Procure to Pay transformation

In today’s business climate, Procure to Pay function is not in the central of stage and always underestimated in the company. Most of leaders think the function is a simple process that enabling the day to day buying which has been under contracts already established. It is true that the Procure to Pay process is not a great value generator. But why it needs to be going through the transformation? The answer is simply that the process is not directly contribute your value acceleration, but it certainly preserves the value the sourcing created. Honestly, the Procure to Pay transformation is much difficult than the Source to Pay transformation. The reasons is the process is used with various stakeholders across the company which requires massive change management. It is always late and adding more challenges, when the company realizes the transformation is needed in place.

The characters of outstanding P2P function

· Heavily digitalized from buying to invoicing

· Process is highly automated

· Clearly guided buying (e.g., catalogs and webforms)

· Average internal users are navigated with the established buying guide with minimum procurement team engagement

· Supplier based is stabilized

· 80% of the managed spend channeled from your preferred suppliers

· 90% of the spend is high level governed by the contract from pricing to payment term

· Centralized buying team with small amount of team members

The P2P transformation is a culture change across the company. It is always sooner than later. The transformation has more benefits to the internal users that brings better experience on buying. It definitely helps the internal users to relocate the time to what they should be focus on. Meanwhile, it changes procurement culture to be a customer centric trusted adviser.

Some strategies may light your way

Centralized team to be assisting buying

The debate over centralized or decentralized buying team is carrying many years. I would say it is not simply as it is. The key to this topic should be how, what and when to centralize and decentralize. In the beginning of the transformation, the procurement leaders have to invest heavily on centralized team which simply provide a one stop buying experience and channel as much as it can. The size of team may look overwhelmed, but it is necessary. At this time, the team is not only helping the internal customer on buying but also gathering the gaps and needs for strategies. In next following year, the strategy will be reducing the team with process automation, buying guide and guided buying. Now it is the time for self-severed and decentralize the buying activities.

Leveraging the procurement technologies

As of today’s world, the trophies are not coming without technologies. Selecting to right tool to powering your P2P is inevitable. This depends on the budget and natural of business. For example, the manufacturing has majority of direct spend which has BOM. In this case, the modern procurement tools are not needed, and the ERP system has material management module could handle the process. However, the massive indirect spend which involved various users require user friendly tool to navigate your users to have online shopping experience. In this case, some leaders spend management cloud based are coming to the picture to fill the gaps. (e.g., Coupa, Ivalua and Zycus etc.).

Ramp up the supplier selection and set-up process

Many suppliers are added by the business users when they need the purchase. It is simply adding more cost and difficulty on the P2P process. Establish supplier selection process based on what the business needs not what the business wants. Before the new supplier set-up, the buy team should advise the business to select the vendors on the AVL (Approved vendor list). In term of the approved vendor failed to meet the requirement, the new vendor has to go through intensive process that includes key procurement personnel to review and approve.

Pre-approved purchase record before purchase

The Purchase Orders (PO) is the one of most effective way to ensure the process is followed. The PO requires the approval and review before issuing to supplier for the purchase. It is great gating process to validate the purchase is using the correct supplier, with the best of cost and tracking the spend to contract. In today’s world, the PO is not the only way to have pre-approved purchase. Some company starts using the one-time authorized virtual card or check to issue to supplier with exact approved amount and expire date. The pre-approved purchase record is the key for the success of P2P transformation.

Read for the massive change management

The success of P2P transformation depends on how well you prepare for the change management. Due to significant changes on the day-to-day operation with massive stakeholder, you should be ready to have agile team to manage change management not only on training and communication but also on the alignment with the senior executives and strategies.

Usually, the P2P transformation takes about 3-5 years to be complete, but it may be longer on the size of company and scope. The first year or two should be focusing on planning and technology implementation. The following one or two year is critical since it has rapid changes on the roadmaps. The team should be focus on the stabilizing and process documentation in the last years of the transformation, which helps the operationalized for the next decade.