Purchasing Insight

Purchase to Pay, Purchasing & Procurement Process, Electronic Invoicing

Browsing Posts tagged eProcurement

Purchase to Pay, P2P and Dynamic Discounting

The selection of procurement software is no – absolutely not – a technical decision.

The successful implementation of Purchase to Pay Processes in a global environment has many challenges. In a short series of items, Purchasing Insight discusses some of the pitfalls. In the second, we look at the procurement software options, the challenges in making the right choice, integration issues and some pointers towards the right route.

Procurement Software

The selection of procurement software is far from straight forward. Although every organization considers itself to be special or different, in reality, there’s no such thing as unique from a P2P perspective. All organizations do more or less the same things. And if you are looking to accommodate the idiosyncrasies that do make your organization unique, you can be sure you at too low a level of detail.

This makes the first choice easy. Build or buy? Purchase to Pay and procurement software are not at the bleeding edge. In 2010, the market is mature and there is a wide range of solutions. The option to build (or adapt an existing solution) should not be in your list of options.

So what are the options? It is usually a safe assumption that the choice of finance system is separate from the selection of a Purchase to Pay system. (Finance systems are a fundamental part of the foundation of an organization that spans much wider than procurement and supply chain.)

The Options

Use you ERP Vendors Module

Some ERP vendors’ procurement and P2P modules are best in class even in isolation from their core finance systems, SAP and Oracle being good examples. But it’s not quite as simple as that. SAP is especially strong in a manufacturing environment but for a financial services company for whom procurement processes are fundamentally different it would SAP would be an unusual choice.

The key benefit of following the finance system lead is integration. Vendor master data may already exist. Version upgrades are a non-issue and there are no interfaces to be managed. The key question however is does it deliver the P2P benefits you want? Great integration doesn’t help if you can’t get suppliers to adopt your purchasing processes.

Third Party Vendors

If your finance system is second tier or lower or is not specific to your industry, third party vendors are a likely optimum choice. Ariba is amongst the best in class for eprocurement and esourcing but will also accomodate electronic invoicing, EIPP and Dynamic Discounting and with a proven track record of implementing alongside a wide range of finance systems Ariba should be included in most short lists.

But also look at the new kids on the block. Coupa for example is a cloud  based service that is seeing some success competing with Ariba in the SMB space. Specilialst vendors such as Basware with an einvoicing heritage are extending their reach and should be including in the mix.

A summary of Purchase to Pay Software is here.

Summary

There’s an adage in investment circles: “I can guarantee I can double your money (I just can’t tell you how long it will take)”. It’s like that with Procurement Software and all business software – it will do what ever you want it to do – it’s just a matter of time and money and in business it’s the time and the money that count. The selection of the right procurement software is not about headline cost and it’s not – absolutely not – a technical decision.

Purchase to Pay, P2P and Dynamic DiscountingTo the initiated, it’s a no brainer. Catalogues allow you to filter strictly what people in your organization can buy and from whom. The purchasing process is slimmed down and the cost of purchasing, as well as the cost of purchases reduced.

But for many of the initiated, they may well have seen catalogues deployed in “easy” environments. A bank for example. No direct goods as such are bought. The easy categories like stationary represent a significant proportion of spend. Oil and gas – lots of MRO spend and very  high IT budgets means that they were amongst the early adopters. An investment in SAP made over 10 years ago pays dividends today in terms of building best practice business processes.

But what of the more difficult environments? Take a medium sied company with an archaic ERP system. Take an industry that doesn’t necessarily lend itself to tidy efficient processes. Miners for example. Sure they, as an industry have bought into the concept of eProcurement and market places but how does a man down a hole order spare parts online? How do you order high specialist raw materials like concrete from a construction site? And how do you change hearts and minds of the dinosaurs in such demanding environments.

This is where we need to go right back to basics. Don’t assume that established best practice will work uniersally. Go back to the fundamentals of why eProcurement and catalogues and restrict the categories that are targeted.

eProcurement is still a good idea in demanding environment. Whether 2010 is the best time to invest is a rather more difficult issue.