Thursday, 6 December 2012

The missed opportunity of P2P implementation

More often than not P2P implementation is being driven by a motivation to streamline and automate the Accounts Payable function – transaction cost reduction in the Purchasing and Accounts Payable administration is the focus. However, while the administrative costs need be reduced much more could be achieved, and potentially longer-term costs avoided, if a more strategic perspective were taken. Unfortunately, the involvement of some Strategic Procurement Units is not always recognised as being fundamental to the success of a P2P implementation and as a result their input is not sought. This is a serious mistake and Procurement need to ensure that this opportunity is seized for procurement improvement.
The starting position is that you should not focus on automating the existing process; the ‘As is’. Instead you should use the disruption as a procurement transformation opportunity. It is an opportunity to revisit Policy, Strategy, Procedures, and Structure.  It is an opportunity to introduce best practice strategic procurement. It is also an opportunity to demonstrate to the market that you should be treated as a preferred customer and to get the market to make the necessary financial investments too.
Automating the existing processes may sound sensible, but it is far better to take a longer-term perspective. Implementing a new IT system and then having to change again in the short to medium term is costly – staff and suppliers can understand managed change but their patience will be quickly exhausted if you subsequently want to make changes which, in their view could be been predicted at the earlier implementation. 
So it is wise to clearly define how procurement will be carried out in the future and design the implementation to reflect the future ‘To be’ state. This will require agreement on the future Procurement Strategy. Included in the Procurement Strategy will need to be clarity on whether you intend to increase or reduce your Vendor Base.
Your P2P system will not work in isolation of
supplier engagement, but for suppliers to invest in being able to communicate with your P2P system they will need a reassurance that they will remain a supplier for some time. Equally, if you want suppliers to be the main provider of Catalogue content, they will need to be aware of its ‘template’ needs. So, introduce your new Vendor Base approach in parallel with a P2P implementation as opposed to afterwards.
But determining which suppliers need to be on-boarded to the P2P system as a result of existing contractual commitments necessitates a single, well-managed Contracts Register.  A good question to ask is “Do we have a single Contracts Register?”  Now is the time to consolidate and standardise the Register, take control of its management and also link with the Vendor Base strategy.
You also need to think about the corporate approach to Structure. Should you be moving to a centralised, decentralised or hybrid structure? If the P2P implementation does not reflect the new structure you will incur greater cost and disruption later when you need to make the shift. So much it is better and more cost effective to design the new Structure and implement the P2P to embed the new structure.
The new P2P system is a change management opportunity. Now is the time to take the lead on Vendor Rating and also the strategic ownership of the supply base. Now is the time to revise Procurement Policy and Procedures. Now is also the ideal opportunity to introduce a new common procurement vocabulary – that will ensure that coding is consistent and that a comprehensive Spend Analysis can be completed. Equipped, perhaps for the first time, with Spend Data is the time to introduce Category Management approaches and reap real cash savings.These strategic initiatives all need to be introduced within a new Procurement Strategy but equally need to be reflected in the P2P implementation.
P2P is just one procurement application – the Procurement Strategy should set out which other applications will be rolled out and when, and those designing the P2P need to know which linkages need to be factored in and when.
The new P2P implementation will require training in use and the associated workflows. That training should not be delivered in isolation but instead should be part of communicating the new Strategy and perceived best practice. That training also needs to reflect new roles, remits, responsibilities and relationships.
P2P implementation therefore needs to be seen as a strategic procurement opportunity to introduce more effective approaches as opposed to making existing processes more efficient.
So, P2P implementation needs to be recognised as a strategic procurement opportunity – an opportunity for procurement transformation in strategy, structure, systems and skills. This opportunity also provides scope for introducing best practice strategic procurement techniques. 
What do I suggest:
  1. View P2P as an opportunity to strategically transform how procurement is carried out throughout the organisation;
  2. Consolidate contracts into a single Contracts Register and confirm who is responsible for owning the supply base;
  3. Refresh the existing Procurement Strategy, prior to setting about P2P implementation – design the implementation to embed and reflect the new Strategy;
  4. In determining the new Procurement Strategy, be clear what your approach is to the future market – there are clear benefits to be gained from addressing vendor rationalisation in parallel with P2P implementation;
  5. Do not implement a P2P without first challenging the existing structure. Ensure the implementation reflects your desired future organisational structure for procuring, then clarify and ownership of new roles, remits, responsibilities and relationships;
  6. Make sure Procedures reflect a new way of doing business, not just in terms of how the P2P process will operate, but the most effective approach;
  7. P2P is just one part of an eProcurement Strategy portfolio – be clear about which other applications will be used by procurement and ensure that the P2P system design reflects the integrate whole;
  8. Staff will need to be trained in the new P2P operating system. Ensure that training goes beyond the operation of the P2P system and includes awareness raising and gaining commitment to the new Policy, Strategy, Practices and Procedures;
  9. P2P should be viewed as a change management initiative, support it with a communications strategy and clear leadership from the organisation’s leadership;
  10. Don’t miss the strategic opportunity of P2P implementation.

1 comment:

  1. Can't argue with that.

    Interestingly the leading example of P2P in European Government -eProcurement Scotland- took precisely that path. We started with a strategic approach in 2000 and then built on it. The main surprise to me has been that our approach and achievements in Scottish Government have been so comprehensively ignored for so long. But then I would say that, wouldn't I!

    Ian Burdon (eProcurement Scotland, 2000-2009)