enrich white paper how to improve your p2p success

© 2014 Enrich LLC. All rights reserved.

“How to improve your P2P processes”


Executive Summary

The smooth and efficient running of the Procure to Pay (P2P) process is the sign of an optimized process or a “Well Oiled Machine”. It points to a well operated iProcurement system with good content, a compliant user community and receipting that doesn’t need prompting. Does this sound familiar? Do you enjoy this happy environment? If you are reading this, then perhaps not? Many organisations struggle with their P2P processes for a variety of reasons many of which are discussed below and many seek to outsource the mess. The author’s advice is don’t outsource the mess, sort it out!


Introduction

The Pain

This diagram identifies some manifestations of poor user adoption in the business.

If these issues are allowed to continue, eventually the whole Procure-to-Pay

process will stall.

In systems parlance, the term “User Adoption” is not fully understood. It conjures up

images of individuals behind computer screens struggling to learn the system – or

images of users ignoring the existence of the system entirely. How to get users to

adopt new technology is a common problem that confounds techies and

procurement system officers as they struggle to make their systems easy to use

while ensuring that the content is relevant and up-to-date.

In truth, poor User Adoption gums up the P2P process, creates huge administrative

indigestion consuming considerable management and senior management time

chasing invoices for payment in order to maintain supply. Is your supply risk

internal? Could that risk be your very own P2P process?

In addition to appropriate content, User Adoption is a major Critical Success Factor post-implementation. Without it, you will not realize the anticipated benefits of your new business system. This white paper discusses PSP through the lens of User Adoption and the attendant effects on your P2P processes by identifying key indicators of poor adoption and exploring potential ways to increase adoption and thereby improve your P2P operations.

Added Value


Users often create workarounds either inside or outside the system to help remedy

the issues they experience with key functionality. The combined effect of these

workarounds may destroy any anticipated value from process improvements,

because they limit access to negotiated contracts or encourage users to work

outside the system. Ultimately, this reduces the system, especially in the case of

iProcurement, to a very expensive stationery-ordering tool.

In addition to not achieving benefits, there are additional costs – for example, the

amount of management time consumed by trying to get invoices paid when

accounts are placed on stop; this can and does impact production in the event that

supply is also stopped.

Let’s review each issue and how it can impact the business.

Committal Before Approval and Invoice Before PO

These are two sides of the same coin, where commitment has been made without the protection of a PO and often (and more importantly) without approval.

When an invoice comes in before a PO is created, users often create a retrospective PO, which is subsequently sent through the approval process. It is sometimes difficult for Accounts Payable departments to identify who in the business must raise the PO, which can result in a delay in payment – further exasperating the supplier. Refusal of authorisation at this point can be rather embarrassing indeed for both the customer and the supplier.

Non-Receipting

Receipting is the Goods Received Note (GRN) element of the PO > Invoice > GRN reconciliation process and is a discipline that must be enforced to ensure the business receives what it set out to buy.

Non-Receipting causes “Receipt Holds” on invoices. This causes the system to generate multiple alerts, which clog email inboxes and ultimately force users to disable system notifications. This is not the answer to poor adoption; it is simply a reward for bad behaviour.

Circumventing Approval Limits

Circumventing Approval Limits occurs when a user raises a number of POs below approval thresholds for the same purchase to avoid triggering the “approval workflow.” This is a flagrant abuse of the established approval process and may also flout procurement policies that are designed to satisfy the organisation’s sustainability goals, along with other key business drivers.


Account on Stop

This situation is a direct result of poor User Adoption within the P2P process,

typically resulting from non-payment of invoices. It can be highly disruptive

and can consume considerable management time to rectify. Worse still, it can

result in stopped or delayed production when the supplier is unwilling to

continue to work with you. This could potentially have a significant impact on

customers along with your internal supply chain.

No Procurement Engagement

This is where a “deal” has been struck and the PO is raised without any

involvement from the Procurement team. The contract then moves through

the approval process only to be held up by Procurement. Again, this is a time-

consuming process as Procurement seeks to improve upon the deal that has

been struck, or award the contract to a different, preferred supplier. It is

likely that a commitment has already been made, and when Procurement

gets involved, it sets that team at odds with the Customer Department and

the Supplier.

Do We Know WHAT We Are Buying?

A lack of clarity on the requisition trickles down into the Purchase Order.

Suppliers may try to investigate and clarify the request, or they may simply

supply their interpretation of your requirements. In these instances, it is not

guaranteed that the supply will be appropriate and can actually be used. In

the event that the goods are not correct, the production process can be

delayed while exchanges are made – if a suitable replacement is available –

and the resulting paperwork is completed and filed. Specifications should be

precise and the requisition should be clear to be sure the goods are correct.

Inaccurate Invoicing

This occurs where there is partial fulfilment following a telephone order. An

out-dated catalogue is often the culprit. Inaccurate data can also include

price differences. Issues with invoicing can take considerable time to resolve,

while generating additional paperwork and modifications to ledger entries.

Poor Specifications

We see this when the specification is not sufficiently detailed or accurate. For

example, imprecise measurements for a workstation – when it arrives, it

doesn’t fit in the allotted space. Specification detail, especially when

manufacture is required, is critical. Otherwise, there can be considerable

wasted supplies and time as rework is done.


There is no “silver bullet” that will correct all of these issues. Rather, there are critical enablers and activities that, when embraced in a structured and systematic way, will drive appropriate behaviour of the organisation and its use of the system. These are discussed below.

There is no “silver bullet” that will correct all of these issues. Rather, there are critical enablers and activities that, when embraced in a structured and systematic way, will drive appropriate behaviour of the organisation and its use of the system. These are discussed below.

In this context, by structure we mean how system modules fit together to support an end-to-end process. Clarity of vision and the fit of a system landscape to deliver the end-to-end user experience are essential to create a solid structure.

More importantly, user adoption of transactional systems is what generates the data for analysis and reporting dashboards. This enables leadership to conduct opportunity assessments, make key business decisions and engage in annual planning and budgeting processes. Poor user adoption results in reduced levels of spend and poor data availability in the data warehouse, which makes the output unreliable and destroys any anticipated return on investment (ROI).

“User adoption of transactional systems generates the data for analysis and reporting,

which enables leadership engagement.”

Ownership of the complete procurement system landscape can be fragmented. For example, sourcing might be owned by Procurement while iProcurement is owned by either Finance or IT. In these circumstances, it is unlikely that there will be a clear vision and strategy for the end-to-end process. The likelihood of the business embracing the integration of these modules is also remote and, consequently, the ROI from system usage is suboptimal.

System Administration

Structure and Ownership

When defining your system administration parameters, there are several key questions to ask.

How is system administration organised? Are you using a tiered system of Users, Super-Users, Helpdesk (Technical & Functional), and Management (Strategy & Vision)? Is there an offshore/onshore mix?

How integrated is the support organisation with the spend strategy of the business? Is there any understanding of the vision and strategy?


System Development

These questions allow you to develop full knowledge of what contracts are in play within the organization, which in turn allows the system administrators and the strategic buyers to determine how the contracts will be presented to the business. In addition, how does feedback between users and administration, and ultimately procurement, work? Or does no such network exist? In complex organisations, you may need to establish system User Groups according to the various disciplines and departments as appropriate.

Depending on your organisational complexity, system development could mean further development of the Landscape where other modules are added – for example, Sourcing, which might follow iProcurement. Or, it could mean rolling in spends from other business units or geographies or different categories. Whatever the addition, attention must be given to the Change Management necessary to optimise value. Failure to make the necessary changes so that users fully embrace this new functionality will result in under-utilisation or, worse still, redundancy (for example, the ability to issue a Request for Quotation direct from Requisition). Unless Change Management is effective, users will not adopt the new system or adapt their existing workflows.

Measurement

What are you measuring? If you are in IT, you are probably measuring System Availability. If you are in Finance, you are probably measuring procurement savings. If you are in Procurement, you may not be measuring anything at all. So who is measuring User Adoption? And what measurements will reveal the reality of your situation? A good starting point is measuring what percentage of spend is being sourced through the platform on an annual basis. What categories? And by whom? What percentage of spend is under contract? How much of a department’s spend is compliant with contract and with process (system)? These are just some key measurements that will reveal how well your users are adopting the system.

Compliance

Process (system) compliance is best measured by individual departments, where such visibility helps system administrators identify the need for more training. Closely reviewing spend can also identify opportunities for process improvements; for example, the use of catalogues, smart forms and information templates.

Compliance is usually behavioural and must be led from the highest levels. A combination of compliance measurement and such tactics as No PO, No Pay can help drive behaviour. Most important of all is the training strategy that is combined with these tactics so that persistent offenders are identified for training and retraining, thus ensuring greater adoption over time.


Once trained, staff may need access to Super Users if they forget how to use specific functionality due to infrequency of use. User guides and online help systems can go a long way in supporting these users. However, if users are left without the necessary assistance for too long, they may shift their attitudes from “can’t” to won’t.” If this type of attitude goes unchecked for long periods, a full system re-launch may be required. This process can be quite painful to conduct, and credibility that is lost will have to be regained.

Don’t Ignore User Adoption, get your P2P sorted out:

If your organisation is suffering from any of the symptoms outlined in this white paper, enlist the experts at Enrich to help you improve your User Adoption rates so that you can achieve the maximum return on your investment and convert the P2P process into a well-oiled machine.

Enrich can help you achieve this starting with a Health Check. Our team will work with your internal resources to identify areas where your software is being under-utilised, optimise your configuration to ensure accurate and efficient data transfer, and train staff on essential functionality. We will determine where you are, identify quick easy wins and provide a detailed roadmap to build your procurement system landscape and get your P2P moving.


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Chennai Office STPI Building – 2nd Floor NO.5 Rajiv Gandhi Salai Taramani Chennai – 600113, India. Phone: +91 44 3910 3536 Email: [email protected]

Author: Padraic Phelan, Consulting Director, Enrich

Padraic Phelan, Consulting Director at Enrich, has held a series of high profile purchasing and commercial directorships, including the Director of Purchasing at TUI AG, one of the world’s largest travel organisations, and Director of Purchasing (and subsequently Commercial Director) of The City University in London. During these tenures, Padraic was responsible for global procurement systems and the processes behind the technology, including the management of P2P processes for over six years. Padraic offers a unique perspective on the challenges facing both private and public sector organisations in an increasingly global environment, and helps these businesses add value to their bottom line.

To discuss any of the issues or schedule your health check, contact your local Enrich: office:

Enrich offers an entire suite of Procurement Solutions and Procurement Concierge Services to help our clients succeed; from spend analytics,


opportunity assessments and sourcing, to contract management, catalogue management, iProcurement, tail spend management and working capital initiatives.

We offer a range of deployment options to suit our clients’ specific needs including; Cloud, On Premise or Hybrid and provide a one-stop shop for implementation and/or managed services to help clients squeeze the maximum value from their Oracle Solution.

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enrich white paper how to improve your p2p success

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