One of the most common challenges for any procurement organization is controlling off-contract buying — or reining in the dreaded “maverick spend.” As businesses expand, so too do their supplier rosters, making it more difficult for purchasing departments to accurately track and manage overall spend.
SAP customer The Ericsson Group has met this challenge by implementing a standardized e-procurement platform based on the IBX eProcurement solution from Capgemini Procurement Services, which limits access to non-contract suppliers and provides deeper visibility into a business’s total spend. And while Ericsson provides telecommunications equipment specifically, the company’s procurement challenges will likely ring true with almost any manufacturer.
Ericsson — an SAP customer in Sweden widely known for its Sony Ericsson mobile phones — faced a similar business challenge in early 2000. The business was experiencing very high procurement transaction volumes and increased maverick spending within its homegrown purchasing solutions, which was increasing costs. After reviewing its procurement process and systems, Ericsson’s managers came to the conclusion that the company needed to increase contract compliance, as well as streamline its invoicing and mandate all purchases be based off a purchase order throughout Ericsson.
Rolling Out “Ericsson Buyer”
Ericsson turned to Capgemini Procurement Services to develop its internal e-procurement system, which it calls Ericsson Buyer. The system is based on four principle tenets: one process, one platform, one system, and one interface. The goal was to standardize and automate some of its purchasing processes by making Ericsson Buyer the only platform for indirect and services buying across Ericsson globally, and to move more of that transactional procurement out to end users in the organization. This would free the purchasing department up to focus on more value-added tasks like negotiating contracts and other strategic sourcing activities.
Ericsson’s biggest challenge during the global rollout was getting its suppliers onboard. Anders Paulsson, Director of Sourcing at Ericsson, was responsible for developing and implementing the new system and says suppliers initially resisted Ericsson Buyer. “At first, suppliers offered to link Ericsson Buyer to their websites,” he says. But Ericsson wanted to use supplier catalogs in its e-procurement system to guide buyers only to preferred suppliers and contracted materials. When Ericsson made this goal clear, the suppliers recognized the benefits that the business sought and got onboard with the Ericsson Buyer rollout.
Ericsson Buyer was launched in 2001 and was rolled out globally to every Ericsson business unit that runs SAP solutions for their business operations. To date, business units in around 100 countries have implemented Ericsson Buyer so the majority of the company’s global operations are on a single e-procurement system. Today, more than 40,000 purchase orders are sent through the system every month. Ericsson has also experienced a host of other benefits, such as:
- Achieved more than 90% purchase order compliance on indirect material
- Reduced the number of suppliers by 60%
- Increased spend capture with savings tracked to the bottom line
- Increased status for purchasers and understanding of their strategic function, due to less administrative work
Ericsson Buyer has not only increased the company’s IT maturity as an integrated part of Ericsson’s SAP landscape, but it confirmed management’s strong belief that an e-procurement system is the most effective way to capture spend.
Ericsson continues to see benefits from its e-procurement system and plans to continue streamlining its procurement operations with the help of Capgemini Procurement Services. The global rollout of Ericsson Buyer is closing in on its finishing line and Paulsson’s next purchasing automation goal is e-invoicing. “The driving force when it comes to e-invoicing is reducing our costs for invoice management by 40%,” he says. “And we see this as a very realistic goal.”