The Executive’s Guide to Purposeful Procure-to-Pay Implementations
By Tony Young & Art Travis
Procure-to-pay (P2P), which involves the four key stages of selecting goods and services, enforcing compliance and order, receiving and reconciliation, and invoicing and payment, is a core business process that offers exceptional opportunities for optimization and integration.
The best P2P software enables organizations to centralize and automate the process of purchasing materials in addition to maintaining an inventory of goods. In recent years, there’s been a dramatic increase in end-use industries implementing P2P software solutions to collaborate with suppliers and other companies along the supply chain, get alerts, and track events as well as analyze business intelligence data. An important benefit of having the intelligence data is that it has made it possible for organizations to gain previously unavailable insights throughout the entire procurement process, thereby allowing for more informed future planning.
The growing demand for centralized procurement processes, as well as the consolidation of supply chain management from various industries, is stimulating procure-to-pay market growth. According to Reports and Data, 2019, the global market for procure-to-pay software was $5 billion in 2018, and it is projected to grow to $9.2 billion by 2026. This represents a compound annual growth rate (CAGR) of 7.6%. With such growth and ongoing technological advancements as well as user expectations, it is no wonder that P2P solutions have evolved to include better features to encompass more segments of the process.
Assess Your P2P Maturity
To this end, it’s a great time to assess the maturity of your P2P operations to understand where you can make changes that will maximize efficiency:
- Does your purchasing team have a sourcing database in a system (not Excel)?
- How easy is it to buy from new organizations?
- Do you have a system to forecast demand (sales) beyond “same as last year”?
- Do you have a sales and operations planning (S&OP) process to discuss the forecast, and turn it into an inventory plan (by month for at least 12 months), complete with agreed-upon service levels?
- Do you have a vendor portal to communicate with suppliers?
- Are you tracking vendor performance and, if yes, are your vendors improving?
- Do you track inbound shipments by product and lot number?
- Can you divert shipments without them ever crossing your dock doors?
- Are more advanced receiving processes (e.g., license plating) part of your process?
- How is quality maintained? When a customer calls with an issue? Or by established processes (e.g., receiving inspection)?
- Do you have an automated three-way match for accounts payable?
- Do you have a separate defined business process to work with drop-ship suppliers?
Create a Vision for the Future
Keep in mind that you may need to rethink and revise many of your business processes to adopt the latest best practices. This will require defining your current state and creating a vision of the future state. Following this process will help:
Build a Team
A successful business process transformation project requires a team of business process owners. This team determines the project scope, objectives and measurements of the project. Create a steering team and a project team, and designate process owners.
Evaluate Your Current Processes
Analyzing your current-state processes begins with detailed key performance metrics and their value. Examples include productivity (order processing time, for example), quality, overtime and inventory levels. The analysis continues with business process mapping, particularly for quote-to-order, order-to-cash and P2P. By documenting your business processes, and by creating visual maps, your team can easily identify waste and redundancies.
Know What’s Possible
Before your team can define a future state, it needs to understand the capabilities a modern enterprise software solution offers, determine current industry best practices, and then map these best practices to enabling technology solutions to construct your future state.
Develop Your Future State Vision
Your team will naturally evolve into sub-teams based on cross-function value streams (such as order-to-cash), and each value stream team should facilitate workshops to develop your future state. The gap between the current state and the future state is where business process redesign begins – and where you identify ways (in addition to the opportunities already discovered) to eliminate waste, optimize processes and improve productivity.
Make the Business Case for Change
The business case is the justification for your project and the rationale for redesigning current business processes. It is a compilation of business value statements that are the goals your company is striving to achieve. The business case for change is important because it is used at every major milestone to confirm that decisions and actions are aligned with attaining project expectations.
Create a Plan and Roadmap
With all this information in hand, the team can create the first draft of a project charter. Your team can then forge a roadmap that will guide you to your future state and define the deployment strategy.
Pre-Implementation Processes Help Facilitate P2P Success
After completing this process, you are ready to put in place the enabling technology. Select a provider that is focused on streamlining the P2P process, and work with a solutions partner that demonstrates an understanding of your organization’s needs and requirements and has the capabilities to meet them.
The next steps are to clearly define your goals and objectives. This also should include new or updated key performance indicators that will enable your organization to measure project success.
As P2P systems evolve to better automate and streamline processes, the benefits of upgrading to a new system are growing. Putting the right processes in place well ahead of implementation will help facilitate organizational buy-in, improve implementation configuration, ensure seamless integration with existing systems, and increase your organization’s use of the new system following implementation.