Why Some Companies Fail to Get Maximum Value from P2P Automation

Spend Matters welcomes a guest post from Mark Schaffner of Verian.

I was recently talking to one of our long-term clients about the evolution of his purchasing program. His company started by streamlining one small department, and then brought 300 items under management. Now they control purchases of over 6,000 preferred items and drive savings on indirect spending of close to $1 billion. He says the biggest challenge around getting front line people to accept centralized purchasing is trust. Front line employees don't trust that purchasing will get them what they need, when they need it – so they don't cooperate with the process.

He then described two things he thinks purchasing professionals can do to make their purchase-to-pay automation initiatives successful:

First, build relationships with people in the field. Make them a deal – they get to pick what to buy, and purchasing gets to pick where to buy it. He said when purchasing starts by dictating what should be bought and by whom, their programs won't get far.

The other suggestion is to take things slow. He talked about a process I termed "See-Manage-Save." Here's how it works:

Stage 1 – See:
During the "See" stage, companies gain better visibility into who is buying items from different suppliers by automating purchasing, invoice processing and expense reimbursement processes.

By reducing manual activities, they gain visibility into purchases, reduce workflow bottlenecks and cycle times, and eliminate inaccurate accruals. Executives will get the clear visibility they need into spending and near term financial commitments.

Although "seeing is believing," investing in purchase-to-pay software doesn't guarantee lower costs. The lines of business must trust purchasing enough to allow them to manage spending and reduce costs.

Stage 2 – Manage:
During the "Manage" stage, purchasing strives to increase the usage of the new system by expanding spend under management and gaining more control over non-payroll spending.

They look for PO, approved invoice, or reimbursed spending that is currently processed outside the purchase to pay system, and bring it through the system to increase visibility.

They also look at large spending categories managed within the system to identify savings and automation opportunities. They break large spending categories with many suppliers into smaller sub-components, rationalize their supplier base and consolidate spending. They increase contract compliance by converting freeform request spending to catalog requisitioning and bring new spending categories under management.

They continually simplify processes to keep the end user experience positive, which in turn ensures user satisfaction and an openness to working with purchasing to manage more of their spend.

Stage 3 – Save:
Savings negotiated during the "Manage" stage are realized only if users leverage existing contracts when purchasing, and suppliers honor negotiated pricing. That is why our client says, "Reports make the world go round!"

He uses reports to help management perceived problems as well as reports to prove that he solved those problems. In the "Save" stage, companies drive savings by using the system's reporting and tracking capabilities to manage company demand as well as increase suppliers' compliance with contracts.

So there you have it, "Trust" and "See- Manage- Save." It's a bigger vision for P2P automation that can mean the difference between achieving ordinary and extraordinary results.

- Mark Schaffner, Verian

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