Editors Note: This article by John Yuva, Director of Research Operations at Ardent Partners, first appeared on November 11th on CPORISING.COM
As Chief Procurement Officers (“CPOs”) and procurement practitioners move into the year ahead, they have the need and the capability for advanced technology solutions to automate and link the source-to-settle process – upstream, strategic sourcing and downstream, procure-to-pay (“P2P”). Digital, automated supply management solutions can help overworked and understaffed procurement teams scale resources and extend their power and influence throughout the enterprise. It matters less where business leaders implement and drive technology adoption and more that they automate up (or down) the source-to-settle value chain; and that they link the chain for maximum value. Of course, even incremental automation can alleviate staff shortages and workloads and allow procurement to return more value to the enterprise. However, current technology adoption remains low up and down the value chain, leaving significant opportunities for value realization. Let’s sail on further downstream into P2P waters.
Procure-to-Pay
Procure-to-pay technologies can be real value drivers for procurement teams looking to take enterprise performance to the next level. For starters, eProcurement tools bridge the gap between upstream sourcing and value negotiation and downstream purchasing and value realization. With eProcurement tools, buyers simply log into a proprietary eCommerce platform that has the look and feel of Amazon, eBay, and other online shopping sites, but connects to preferred suppliers with which the enterprise has established a relationship. Buyers can search through punch-out catalogs provided by suppliers, and can drill down into different categories, such as department, make, model, price range, etc. After making their selection, buyers can purchase the good or service on the platform, which then routes payment information directly to AP/Finance for fast and seamless processing. In sum, eProcurement tools leverage existing suppliers, drive greater on-contract spend/contract compliance, and link directly with AP/Finance. They embody P2P.
Likewise, AP automation (also called ePayables), digitally and directly links purchasing with remittance, closing the gap between the two where value is often lost. Traditionally, paper-based requisitions and expense reports would have to be filled out and submitted by hand, delaying the purchasing and payment processes. Manual, paper-based processes also increase the likelihood that they will sit on someone’s desk, get lost in the shuffle, or otherwise be misplaced. But automating AP processes reduces this risk, and increases the likelihood that payment will be issued on time or early. In doing so, AP automation also opens organizations up to new ways to save, like early-payment or dynamic discounting. It also increases visibility into payment data, greater internal and external compliance, and ultimately, greater enterprise performance. Integration, speed, efficiency, reduced risk, faster remittance, and new savings opportunities are the primary ways that AP automation can be a real value driver for CPOs and AP/Finance leaders, alike.
Automated P2P tools, like eProcurement and AP automation, are scalable and repeatable in ways that manual, paper-based processes are not. For example, automated, digital procurement platforms allow buyers to purchase more goods and services in a shorter period of time, driving more value through the procurement process than performing manual, one-off buys, three-bids-and-a-buy, or off-contract (maverick) spending. Moreover, fully-automated P2P tools can provide greater visibility into the needs of the enterprise, and allow procurement and AP to collaborate to deliver them. With procurement and AP linked on either side of the spectrum by a common platform, AP can peer into the buying habits of procurement and help them find ways to save, while procurement can better track spending and help reign in maverick/off-contract spend.
Final Thoughts
Ultimately, linking upstream and downstream processes and tools – a fully automated and integrated source-to-settle suite – can be even more of a game-changer for supply management leaders than automating one stream or another. For CPOs and other procurement leaders, that is the ideal, new and improved technology end-game. However, many organizations simply do not have the budget or the talent required to successfully adopt and implement a fully-automated source-to-settle solution suite. For such organizations, all hope is not lost, for even incremental technology adoption and automation can drive significant savings and value through the process. But they should have a technology adoption roadmap for the future. And they should understand that a strong business case can be made by most organizations to deploy a fully-automated source-to-settle solution suite, and they should be working towards that end state.
