News and Latest Articles

E-PROCUREMENT IS THE FUTURE

Charlie Morgan, of LSG, talks to Captive Review about e-procurement for professional services, procure-manage-pay and the power of metrics

Technology is playing an increasingly prominent role in the world of claims management, vendor/ supplier sourcing and procurement management. Recent advances in the world of electronic procurement and supplier management technology span many different industries including the captive market.

The captive market alone is estimated to spend billions per year on third party professional services but is this being managed effectively and efficiently? Is your organisation using the best in class technology solutions and services to deliver total outcomes?

Leveraging buying power is a driving force in the utilisation of procurement technologies. Small to medium-sized organisations may also take advantage of an abundance of software tools and support services which are readily available at competitive prices. Any service or product - from paperclips to lawyers – may now be sourced, procured and managed electronically.

In the ‘claims world’, the benefits of a strategic approach to e-procurement for professional services are very real and numerous.

In this article, Charlie Morgan, client relations manager of LSG, outlines the new enhancements to LSG’s Advocator System® ELM, delivering greater value to the general counsel, claims directors, CFOs and procurement professionals of a growing number of organisations.

E-sourcing: the buying and procurement world

Procurement affects almost all commercial sectors, from insurance to construction, mining,  energy,  transportation  and logistics. Almost anything we consume has been sourced and made available through a complex number of layers within the global supply chain.

The supply chain can begin from the source of raw materials, such as iron ore for steel-making, and end with the opening of a new bridge or tunnel in the case of a large scale construction project. In the centre of these chains is the management of professional services, suppliers and products.

How much of the supply chain has moved onto an electronic platform varies from industry to industry, but in most cases, all products and a growing number of services are being driven by e-sourcing software solutions.

E-sourcing, simply put, is moving from what was once a highly paper-driven process to one or more electronic platforms. How much of the client-supplier/vendor relationship has moved to this procurement model depends on the complexity of the requirements for services and/or products in question and the industry.

The manufacturing industry, for example, is highly engaged and has been a key player in the development and sophistication of e-sourcing solutions and the insurance/claims industry insurance is also a key driver.

e-RFI & bidding

Selecting the best supplier(s) and/or product( s) for the requirement(s) is the first step to satisfying the procurement needs at optimal level. Procurement professionals, in collaboration with their internal stakeholders, are challenged to identify and select the best supplier for their specific needs. Typically, a request for information (RFI)/request for proposal (RFP) process will be conducted, sometimes with the assistance of outside consultants before selection(s) are made.

How this process is managed can be improved with the support of technology. At LSG, we have built an RFI and bidding plat- form whereby pre-approved suppliers can provide detailed information, documents and pricing about themselves and their services in response to a RFI/RFP. This bidding process enables the organisation to manage and control the RFI/RFP process and ultimately to select the best supplier.

Procure-manage-pay

Following selection, the supply of the service or product can be controlled with approved purchase orders and payment is made at agreed points. This reflects the typical procure-to-pay model adopted by many technology providers.

At  LSG, we  have  enhanced   this procure-to-pay   model  by  adding  a ‘case/matter/project management’ layer where the delivery of the service requires a more ‘hands-on’ approach. This enables our clients to track tasks, milestones and budgets as appropriate: the classic example being the provision of time and rate-based legal services together with associated expenses.

The procure-manage-pay  solution  allows our clients to have the ‘best of both worlds’: service and/or  product  selection  based  on appropriate supplier valuation and greater control over professional spend which typically cannot be predicted so well, as opposed to, for example, a single order of X widgets.

It also enables our clients to track all category spends giving accurate  ‘line of sight’ across the organisation (see box out).

Metrics to measure outcomes, performance and financials

Never before has there been so much attention placed on data and the importance of leveraging its potential. Those that master the latter are likely to gain insights that will give them significant competitive advantages and opportunities. The first step is to start collecting and measuring this data in a meaningful way.

As H James Harrington said: “Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something,  you can’t understand  it.  If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”

Likewise, we can learn lessons from Douglas W Hubbard when he said: “If a measurement matters at all, it is because it must have some conceivable effect on decisions and behaviour. If we can’t identify a decision that could be affected by a proposed measurement and how it could change those decisions, then the measurement simply has no value.”

For these reasons, our  clients are  leveraging the value of the data collected by our technology solutions. Metrics to measure total outcomes, performance and financials of your valued suppliers are provided as standard via our reporting  solution  Advocator System® ELM Dashboard.

Reports provide  line  of sight across the organisation  as a  whole, by geography, by business  unit, by supplier  and/or  by spend  (fees, expenses  and  damages/ indemnity),  (un)realised  fast-pay discounts and many others. Other benefits include harnessing  the  data  to  plan and predict costs for similar matters, claims, cases and projects according to defined criteria.

Conclusion

Procurement, claims, legal and financial departments that want to enhance their operations should be considering technology solutions that are designed to do this.

These solutions deliver value throughout the procure-manage-pay life-cycle as well as ensuring compliance against your procurement processes, spend control programme and billing guidelines.

Consider also the power  of metrics designed to give total outcomes, best performance and financial reports. These are the real goals here.

Download complete article in pdf format Download