If Google and Facebook then ...

How on earth did Google and Facebook fall for such a basic and traditional scam that they have lost $100m by paying false invoices?  If they could, could you also be vulnerable?

I've discussed this type of fraud so often it almost makes me doubt reiterating, yet surely the evidence from both Google and Facebook is that the lessons are not being learnt? If they are being learnt is there a loophole which yet remains unplugged.

1. There needs to be a clear separation of roles between Procurement, Finance and receipt of delivery;
2. Procurement alone should have the responsibility for adding new vendors to the database of creditors;
3. Ensure due diligence in validating creditors bank details;
4. Every invoice needs to be cross-matched with a Purchase Order;
5. Have a regular spend analysis which flags up where the money is going and use that to establish where there are strategic contract gaps;
6. Have contracts on an integrated S2P system or at the very least linked to the P2P;
7. Use the P2P matching to manage creditors payments;
8. Have a strategic approach to procurement risk management.

Let face it, if it could happen to Google and Facebook, it could being happening to you.

You can read more about establishing vulnerability to fraud at the TCS blog or my article. 

You need to get suppliers on board for your S2P journey (3) Comms & Skills Development

In previous posts I highlighted that the lack of supplier engagement is one of the highest impact risks with a S2P implementation. To mitigate that risk a strategic approach is required which includes creating a sound foundation and taking a wave approach to supplier engagement.  In this post, I discuss the need for a communications plan, and a training and skills development plan aimed at the supply base.

The communications plan needs to be considered as soon as discussion on the potential implementation of a S2P solution is mooted. There needs to be some flagging that change is anticipated and that the organisation intends to ‘work with’ the market as opposed to ‘doing it to suppliers’. That early reassurance will pay dividends later and signal that the organisation has a strategic approach.

In a previous post I advocated that a categorisation of suppliers as ‘Users’,‘Converts’, ‘Willing Novices’ and ‘Late Adopters’ could be applied. That categorisation flows from the first stage of a Change Impact Assessment – identifying what the implementation of a S2P solution will mean to suppliers. If suppliers are unclear what the changes could mean to them, then it is not possible for them to make the necessary commitment to those changes. The change readiness assessment will draw on the change impact assessment and statement of technology requirements to contribute to the categorisation of suppliers as ‘Users’, ‘Converts’, ‘Willing Novices’ and ‘Late Adopters’.

Regardless of suppliers engagement with S2P it is unlikely they will not have some level of training needs to match the new ways of working. Therefore it makes sense to complete a Supplier Training Needs Assessment.

Categorising the supply market is an acknowledgement that each category of suppliers will have fundamentally different needs. The Communications Plan therefore

You need to get suppliers on board for your S2P journey (2) - A wave approach

In the previous post I discussed the need, when planning a S2P implementation, to createa sound foundation for supplier engagement. Now we move on to the supplier profiling and development of waves for supplier engagement.

Using a ‘big bang’ approach to supplier adoption is unlikely to be effective. It will demand a lot of resources and loses the benefits of lessons being learnt which can be transferred quickly. Most of all it frequently fails to recognise that not all suppliers are starting from the same position and tailored journeys to ownership are necessary.

A phased approach is therefore recommended with suppliers being on-boarded in waves.  Of course, that begs the question, ‘What does the wave choreography look like and what sequencing of suppliers should apply?’. 

Some advocate the use of spend analytics and detailed mapping.  But those approaches fail to recognise that a frequent justifications for the implementation of a S2P solution is that it will provide clarity of spend – in other-words, the reality is that spend analytics are unlikely to be available. Secondly, even if the data were available, is the investment in time required justified, given that the objective is to develop a wave plan which will lead to maximum adoption as opposed to a comprehensive scientific approach to ‘who and when’.

Don’t mistakenly think that the wave approach focuses on just one wave of suppliers before moving on to the next wave. Like waves hitting the shore as one wave hits the shore the next wave is already building up, so all waves are worked on simultaneously albeit with differing emphasis. A simple approach to wave designation is to categorise suppliers as ‘Users’, ‘Coverts’, ‘Willing Novices’ and ‘Late Adopters’.

1.     ‘Users’ are existing users of the chosen S2P solution who need to be on-boarded but with will face minimal change to their existing ways of working;

2.     ‘Converts’ are existing users of a S2P solution although not existing users of the chosen Solution;

3.     ‘Willing Novices’ are businesses which see the merits of using the proposed S2P Solution but as yet have no experience with S2P; and,

4.     ‘Late Adopters’ are those who lack enthusiasm to embark on the use of S2P.

It should also be noted that the wave approach advocated is based on an assumption that contracts are not currently in the process of being renewed. If however, contract renewals and re-letting are taking place, those sourcing strategies should be used as a parallel first wave means of ‘winning commitment’ through the award process. Equally, wasting resources on on-boarding suppliers who are unlikely to gain future business will ultimately lead to a perception that the organisation lacks a coherent strategy.

Some ask how many suppliers should comprise each wave and how long should be required? There is no simple answer to those questions as it depends on how large the supplier base is and the supplier state of readiness.

In the next post I shall discuss the need for a communications plan and a training and skills development plan.

You need to get suppliers on board for your S2P journey (1) - A sound foundation.

There is a need to think about supplier engagement when developing the S2P business justification – the lack of supplier engagement is one of the highest impact risks with a S2P implementation. Supplier engagement is a change management issue and needs to be managed as such. First create a sound foundation, then a concurrent three-strand approach is merited, namely, identifying the waves for targeted adoptions, a communications plan, and a skills development plan. In separate blogs each will be addressed.

Without a sound foundation the probability of an effective implementation is seriously compromised and, at worst, highly unlikely.

Be clear what the  future will look like and any organisational restructure, changes to processes and procedures before starting a discussion with the supply base. An absence of clarity will contribute to a lack of supply market confidence and reluctance to embrace the proposed changes. 

Critical to success is ensuring that the business case has recognised that one of the key risks to a successful S2P implementation is the failure to gain supplier ownership of the proposed new systems and processes.  Suppliers are one of the main stakeholders of any procurement change initiative, particularly a S2P implementation.

It is understandable that many suppliers will adopt a ‘wait and see’ approach with a S2P implementation and delay commitment.  After all, ‘what’s in it for them’, especially if ‘no change’ also means no loss of business? 

A S2P system is a two-way communication system and suppliers have to make a conscious business choice that they are prepared engage in that system and with the new ways of working.  Those new ways of working can be both new systems and new processes. For suppliers this could mean new investment in both technology and skills is required without any contribution from the customer organisation.

Part of mitigating the risk of a lack of ownership is the need for the implementing organisation to allocate a budget for supplier engagement. A second mitigation is to be clear which suppliers ‘need to be on-boarded’ to build up a critical mass which will enable the S2P implementation to be justified. It is a mistake to assume that there will ever be 100% supplier adoption of the new ways of working but there needs to be clarity of what the breakeven point of supplier uptake is.

Another critical success factor is the designation of a senior level champion who will be the public face of the initiative.  That person needs to be credible, empathise with the supply market and ensure their ‘voice’ is heard.

In a future post I will discuss Supplier Profiling.

'Cut the Cards: making SAP work' - Book review

At first glance you may wonder what relevance this book could have to you. Don't be put off by the title as it is not a book for SAP 'techies'; it is much more and I would view it as recommended reading for anyone on an MBA course or with an interest in PRINCE2. I suspect those who would benefit most though would be those designated as Sponsor of an ERP implementation and those charged with an oversight or scrutiny role.

Donnelly has produced an easily readable book on what could be a very dry subject and his black humor works very effectively. Having said that, assuming there is a second edition, I think the addition of section headings would be beneficial.

In a forensic analysis of public and private sector IT implementation disasters, Donnelly provides a diagnosis of what he believes really went wrong: cash-flow, poor leadership, self-serving partners, poor project management, poor risk management, and poor contract management are all there.  Key lessons for me are the need to modify SAPs standard processes as little as possible, so change management should be concerned with moving from the As-is to the correct SAP process, having the correct governance in place and use PRINCE2 methodology.

Also covered, although indirectly, is SAP's marketing strategy - a good case study in itself.

But what's there for a procurement practitioner? If there's an ERP project the CPO needs to have a seat at the table as part of the business case development, specifying, contract drafting, selection, risk management, change management and contract management. Then the CPO needs to be engaged with Blueprinting the To-Be - I have previously discussed how that should be an opportunity for procurement transformation, yet too often is missed through automating the existing, yes, that still happens!

Case studies in Procurement fraud for Dummies

Who would immediately spot the likeness between a Sony Vice President and an NHS learning & technology manager. Yet, apart from both making the news today, both carried out simple procurement frauds.

The Sony VP submitted false invoices and pocketed the dosh, while the NHS manager was slightly more creative in that he set up his own company and supplied the Trust at inflated prices.

These types of procurement fraud are straight out of the introductory pages of Procurement Fraud for Dummies and could have been easily avoided. Three-way matching is the traditional protection: the person responsible for the Purchase Order, the person confirming delivery and the person authorising the invoice payment need to be different people. An effective eP2P system is another solution - when you're dealing with £1m fraud the business justification easily stacks up, but the system needs to be properly implemented with the right protections.

Slightly more protection is needed to protect against the likes of the NHS fraudster, yet still fairly basic. He was able to invoice for services received from his own company at inflated rates, for example, invoicing £10,750 for a service which cost £1,500. Why on earth did the organisation not require a 'ballpark' estimate of the price compared against the invoice price? Although I am not a great fan of low thresholds for RFPs, it would be interesting to know what the Trust's thresholds were and whether those internal rules were policed. Then again, how was it so easy for an employee to sell to his employer - it may not have stopped the fraud but signing an annual declaration of interests may have helped.

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