A: Stewart Hosford, director of e-solutions at QP Group, writes: “Compliance” as a commonly used term arrived with e-procurement in the late 1990s and applied to the ability of an organisation to drive spend through these systems. At its simplest level, compliance is the “stickiness” that an organisation can achieve with the processes and systems that are in place to manage spend. In financial terms, it is how sourcing savings are delivered to the bottom line, which requires specific and dedicated focus.

In practical terms, compliance troubles itself with the “four rights” of purchasing: the right item (what); the right process (how); the right price/quantity (how much); and the right supplier (who). Typically, if an organisation has in place some policy, process or technical solution to manage these “four rights”, then it will certainly understand the challenge of compliance, and begin to create a compliance strategy to manage it.

A compliance strategy is linked to the overall purchasing or supply chain strategy, and sets out compliance targets. Linked to these strategy targets are the “tactics” that an organisation can use to drive the required compliance. A tactical example may be charging cost centres for non-compliance, or taking suppliers off systems entirely, to stop usage. What is certain is that compliance requires its own strategy, which must include HR and people policy elements. It requires buy-in from the business and management in order to have any effect.

It is only at a certain point of improvement in the purchasing process that organisations begin to understand how significant an issue compliance can be. Over the past three years, I have worked with two organisations in a similar industry. The first had made investments in the purchasing process and tools, and understood there to be a major global problem with compliance, particularly with regard to the “right supplier”. Where a common supplier could be used, the correct or “right price” component of compliance management was also difficult to track and measure.

With the second organisation, it was in the early stages of investing in such tools and processes as e-procurement and e-sourcing. Its optimism stemmed from lack of visibility and, as such, they had underestimated the size of the task.

What these examples illustrate is that it is only when organisations begin to implement the process and associated tools that they begin to realise how important and challenging compliance management can be.

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