Buyer behavior in your purchasing application can identify many things, but most importantly it’s a lens into why contract compliance and utilization are not meeting expectations or tracking to your goals.
Supply chain and acquisition teams set goals for contract compliance that typically lead to cost savings for the organization and drive a strategy that makes rebates and tier-pricing incentives attainable, not just terms and conditions in a supplier or GPO agreement.
A single source of truth for all contracted items is a valuable driver of goals and objectives, but it is only part of the equation. It is critical that the behavior of end users – buyers and purchasing agents – in the single-source-of-truth marketplace is analyzed and tracked to ensure the system is enforcing the correct behavior. There are many factors that go into defining what the correct behavior is for an organization, but there are basic concepts that should always be part of the discussion.
For starters, system access must be a simple and seamless process. Buyers need to be able to quickly access the buying application through a seamless connection or authentication process. Ideally, single sign-on (SSO) should be used to avoid multiple usernames and passwords.
A complicated process might deter buyers from using the application. If the login data shows a low user count, evaluate to determine if system access is too complicated, takes too long, or has too many gates. There should be an easy-to-follow process to access the system that has the right security and filtering in place.
A Seamless Search
Second, buyers should be able to seamlessly search across all contracted content from one search bar. Web application users are used to typing in one search bar to get a result set without defining all the different parameters for an item. If the system cannot search across all content in one search, its ability to drive compliance and utilization is limited.
One way to determine what is being presented in the search results is to track and monitor the search terms for each buyer, or by business unit or department. Analyze this data to see which actions the buyer took based on search results. Did they choose the right item and process it through the application; did they choose an item that is compliant to a contract but not the most-preferred; or did they log out and purchase an item through another buying channel?
Reviewing and analyzing this data point can assist in determining the correct behavior modification approach – such as remedial training on the application with hands-on assistance, video training modules, or training documentation. It can also show if a user or business unit has a need for an item, but that they are not finding it. Content-filtering rules may need to be adjusted in the application to make the item available to them at the contract price.
Preferred Items First
One way to improve buyer behavior is to make it easier to pick the right item every time. Push the most preferred items to the top of the search results. In many cases where Prodigo Solutions analyzed buyer behavior in the purchasing application, it found that the most preferred items are not making it to the first page of the search results – rather, they are buried on the second page and beyond.
In most sessions, buyers do not go beyond the first page of search results. To solve this problem, Prodigo works with the supply chain team to identify the most-preferred items that match the most-popular search term(s). By doing this, we modify the item and search algorithm to show the most-preferred items either at the top of the page or the first page of the search-result set.
Once this is done, it is important to track and monitor results to make sure the preferred item is selected. The purchasing system should have the flexibility to direct spend to the right items to support strategic contract terms and conditions related to rebates and tiered-pricing agreements. If there is no way to strategically manipulate search results to shift the advantage to the buy side of the equation, then a new system should be considered.
Using the Purchasing Application
Ensure that buyers are completing the transaction in the purchasing application. A data point that always stands out is whether the buyer checked out or submitted the order in the purchasing application. In some cases, buyers log into the application and perform searches, but do not process the order through the system. In others, buyers do market research for the acquisition/sourcing team to provide information about items on a specific contract, but in many cases the buyer simply looked for an item and then purchased through another buying channel for various reasons.
For example, a buyer may access the system to find items emailed to them by a coworker and then purchase them through a buying channel that is not controlled or monitored properly. Prodigo’s data analysis would allow the organization to address the issue and modify the behavior before it becomes a problem. Otherwise, the organization might not have known this was occurring.
Monitor the Metrics
Identify your top buyers by dollar amounts and transaction numbers. One metric of importance is your top users’ behavior in the purchasing system. You can look at buyers who have the top-dollar amounts processed or those that use the system most frequently to purchase goods and services. The metric is not used to provide rewards or accolades; rather, it shows usage across the organization to determine if one buyer or business unit is using the system more than another and, in some cases, help ascertain why there are disparities between similar departments.
In a large health system there may be hospitals that perform the same services but are spread out over large geographic areas. They both may use similar contracts for items and the same purchasing system. However, the usage of the system may be much higher for one hospital over another. In this case, it is critical to analyze who is using the system and how much from each location to identify why a gap exists or why contract compliance is higher at one location and lower at another. Multiple locations buy the same items and have access to the same system, so why is the usage different? Without user data, it is difficult to isolate the root cause. Other factors come into play, such as the hospital’s census and bed count, but when these variables are similar and the numbers are not aligned, it is time to look deeper.
One of the most compelling metrics of buyer behavior is looking at the transaction types that are processed from the purchasing application to determine if the correct decision was made. Analyze specific transaction types and cart lines by the buyer to minimize ad-hoc or special request spend.
Ad-hoc or special requests are transactions that a buyer submitted containing items that are not in the purchasing system content index. In most cases, they contain items or services that are not on a contract, or the item was put on a contract, but the content didn’t make it into the purchasing system. In some cases, the item is in the system, but the buyer was unaware of its existence. The purchasing system should be able to alert the buyer in real time and at the point of requisition that the item has been added to the system, so they can select it instead of submitting a special request.
Most applications have a form to enter information to initiate a special request, and as information is added to the form the application should be searching to find that item to avoid a special request. The number of special requests drastically decreases when the purchasing application supports this functionality, and thus compliance and utilization increase. Special requests take more time to process and require investigation to find the item the buyer intends to purchase, which delays delivery and increases off-contract spend. Analyzing this data is critical to determine how to change behavior, update content, or source a new contract, all of which support compliance goals and reduce costs.
Buyer Behavior is the Starting Point
With the amount of data collected in the purchasing system, it can be difficult to know where to focus your attention. Buyer behavior is good place to start. These metrics show exactly what buyers are doing and how they are doing it, which can lead to positive outcomes.
Analyze the data to better understand how buyers are interacting with the system and content. Be prepared to make adjustments with training, content updates, process improvement, and sourcing strategy. Work toward anticipating the wrong behavior and have a plan to address it quickly.
In the article Noncompliant Buying Channels Erode Contract Compliance and Utilization, we noted that “the buying channel is critical to the buying process, and when it is not controlled and monitored on a regular basis the results can quickly change the advantage to the buy side.” Controlling the buying channel and making sure it is being used for every purchase takes diligence. One way to do that effectively is to report and analyze what buyers are doing and how they are using the system. The phrase “trust but verify” is used frequently, but it applies to this discussion.
About the Author
Ted Dagnal is the Vice President of Government Strategy at Prodigo Solutions responsible for all public sector initiatives and programs. Ted has been shaping supply chain best practices in the commercial healthcare industry for more than 20 years, working with some of the largest health and research systems in the country. He is passionate about bringing industry lessons learned, as well as more than 20 years of leadership service as a former U.S. Army officer, to actively help government clients transform and secure their supply chains and data in a federal environment.
Ted is leading the effort to rationalize the Supply Chain Master Catalog for the Department of Veterans Affairs to improve their data quality, enrich item attribute information, and improve contract utilization. He also led the FedRAMP authorization and ATO approval process for Prodigo’s Marketplace platform at VA.