Can services spend for engineering/maintenance be helped by a new technology approach?

Services procurement creates so many headaches across companies, and business leaders’ frustrations with it have risen to a level that it needs to be addressed.

Spend Matters has heard from procurement pros that technology doesn’t properly address all services workflows, doesn’t offer enough spend visibility, can’t be easily used by anyone across the company, and doesn’t fully meet compliance and audit needs due to the complex requirements of services procurement across various groups.

With an estimated $1 trillion in annual services spent by U.S. firms, those are big issues — especially when trying to buy engineering/maintenance services for manufacturing facilities and equipment, large turnaround projects, capital-intensive projects and IT operations outsourcing.

Managing this process takes a lot of manual, time-consuming attention and often doesn’t efficiently result in the desired outcomes. The effort and time to get engineering drawings or big projects from an offline team into the source-to-pay process raises the question: Why not start the digital process sooner, in the engineering/maintenance phase so the workflow, like sourcing for materials and vendors, can begin sooner and with more visibility?

And now that the coronavirus crisis has disrupted revenues and supply chains, pressure to preserve cash and reduce risks has mounted. Profitability cannot rely on having a single supplier for key goods and services. That model makes a business too vulnerable to shocks to supply and demand.

While having multiple suppliers adds resiliency to a supply chain, it also adds complexity. Manual workflows to buy services are complex enough, so it quickly becomes apparent that having a proper process and the right technology for manufacturing facilities and equipment, large turnaround projects, capital-intensive projects and IT operations outsourcing to cohesively join the source-to-pay process and technology requires a more agile and efficient system to balance the costs versus the risks.

Challenges in Services Procurement

If the teams for engineering and maintenance at your plant can’t keep the production line running or if IT can’t keep the patchwork of computer systems tuned up, then your business suffers. In today’s fragile business climate, that can’t happen because these challenges have an increased chance to result in audits and compliance problems as well as business slowdowns.

But by examining the challenges to services procurement, businesses can understand the scope of the problems and the benefits of addressing them.

Carrying out the process for finding and managing services relies on how well your IT and reporting operate across the different needs of manufacturing/engineering/maintenance and sourcing/procurement. Often, they’re misaligned due to their unique operational needs, and problems cascade inside the company and with suppliers. Let’s take a look at the challenges:

• Siloed departments keep some teams unclear of other teams’ roles and responsibilities. That leads to poor internal communications and inefficient work processes.
• Suppliers also lack support and clear expectations for governance and the P2P process, like change requests and billing. That also limits communications with customers and getting feedback from them, which hampers your chances for a partnership for growth and innovation.
• Complex workflows often are saddled with manual handoffs from one team to the next, and they rely too heavily on work-arounds, meaning things can easily fall through the cracks and take an increased amount of time to complete.
• ERPs that are used often have a UI/UX that isn’t complete or easy to use — and doesn’t encourage internal teams and vendors alike to use it to improve efficiency and compliance.
• The lack of IT support often leads to heavy manual workloads and blind spots. Internal and external users can’t see the status of purchase requests, POs, service receipts and payments. And the lack of data collection hampers visibility from digital tools like analytics and dashboards.

Creating an ‘Engineer-to-Pay’ Process

With so many issues involved to gain successful service outcomes, the people tasked with these jobs need help to manage the end-to-end process.

The consultants at BearingPoint have begun tackling the issues with a concept of engineer-to-pay, where engineering/maintenance/turnaround/capital spend is fully supported by IT and process automation to give visibility, control and governance across the whole business.

Engineer-to-pay (E2P) works by marrying typical engineering/maintenance/turnaround/capital processes to the sourcing, procurement and payment processes. An E2P workflow gets sourcing teams involved early and keeps collaboration and communication flowing throughout the process. At the start, it lets the team easily generate a purchase request (PR) for defined labor services from an engineering drawing or a request for maintenance or project services. A status tracker lets stakeholders monitor the progress as it becomes a PO and the work begins, but changes invariably are needed, and an integrated process for handling changes smooths out those issues.

BearingPoint finds that standardizing a services operation and combining it with the standard sourcing and procurement process reduces errors, improves efficiency, speeds up responses to engineering/maintenance requirements, and adds more control over procurement costs and quality. The consulting firm also sees that E2P improvement can result in reducing lead times by up to 40%, improving the source-to-pay process up to 35% and cutting annual spend by 8-12%.

“Engineer-to-pay really pulls together some offline, manual tasks that had too many risks and were overdue for being part of the digital workflow,” said Dietrich Pankratz, BearingPoint’s U.S. Operations Practice Leader. “We’re seeing one solution tackle this well. The AES/32 solution gets projects started digitally with sourcing and procurement and it also gets vendors engaged to really speed up how projects and activities are executed and completed.

“That’s key, especially as the COVID crisis has raised expectation for remote work. Stakeholders expect digital solutions to really make a company’s whole process click — end to end. With services procurement, it’s all about outcomes, process transparency and efficiency, and clients like the results they’re seeing with engineer-to-pay.”

To get a better sense of the details, the graphic below shows how the AES solution works.

From using the catalog for service-related activities at the start to the One-Click feature later in the process, internal customers like engineers, maintenance and IT can begin a project by choosing services/activities in a catalog, and vendors can collaborate — all in a secure system that speeds up results.

(Click image to enlarge)

A key benefit of the catalog is that it has pre-approved vendors, so when a project gets kicked off, the process gets expedited. From engineering drawings, capital projects, turnarounds or a maintenance request, the internal team can assess the demand for a project and plan for labor, services and materials — then find an approved vendor in the pre-negotiated catalog. Once vendors sort out the scope of a project in a quantity survey, the work can be approved, completed and billed — all via AES. The process is complete when that billing is approved.

This Brand Studio article was written with BearingPoint.