We asked Chief Execs: what can procurement do for the business in times of crisis? – Process Continuity

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As a procurement- and supply-related research, news and publishing platform, Spend Matters’ analysts and editors are well placed to hear from the market about what the business really needs from procurement in times of crisis.

Our analysts are running a series called Coronavirus Response which examines seven categories of solutions and example providers that professionals in procurement, finance and supply chain organisations should investigate to reduce, and even mitigate, coronavirus supply risk. Here in Europe, we are talking to various vendor senior execs about what they think procurement needs to focus on right now.

The word on the street is that more than ever, Procurement is being relied upon to produce answers to some difficult questions under difficult circumstances. Procurement’s many strings are being plucked, sometimes for the first time, by people in the organisation looking for solutions, tapping into the facets of procurement they hadn’t thought to use before.

Any crisis forces organisations to look more deeply, and probably for the first time in a long time, at their processes, risk management, analytics and sourcing backup plans. We expect there’s a lot of firefighting going on in the workplace right now, and the business needs help with the likes of renegotiating contracts, re-prioritising spending, and basically keeping processes running as smoothly as possible.

Procurement is in a great position to help, with its cross-functional way of working with the business units, whose needs it understands, and with its knowledge of the market. So let's start with process continuity and alignment as one of the means for procurement to help the business.

Process Mining

Process mining, process flow control, process improvement – however we refer to it - is crucial to get right. As crises such as the Fukushima and the Thailand floods have taught us, supply chains are fragile and the processes that underpin them are equally so, from the moment an order is placed, to a product being delivered, to a payment being made. Never has there been a more pressing time to identify and put right the friction and bottlenecks in your purchase-to-pay (P2P) processes.

But to do that, we can no longer rely on interview-based research, documenting all the steps or manual mapping. It’s a long and time-consuming process, not to mention expensive. Specialist tools exist: process mining software captures information from enterprise transaction systems and quickly provides detailed, data-driven insight into how key processes are performing, some offering a visual representation of where your processes are falling down. Given that, there is no longer a good reason for process mining to be the back-burner issue it has been for many years, as specialist technology is coming to the fore.

This is not a unique market to be in, there are several players, but not all are procurement-focused. A solution required to analyse and improve procurement processes must be able to connect with all your enterprise systems, whether you are running Ariba, Basware, Coupa, Fieldglass, Jaggaer, Oracle, SAP, Tradeshift or any other, to give you full visibility of each step in the procurement process. And ideally, it will provide you with actionable recommendations on how to put a broken step right or remove the point of friction.

It sounds simple enough, but many companies still do not have this full insight. They cannot see whether a process is running smoothly across the various systems. Given that there can be millions of steps to some processes, we need to gain visibilty across all of them.

Use cases

Process mining can be used to analyse and improve all business processes. The P2P process is the classic place to start. In our industry friction can start from the moment a free-text-form order is placed, and ripple through to misalignment between PO and invoice. And the smallest hiccup have a major impact on process flow: for example, a supplier invoice may be stuck in the system because of a tiny change in price. The software will identify the process that isn’t running smoothly and pinpoint the deviation from contract as the cause. It will then advise you to review the price, correct the difference in the master data and update the catalogue. The invoice will continue to be processed without inconvenience to the supplier.

Of course, paying suppliers on time is vital to keep the supply chain going, but what’s also important to the buyer is making sure the company is adhering to the right payment terms and leveraging any discounts that are available. The technology will identify all the places the terms are referenced, whether in the contract, in the PO or in the master data, and recommend which one to use to best support your company objectives, optimising your working capital and improving company cash flow.

One technology provider that is considered to be market-leading in this niche space is Celonis, whose chief innovation officer, Dr. Marcell Vollmer, told us:

“We need to understand and have visibility of all our processes for at least two very good reasons:

One: there is high demand from the consumer side to understand the origins of your products.

Two: people are firefighting; they need all the help they can get to smooth out their processes, enhance compliance and contribute to business performance.”

“People see only their part of the process, they do not see the process as a whole – that’s where process mining comes in. It will show you variations in process across the whole organisation, and by identifying patterns in the recorded transactions it collects from ERP and other systems, it can tell you how long a process is taking and where it departs from the norm. It then uses AI algorithms to detect the root causes of variation. Teams can see for the first time an integrated view of the end-to-end process, by business and by product line. Good process mining software will provide you with a visual view of process performance and ultimately enable better data-driven decision making.”

As our analyst Magnus Bergfors commented:

“This is a very distinct market, one in which Celonis stands out from a procurement perspective. It helps streamline your procurement transformation by pulling all your transactions into one place and visually mapping your actual processes to provide transparency, for example identifying where POs and invoices don’t match and reducing cycle times. In fact, this is a super useful accompaniment to spend analytics at a time when organisations need all the control they can get.”

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First Voice

  1. Josephine:

    It’s a nice piece

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