So your organization has made the transformation from a paper-based, zero control system to the latest, fresh off-the-shelf Procurement platform. You finished ahead of schedule and managed not to incite a revolt amongst your stakeholders. And now you have a fully “live” system. You should be on “cloud” nine.
However, a dark cloud is looming on the horizon — adoption! In order to fully realize your return on investment (ROI), your organization must continue to increase adoption across all spend categories. The math is simple adoption plus spend throughput equals savings.
Enabling spend can be a daunting task. Each spend category may consist of several supplier types. Each supplier may have features and attributes that require several enablement approaches. Additionally, supplier connection types (direct connection from an ERP, ERP to portal, or PDF reader/robust email process) will require specific roll out processes, attributes, and concerns for both the suppliers and the internal stakeholders.
Prior to moving to a value-based assessment methodology, the primary measure of success for a Procure-to-Pay (P2P) deployment was meeting the predefined “go live,” date while remaining under budget. However, transitioning from a licensing business model to a subscription business model, both the client and the software provider realized that measurable ROI attainment is essential to ensuring success. This new model requires a greater stake by both parties. In order to realize savings and efficiencies from a P2P platform, all stakeholders must be included in the equation. Without a healthy supplier base, the procurement and accounts payable organizations lose any efficiencies necessary to eliminate costs. Conversely, suppliers with only one connection to their customer base also suffer from the inability to take advantage of the exponential decrease in Days Sales Outstanding (DSO).
The goal of an organization should be to maximize connectivity while minimizing time to ROI. To do this, the client needs to focus on enabling suppliers that provide the user population access to the necessary goods and services. But who goes first? Often, internal stakeholders see integrators as disruptors and don’t run to embrace the change. Therefore, the project team usually focuses on attacking the easiest spend first; the “low hanging fruit”.
While this is a good start, it usually heralds the end of the process. Why? Because there is no enablement roadmap to ensure that additional content is enabled. Without a roadmap, critical mass is often lost and ROI is unattainable. Along with a roadmap, metrics need to be established in order to measure success. These metrics must be attainable, but should also stretch the organization in order to meet ROI goals set during the business case.
A consistent way of ensuring success is by leveraging a category enablement plan (CEP). A CEP should take the following into consideration:
- In Scope Categories — These categories should be aligned by the level of complexity; business process groups; amount of spend. Once categorized, these categories (or commodities) should be ranked by amount of spend, complexity. This sets the foundation of the plan.
- Suppliers — The best rule of thumb for supplier enablement is to match suppliers to the appropriate categories. Be careful of focusing on getting all of your suppliers enabled. Frankly, that goal is 1) unattainable 2) unnecessary. How could this be unnecessary? Because it is the wrong metric. The correct metric is to focus on enabling those suppliers that account for most of the categories’ spend. Use the 80/20 rule here. Eighty percent of your spend is comprised of 20 percent of your supplier base. Focus on these key suppliers for faster ROI.
- Previously Enabled Content — Most companies will have used a point-to-point vendor system to buy specific items (e.g., Office Depot; Staples; Xerox). By ensuring this content is enabled fairly early in the process you are able to provide a large footprint of the P2P system throughout your organization. An ancillary benefit is the ability to turn off expensive EDI connections that will become obsolete.
Lastly, once you have your plan in place, it is critical that you get internal stakeholder buy-in. This can be done by mocking up the category processes and demonstrating these early and often. You will be happily surprised by the input you will receive. You will also uncover information that may affect your plan. Examples of this could be that a category that you have planned for the initial wave may have to be moved out due to a sourcing event that is currently being run. You will also have the ability to uncover critical requirements that need to be passed onto the deployment team.
If you follow the guidelines above, you will be able to transition your organization that has very little control over its spend (or really doesn’t know what is being purchased) to an organization that buys in the most efficient manner, while avoiding costs and honoring agreements. This has the effect of allowing your stakeholders to be more effective and increasing the satisfaction of buyers and suppliers.
Loyd Hawkins is Global Vice President, Supplier Management, at Elemica.