Category Archives: Procurement Innovation

No Environment is too Challenging or too Unique for Procure to Pay

Pete Loughlin recently penned a great post over on the Purchasing Insight blog that asked “Is This the Most Challenging Environment for Purchase to Pay” where he discussed whether or not the entertainment industry (and movie making in particular) was the toughest environment for Purchase to Pay there is.

As per Loughlin’s post, where he quoted Bogdan Tomassini-Büchner from digitalpurchaseorder.com, on a movie set it’s complete chaos. You’re hiring lots of people for a short time at short notice, there’s no time, there’s no money — even for multi-million dollar projects — buying stuff is a nightmare. There’s no time for a requisition approval process — the stand-ins, the set, the food is needed now. But with the right system, all purchases can be put through (approved) and all spend can be tracked.

Regardless of whether or not cost is critical, or incidental (because the biggest profit potential is in increased revenue and not cost reduction), cost still needs to be tracked, understood, and opportunities for significant savings identified. For example, even in entertainment, if, at the end of the year, the same provider is providing a significant amount of product across multiple sets or budgets, the parent company can negotiate an across-the-board discount off of the standard rate sheet for the following year (and all purchase orders to the vendor can automatically use that rate).

The same situation exists in the hospitality — or tour — industry, especially when products or services have to be acquired, or re-acquired (because the restaurant was closed for a health violation, the bus broke down, etc.) at the last minute. But all costs needs to be tabulated, tracked, reported, and when possible, appropriate taxes reclaimed.

However, the biggest challenge is in an old-school manufacturing or logistics company where everything is paper and fax and e-mail based, the process has to be “done this way”, and no Procurement system meets the need. If a vendor is trying to go into one of these environments without a highly configurable, adaptable, customizeable workflow — they will be as challenged as a first generation procurement system in the high-speed hospitality and entertainment industries.

However, as Pete has pointed out, there is no environmnt too complex for a highly configurable, adaptable, customizeable workflow. So if you don’t have a good P2P system, there is no excuse not to get one.

What Procurement Processes Should Be Automated?

The big push in Procurement Automation is typically the automation of invoice processing: automatic matching, verification, and when possible, payment because paper-based invoice processing in an average organization can cost $30 or more (with some estimates that paper-based invoice processing can cost an organization as much as $60). But when an organization switches to automated invoice matching, processing, and payment with a best-of-breed system that can automate processing the 85%+ of invoices that are problem free can reduce invoice processing costs to somewhere between $3 and $8 an invoice, depending on the system and the overhead costs.

And while this cost savings is great, it shouldn’t distract from the other cost savings opportunities that can come from automating other procurement processes, which eat up valuable time and resources. In this post we will discuss three other areas of Procurement that should be automated.

Requisition Approvals

Not every requisition needs a manual review. A requisition for a standard office supply reorder from the office manager, a requisition for a standard setup for a new hire, or a requisition for standard travel expenses for a pre-approved conference can all be automatically approved if the expenses are within the expected range and budgets are not exceeded. A requisition system that supports the definition of rules that can allow requisitions to be auto-approved can save the organization a lot of time and resource energy.

Automated MRO re-orders

A system that can support the definition of minimum stock levels, maximum stock levels, and perfect re-order levels can allow stock to be automatically re-ordered when a threshold is met. This negates the need for an MRO clerk to regularly check inventory levels and compute re-order levels.

Supplier Profile Maintenance

Supplier profiles need to be kept up to date to enable the organization to contact the right people, select the right locations, keep track of current products and services, and make payment. People change roles, and jobs, office locations move, products get discontinued, and so on. Keeping this information up to date takes a lot of time and effort – with a good portal, that reminds suppliers of their need to auto-update, suppliers can maintain their information, upload insurance certificates and certifications, and provide the organization with requested information on an as-needed basis.

Good Procurement systems automate the tactical and allow procurement professionals to focus on issues, not paper pushing.

Intenda – A Trusted Platform for Public Sector Procurement

Intenda is another name you might not know, as they are a South African Enterprise whose primary global customer base centred around South Africa, the UK, and Australia, but they are a very strong provider of Source-to-Pay in the public sector with tens of thousands of users across multiple global sites that collectively serve customers in over 30 countries.

Intenda is one of the unique, odd-ball, providers in the Source-to-Pay world. Like b-Pack (now part of Determine) and iValue, it’s development was heavily influenced by its initial customer base and in addition to standard S2P functionality, it also has

  • inventory & asset management,
  • GRC (governance, risk, and compliance) and Traceability, and
  • GPO / central service centre support.

From a Source-to-Pay (S2P) perspective, the strength of the platform lies primarily in its Purchase Order (PO) and invoice management capability and secondarily in its sourcing management capability. The requisition management capability is among the most powerful and most flexible on the market. Not only can requisitions be very detailed with complete part information (if known), multiple lines, cost breakdowns, detailed headers for proper (approval) routing and budget assessment, but different requisitions, with pre-defined headers, processing, and routing information, can be created for each type of purchase, each business unit, each geography, and each special case that the organization needs to support.

The system also supports detailed RFQs/RFBs, the ability to compare them side-by-side using multiple weighting schemes, and do calculation scenarios on sub-bids using any set of filters or restrictions that are required. The platform also supports basic e-Auctions for those clients that want it, but this feature is optional. A user can create an extensively detailed requisition, flip it to a (senior) buyer who can use it as the basis for a detailed RFP, get quotes, and then run an auction and/or make an award.

But the biggest strength of the platform is the audited and government approved security. The solution supports defense clients and revenue service clients in multiple countries, and has gone through just about every security and certification test that one can think of for a SaaS based solution. The solution, which supports fine-grained role-based security, heavy encryption, and multiple levels of authentication, including LDAP integration, if required, has been verified as secure by the most demanding of organizations. Very few platforms have gone through the level of security validation that Intenda has.

If you are a public sector body, or a large multi-national private sector organization that needs an inclusive S2P platform, Intenda is another platform you need to know about. For a detailed review, check out the recent Spend Matters Pro series (membership required) by the doctor and the prophet (Part I). The insights are worth it.

Coupa IPO: Good or Bad?

Coupa has filed for a 75 M IPO. Coupa is going to go public, like heavyweights before it, and things are going to change. The question is, for better or worse?

Many bloggers, analysts, and even journalists have written much about the subject, and you can probably buy at least a dozen in-depth analyst reports by now advising you on whether you should invest, how much, when, and how to make money off of it.

And if you are interested in that, go and Google that Sh!t, because, you guessed it, SI doesn’t care about that in the least. What it cares about, and the only thing it cares about, is whether or not its good for Procurement. This blog is about education — process transformation, technology, and talent enablement — not about how to make the most money (or even save the most money, because it’s not savings, its value generated … savings are here today, gone tomorrow without foresight).

So is it good for Procurement? Yes and No. That’s right, Yes and No!

The 75M will help them considerably expand their platform, their support, their global reach, and, most importantly, their sales force. As with any big company that goes IPO, they will need ramp up their sales quickly to support their overhead, which means more big ticket sales. The only way to do this will be to focus on the Global 3000 or the large mid-market companies growing fast that are willing to invest extra dollars in an effort to crack the Global 3000. And if you are one of these companies, they are going to do everything they can to be the perfect solution for you, or at least the best option you have, as they try to win the P2P market away from SAP (Ariba), GEP, and SciQuest and fend off the European heavyweights, like Basware, that are making inroads in their home turf.

But if you are a mid-market Procurement organization, or smaller, and the Procurement organization that Coupa was originally designed for when they launched on Procurement Independence Day ten years ago, not so much.

Big organizations want big, extensive, bloated, solutions with lots of features, and lots of support, that come with big price tags — price tags that are often higher than a smaller organization wants to, or can, pay. And even though Coupa could offer a slimmed down offering at an affordable price tag if they wanted to, it’s not going to be their first priority when they have to prove the value of their IPO. So if you are in this group of Procurement organizations, its not so good for you – at least not in the short term. (Longer term, they could create a platform license model for their core, like Trade Extensions does, and allow a third party to bulk sell at lower rates in exchange for them taking over support and the associated overhead costs, the same way many companies offer SAP support, but that’s not likely in the short term.)

So that’s the short answer for Procurement organizations, which is not the same answer for Investors or for Coupa, but we’ll leave those answers to the analysts and investment advisors.

Want an Exceptional Supply Management System? Do NOT Forget the Supplier!

Exceptional results come from the right intersection of exceptional talent, exceptional technology, and exceptional transformation. The three T’s.

And while each piece is important, and no piece can be ignored, the importance of good technology is often overlooked, and, more importantly, key factors that differentiate good technology from great (and exceptional) technology are almost always overlooked — and this is one reason why there are so few true best in class Procurement organizations (and why the Hackett top 8% is the top 8%).

So what makes a great Supply Management System?

Factors include, but are not limited to:

  • ease of use as even a junior buyer should find it natural
  • customizeable workflow as it should fit the transformed organizational processes
  • data import/export as data will need to be imported from ERPs and predecessor systems and exported to successor systems
  • templates and template customization so that RFXs/Auctions/Orders/etc. can easily be created, customized, copied and reused ad infinitum
  • multi-currency support as most Procurement organizations have to deal internationally

And each and every one of these factors should be considered, and included in the evaluation of the supply management system, and systems that do not score well against each and every one of these factors tossed aside, but is this enough to insure you get a great system? Of course not!

First of all, it has to contain all of the specific functions required of the system you are evaluating. For example, if the organization is looking for strategic sourcing, then the organization needs optimization-backed RFX and Auction capability as well as analytics and spend analysis. For Procurement, requisition management, approvals, budget integration, automatic (split) PO creation, good receipt management, invoice acceptance and m-way comparison, etc. And so on. If all functions are there, and all work well, it could be a great system — for the organization.

But will it be an exceptional one? Not necessarily. Exceptional systems need lots of data — and use — to produce exceptional results. Some needs to come from the organization. Some needs to come from third parties. And some needs to come from suppliers. And typically that data is needed in (near) real time. Which means you need suppliers to use the system — which is something they are only going to (want to) do if it’s easier for them to do it in the system, than do it outside the system (and bitterly complain if they are forced to use it to submit invoices to get paid).

This means that the system also needs to be designed for the supplier — something many first, and even second, generation systems were not, even if they had a supplier portal.

Not only should the system be as easy to use for the supplier as it is for the buyer, but it should enable their workflows, provide them with templates, make data import and export as easy for them as it is for the buyer, offer them full multi-currency support as well, and support the internationalization necessary for all of your suppliers in the countries you do business with to use it in their native language.

For example, if you want a supplier to respond to each and every RFX and auction, make it easy for them to manage their catalogs and quickly select the relevant products, update price lists, define volume discounts, and define what you get to see — and don’t get to see. If you want a supplier to use it for e-Invoicing, make it easy for them to upload, create, manage, and track invoice status not just of invoices sent to you, but of all their invoices (as chances are their AR system or sales system doesn’t do that). Make sure they have the same rights to create user accounts, set permissions, and delegate work (especially with respect to RFX responses) to the right people as you do. Let them toggle between languages. And, most importantly, before they submit, let them see what you see the way you see it.

And if the system is truly exceptional, you’ll easily be able to see what they see (with a toggle view) before you send it. Suppliers are your supply chain, so it’s as important to support them as it is to support you — and an exceptionally designed system will do that.