Organizations Want to Modernize Indirect Procure-to-Pay

Spend Matters welcomes this guest article by Becky Partida, research specialist, supply chain management, APQC.

Procurement managers, along with their counterparts in financial management who focus on accounts payable and invoice processing, are keenly interested in strategic benefits that can be obtained by modernizing processes in this area. A recent survey looked at what plans companies have for modernizing aspects of their procure-to-pay (P2P) process, with a focus on indirect spending.

As the below figure shows, nearly 85 percent of survey respondents say their P2P process would benefit from modernization. Note that APQC defined modernization as using IT innovations such as e-commerce portals, automated workflows or online self-service tools for employees. Respondents agreed that modernization would allow them to improve service to internal customers, bolster policy enforcement and controls and help identify and reduce maverick spending.

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One organization improving its P2P process is Woodward Inc., which integrates technologies into fuel, combustion, fluid, actuation and electronic control systems for aerospace and energy markets around the world. The organization was recently motivated to make improvements to its P2P process following a benchmarking effort to identify efficiency gaps. It is planning a shift from paper-based invoice management to automated invoice processing using software from OpenText. It expects implementation to begin in the second half of 2015.

With this new approach to invoice processing, Woodward will send paper invoices to a third party for scanning or to a dedicated email site so that the organization can extract digital data. Purchase order items will be sent to the organization’s ERP system for automated 3-way matching. For all other items, there will be an automated approval workflow. Moreover, if a purchase order item fails to match automatically via the ERP system, several email workflows will facilitate communications to reconcile the issue. At the back-end, Woodward will have a single archive that will be highly searchable.

Woodward is also working to implement an e-procurement system using a software-as-a-service (SaaS) solution. The goal is to have its 22 sites worldwide eventually using standardized processes and systems with the ultimate aim being stronger control and compliance and a better audit trail. Another of Woodward’s goals is to gain better visibility into the process and therefore identify bottlenecks. It also wants to improve the experience for its internal customers.

For example, it will have a hosted catalog that will provide the capability to drive toward negotiated pricing. If a vendor resists the notion of the e-catalog, then that supplier can be persuaded to join a supplier network set up by the SaaS supplier, which has Woodward’s chart of accounts so it can manage direct communications with the company’s ERP system.

Process cost reduction is always on the list of outcomes drawn up by process owners. Beyond that, organizations are looking for ways to strengthen enforcement and control of spend policies – ideally, without having to add more people to the procurement staff. Technology can be helpful in this regard. For example, e-catalogs accessible via online portals make it easy for employees to order supplies from approved vendors. At the same time, an e-catalog can ensure that employees are buying materials or services at pre-negotiated prices. Beyond that, analytics software can help organizations easily analyze patterns of spending, which in turn can inform pricing negotiations. Cloud-based technology, with its embedded collaboration, workflows and analytics, reduces the processing burden on both procurement and accounts payable employees.

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