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FAQ
Frequently asked questions
What is Tail spend?
Tail spend, also called spot buy, concerns all the products and services that companies need on a punctual and irregular basis to operate on a daily basis.
For example, during a snowstorm, this may involve purchasing snow removal salt, or when you are organizing a seminar, purchasing chairs, or even individual protective equipment (stocks of gloves, masks, etc.) in anticipation of an epidemic.
Most of the time, these unauthorized purchases are made outside the purchasing policy in place. This therefore runs counter to a TCO approach.
How is the cost of a paperless transaction estimated?
The digitization of the purchasing process concerns the steps of product selection, sending the order, processing invoices and finally paying them electronically:
– The purchase request and its validation are done directly in the digital solution (Punch-out for example). This eliminates the need for the buyer to manually create an order.
– The order is sent directly from the digital solution after hierarchical approval.
– Invoices are collected online via the Supplier Portal or via interfaces (EDI).
– Payment of supplier invoices is triggered automatically on the due date if everything is in order (amount, quantity, receipt, quality).
In this case, we are talking about sending orders electronically (EDI: electronic data interchange).
Thus, through this optimization of the purchasing process (without human interaction), the cost per transaction goes from an average estimate of 120 € to 26 €.
What do you think about counter orders?
Counter purchases can be useful in some cases, especially in case of extreme urgency on a construction site.
When it comes to tail spend, the urgency criteria should be put into perspective or even discarded, as they are most of the time due to a lack of anticipation that can be solved by a respected purchasing strategy and an adapted digital solution. Counter purchases once again go against a TCO approach because they generate a lot of hidden costs.
Nevertheless, BME offers an emergency service that allows you to pay a counter supplier remotely and in real time. The respect of the deadlines of a construction site and the safety of your customers are our priorities.
When it comes to tail spend, the urgency criteria should be put into perspective or even discarded, as they are most of the time due to a lack of anticipation that can be solved by a respected purchasing strategy and an adapted digital solution. Counter purchases once again go against a TCO approach because they generate a lot of hidden costs.
Nevertheless, BME offers an emergency service that allows you to pay a counter supplier remotely and in real time. The respect of the deadlines of a construction site and the safety of your customers are our priorities.
Can you specify the evaluation of the average management cost of 1000 € per supplier?
This evaluation can be broken down into four main costs:
– First, an initial cost of referencing the supplier: sourcing the supplier, analyzing the profile, retrieving the initial administrative information, even evaluating the financial risk.
– Then the cost of maintaining the supplier database. Purchasing departments evaluate the status of their suppliers annually (active, dormant, etc.). In addition, there is often the cost of the ERP itself and of external monitoring service providers.
– The cost of administrative management imposed by regulations (legal documentation, solvency, CSR, subcontracting). There are specialized companies that can help Purchasing Departments collect this information, but this generates an additional cost.
– Dispute management, concerning product returns and credit notes.
– First, an initial cost of referencing the supplier: sourcing the supplier, analyzing the profile, retrieving the initial administrative information, even evaluating the financial risk.
– Then the cost of maintaining the supplier database. Purchasing departments evaluate the status of their suppliers annually (active, dormant, etc.). In addition, there is often the cost of the ERP itself and of external monitoring service providers.
– The cost of administrative management imposed by regulations (legal documentation, solvency, CSR, subcontracting). There are specialized companies that can help Purchasing Departments collect this information, but this generates an additional cost.
– Dispute management, concerning product returns and credit notes.
Can this approach of outsourcing spot purchases be applied to an SME?
Yes, this approach can indeed be applied to an SME as well as to a large company.
The cost can be reduced, depending on the size of the company, its structural and/or organizational costs, or its sector of activity.
An SME specialized in the nuclear sector or another specific sector may have additional administrative costs by the simple fact of having to control the normative aspect of its obligations.
In any case, centralizing spot transactions on a single supplier generates better fluidity and sustainable savings.
The cost can be reduced, depending on the size of the company, its structural and/or organizational costs, or its sector of activity.
An SME specialized in the nuclear sector or another specific sector may have additional administrative costs by the simple fact of having to control the normative aspect of its obligations.
In any case, centralizing spot transactions on a single supplier generates better fluidity and sustainable savings.
What are the different types of purchase classification?
Purchasing departments most often use their own classifications (commodities/purchasing categories). If this is not the case, they can use the most widely used generic classifications such as the UNSPSC or eCl@ss.
For example, the UNSPSC or “United Nations Standard Products and Services Code” is a nomenclature of more than twenty thousand categories proposed by the United Nations, with a hierarchical structure at four levels: “Segment”, “Family”, “Class” and “Product”. The hammers belong to the class of “forming tools” which belong to the family of “hand tools”, which in turn belong to the segment of “general tools and machinery”.
For example, the UNSPSC or “United Nations Standard Products and Services Code” is a nomenclature of more than twenty thousand categories proposed by the United Nations, with a hierarchical structure at four levels: “Segment”, “Family”, “Class” and “Product”. The hammers belong to the class of “forming tools” which belong to the family of “hand tools”, which in turn belong to the segment of “general tools and machinery”.
Which digital system would you recommend for supplier catalog management?
We recommend working with a digital solution such as Punchout in order to benefit from a product offer that is updated in real time (stock availability, access to product sheets, etc.) and that is much more intuitive for users during their product search. This also allows users to avoid wild purchases by accessing hundreds of thousands of references more easily in the case of tail spend.
How do you calculate your own cost per transaction (TCO)?
The cost per transaction can be calculated by breaking down the ordering process in your company. Then determine for each step which employees are involved, how much time they spend on the transaction, and what costs are involved for the company. Adding up all these costs gives an estimate of the cost per transaction.
I invite you to download our White Paper on this subject.
I invite you to download our White Paper on this subject.
Doesn't the implementation of a punch-out tend to increase the number of orders?
This may be true in some cases, such as when no minimum order amount is specified. The aim is to avoid processing orders that generate more processing costs than the value of the items ordered.
Furthermore, the Sourcing Force solution integrates validation circuits and budgetary controls to avoid any abuse of consumption.
Furthermore, the Sourcing Force solution integrates validation circuits and budgetary controls to avoid any abuse of consumption.
What is a TCO approach?
The TCO (Total Cost of Ownership) aims at analyzing the real costs generated by the purchase of a product (beyond the simple purchase price) from a supplier. The TCO includes all the costs throughout the life cycle of the product, combining direct costs but also and especially indirect costs, also called “hidden” costs.
How come Buy Made Easy estimates the cost per traditional transaction at €120 when it is usually estimated between €150 and €250?
Indeed, in the studies, there are several evaluations of the traditional transactional cost ranging from 150 € to 250 €. At Buy Made Easy we have decided to take the average of our own consulting missions in French companies. We believe that this cost per transaction is closer to the reality of companies in France that have generally already optimized part of their purchasing procedures.
This remains an estimate, which may vary according to the organization/structure costs of each company.
This remains an estimate, which may vary according to the organization/structure costs of each company.
Are you able to list any product at BME?
We have enriched our offer leading us to propose today more than 5 000 000 references for companies of all sizes. Our B2B marketplace offer aims to cover all the needs of companies such as tools, packaging and handling products, office supplies, office furniture, etc.
Depending on the type of products that are not referenced in our offer, we carry out a referencing on demand. For example, having been requested by several customers, we have recently referenced a new range of industrial products covering mechanical transmission elements (ball bearings, etc.).
We also take care of all types of non-catalog references such as services, seminars or manufacturing to plan.
Depending on the type of products that are not referenced in our offer, we carry out a referencing on demand. For example, having been requested by several customers, we have recently referenced a new range of industrial products covering mechanical transmission elements (ball bearings, etc.).
We also take care of all types of non-catalog references such as services, seminars or manufacturing to plan.
What do you think about small purchases made by credit card on the Internet?
Many Purchasing Departments have made company bank cards available to their employees, as part of an effort to control expenses. At first glance, this makes life easier for employees and helps them control their overall budget.
However, this solution is not satisfactory in many respects. Indeed, if you really want to optimize your spot purchasing, it is necessary to be able to analyze expenses by purchasing category (suppliers/products) and not in a global way.
The use of purchasing cards leads to an increase in the number of suppliers and goes against the rationalization of the supplier panel.
Users retain the administrative burden of managing expense reports and keeping receipts. Accounting must reprocess the transactions to assign them manually to cost centers.
However, this solution is not satisfactory in many respects. Indeed, if you really want to optimize your spot purchasing, it is necessary to be able to analyze expenses by purchasing category (suppliers/products) and not in a global way.
The use of purchasing cards leads to an increase in the number of suppliers and goes against the rationalization of the supplier panel.
Users retain the administrative burden of managing expense reports and keeping receipts. Accounting must reprocess the transactions to assign them manually to cost centers.
The key word is "communication", do you have any predefined communication plans, tips for outsourcing spot purchases?
Indeed, communication is crucial in the implementation of the purchasing outsourcing action plan. The important thing is to coordinate joint communication between the purchasing departments, Buy Made Easy, the second-tier supplier and the users.
The purchasing departments of companies have much more influence with users than an external service provider. Thus, the external service provider will accompany them in order to raise awareness among users about bad practices, to eradicate unsuitable procedures (unauthorized purchases: counter, credit card, etc.) and then to promote the digital solution by highlighting the savings that can be made for the benefit of the company.
The trick is to communicate through internal newsletters, or well established formats in the company. These communications should include the conditions of the offer (discount), the possibilities for the end-users, the type of products concerned, explanations on what changes with respect to the habits.
The crucial point is to anticipate the resistance of employees to the change of suppliers, by explaining how this change occurs and why Buy Made Easy is the best answer.
The purchasing departments of companies have much more influence with users than an external service provider. Thus, the external service provider will accompany them in order to raise awareness among users about bad practices, to eradicate unsuitable procedures (unauthorized purchases: counter, credit card, etc.) and then to promote the digital solution by highlighting the savings that can be made for the benefit of the company.
The trick is to communicate through internal newsletters, or well established formats in the company. These communications should include the conditions of the offer (discount), the possibilities for the end-users, the type of products concerned, explanations on what changes with respect to the habits.
The crucial point is to anticipate the resistance of employees to the change of suppliers, by explaining how this change occurs and why Buy Made Easy is the best answer.
Do you include the cost of installing an e-procurement solution in the estimate of digitalized transactions?
The initial investment in the e-procurement solution is not included in the estimated cost per digitalized transaction of 26€.
Sourcing Force offers advice and support you for the implementation of the punchout or hosted catalog. Except for specific development requests, the set-up costs are negligible on the transaction cost.
Sourcing Force offers advice and support you for the implementation of the punchout or hosted catalog. Except for specific development requests, the set-up costs are negligible on the transaction cost.
Does substituting several suppliers with a single one lead to giving this supplier the function of referencing (sourcing) and placing orders?
In practice, we speak of “out-sourcing” in English, or externalized referencing in French. In the case where the substitutable suppliers are regular suppliers of the company, BME Consulting will take the decision with its product managers to get closer to these suppliers and to reference them if they are not already. The advantage of this solution is that BME Consulting allows you to benefit from better prices, as well as associated services.
Regarding the ordering process, it remains centralized at BME in order to offer you a unique supplier account for all your spot purchases.
Regarding the ordering process, it remains centralized at BME in order to offer you a unique supplier account for all your spot purchases.
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