Given the emerging understanding that Procure to Pay (P2P) improvements can yield 5-10% bottom line savings or more, many companies are looking again at their P2P processes. Procurement, Finance and IT may all become involved in these projects, often without an understanding of what the others are doing, and often to the detriment of the overall project effectiveness. Effective organizations like Walt Disney, British Airways, and others have learned 5 key points of success:
Have Executive Support – Change is hard and unless it’s driven from the top down or integrated into the culture, change is VERY slow and often focused at the departmental level rather than in the most effective, holistic fashion. Identify an executive to support and champion the project, and be sure they will continue to emphasize the importance of adoption after the launch. Imagine how British Airways’ adoption increased when the CFO said any out-of-process purchases would require his approval, and 3 process violations could result in termination?
Make it Easy to Use – In the words of the Walt Disney Company, “Focus on the user experience and results will follow.” People today are used to online purchasing – selecting, comparing and ordering products from their home PC’s. Give them this same simple experience at work, in a way that ensures they are buying from an approved vendor at approved terms and you have the foundations for success.
Make it Scalable – All of today’s P2P systems say they integrate with suppliers. The question is, how well do they integrate and how sustainable is that integration? If your goal is to have over 80% of your spend go through this system (which should be your goal), how many suppliers will you have to manage? What kinds of portals can be established and do you have to maintain a unique one for each, or is it a universal portal? With few exceptions, companies can only reach the level of scalability needed to reach their goals by using universal adapters and portals that extend beyond the core ERP and connect to a robust Supplier Network.
Make it Accurate – In classic business terms, Garbage In, Garbage Out. If the buying that occurs is not compliant across vendor selection, pricing and contract terms, how do you expect to actually pay what you should? Putting a process of 70 checks in place at the time of Invoice receipt is NOT an efficient process (I wish I was making up this number, I’m not). Instead, drive the solution back to the start of the problem. Ensure that when an order is placed it meets the 3 key criteria (supplier, price, and contract terms). Have automated systems to ensure that what is received matches the accurate order and the invoice. Suddenly you end up with 2 finance rules: 1) Is it a unique invoice and 2) Does it have a accurate order. Now the Invoice is ready to pay upon receipt, transitioning AP into a cash management function rather than a librarian who has to look up the contract, price and supplier terms to validate each order.
Make it Visible – Nothing breeds success like visibility. Have a clear, simple metric that your Executive Sponsor supports (perhaps it’s the % of total spend that goes through the system, a goal for number of orders or the total dollars of compliant spend). Whatever it is, be sure it is easily measured and reported on frequently (at least quarterly, but better on a monthly or even weekly basis). Provide recognition for the organizations doing well, and motivation for others to improve. (Who wants to be the one with the rubber chicken hung from their office door for a month for having the least-compliant department?)