are there any duplicated processes?
    1. Yes as the requisition approval takes place offline and then the received invoice is routed to the same approvers for payment of spend already authorized by requisition approval.

Best Practice Business Scenario

Company A Procurement Operations is responsible for executing Purchase Orders based on system generated and approved requisitions. Requisition process is moved to purchasing system and requisitions are created with detailed line items and routed through workflow to obtain all required spend approvals. Non-procurement personnel are moved from PO entry roles to Requisition entry roles.

Best Practice Business Process

  • Requester or designated person creates requisition and submits for spend approval within procurement system.
  • Requisition is converted to Request for Quote/Proposal to obtain negotiated prices.
  • Buyer processes requisition and quote to Purchase Order with all details contained in requisition
  • Purchase Order submitted for review and compliance approval by procurement management as required by document value.
  • All Purchase orders require receipts to allow invoice matching and payment with no additional approval requirements.

Assessing the process:

  1. Does it support the need to audit procurement records?
    1. Full audit history on requisition and purchase order life cycle including changes and approval processing.
  2. Can the procurement system analyze historical spend?
    1. As requisition created in purchasing system the line level details offer ongoing analysis. Additionally these details are available for reporting.
  3. Can buyers assess current to historical costs with a new procurement?
    1. Historical costs can be assessed by category or item.
  4. Are there any duplicated processes?
    1. By leveraging requisition approval within the purchasing system and matching invoices to PO and receipt approval workflow for invoices is no longer required.

Benefits

  • Concern for change management related to non-procurement personnel needing to ‘learn a new process’ was mediated as user training was required regardless of deployment path. Choosing the best practice required no additional change management.
  • Supplier payment cycle time reduced by eliminating invoice approval flow
  • Management visibility to spend commitments increased
  • Auditability of purchasing process improved
About the Author

John serves as a Solution Architect for the Perficient Oracle ERP Practice with 25+ years of experience in Procurement and Supply Chain Systems.

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