About the same time I was authoring my rebuttal on why there’s nothing more important than a good “test drive” — even in e-Procurement, yet another e-mail from the SSON hit my inbox. This one started off promoting P2P on a Budget … and all I could think was “is there any other way?“. After all, as per my previous post, the only requirements for a P2P system is that it permit e-Procurement, possibly through a (n integrated) third-party (e-Procurement) platform that permits electronic ordering, and that it permit payment approval, possibly through a(n integrated) third-party (e-Payment) platform. That’s not a lot of functionality, and definitely not a lot of value, so you shouldn’t be paying that much for a P2P solution in the first place.
That being said, since most people still don’t know the difference between P2P, EIPP, and e-Procurement (see my last post for an explanation), I thought I’d check it out in case some of the “experts” they gathered didn’t know the difference either and offered up valuable e-Procurement advice in place of relatively valueless P2P advice.
When the editors said that sometimes you have to spend a little to save a lot and that investment during all but the most terminal of cash crises can result in savings that can make the difference between success and a very final failure, they’re right. Right now, small investments in spend analysis, sourcing expertise and supporting systems, expert consultants (like yours truly), and e-Procurement systems to minimize your transaction costs, prevent maverick buying, and enforce negotiated prices can save you a small fortune (or, if you’re particularly inefficient, which at least 85% of companies are given that only 15% have a CPO in the C-suite, a large fortune).
However, the article on how to get the best from your procure-to-pay process was pretty useless as the contributors were all over the map. The contributor from Eli Lilly talked about the importance of speedy invoice management, which doesn’t really save you anything. The contributor from Lockheed Martin discusses the importance of JIT delivery, which is off-topic. And the contributor from Schneider Electric took a broad brush to demand management, spend management, and cash management without any apparent understanding of where P2P fits in a discussion that tackled (human) resource allocation, contract management, differentiated spend management, demand management, centralized invoice management, and process standardization. Finally, the contributor from Emerson Argentina talked about stock reduction, volume leverage, and extended payment terms. And it got worse from there.
In my view, it was a wasted effort on SSON’s part and a total waste of any reader’s time because getting value from P2P is easy. Here’s the magic formula.
- Standardize your processes and make them e-Procurement friendly.
- Adpot a low-cost SaaS end-to-end e-Procurement platform that supports purchase orders, invoices, and electronic requisitions through “cart-based” interfaces that can be “integrated” with your current AP and e-Payment systems through standard XML interfaces and securely transmitted data files or feeds.
- Load your catalogs, integrate your punch-outs, define your buying rules, and, most importantly load your contracts and price tables and make sure they override catalog and punch-out prices (or obtain a compliance monitoring solution).
- No requisitions not through the system.
That’s it. Instant value. Buying rules ensure that no purchases can be made off-contract without authorization. Price rules ensure that suppliers don’t “accidentally” change punch-out pricing and buying rules can be defined to insure that “approved” products don’t get replaced with “unapproved” ones. Authorizations insure that no one spends above their allowance without approval. And the net result is you never pay more than the contract price, discounts and rebates are captured up front, and unnecessary spend is stopped dead in its tracks. This means you don’t have to pay a consultancy $10K to help you find and recover $100K in over charges from your office supplies vendor or $50K to help you find and recover $500K in overcharges from your hardware provider who’s best price on a system configuration that hasn’t changed in a year only declined 0.3% a month when most hardware depreciates 3% a month.
Of course, if you want to take the hard road, you can do it the hard way and read the 20 or so pages provided by the SSON which does a great job of leading you in circles and never getting to the point.