Integrating P2P with Strategic Sourcing Suite A way to treat organization s Silo Syndrome www.zycus.com
Introduction The market is undergoing a shift to a more integrated system away from loosely coupled heterogeneous approaches. But the question comes that what are the factors that drive procurement towards a more integrated approach? The performance pressure faced by procurement both internally and externally with other functions plays an important factor that drives organizations towards more integrated approach. To find more savings in the organization, to increase overall effectiveness and influence of decision making process, to check performance of all suppliers and to increase spend under management are the pressure areas chalked out by Ardent partners in procurement function. Keeping a tab on these areas and ensuring better performance can be quite an uphill task for procurement. Therefore companies can gain better results by integrating existing point solution with consolidated strategic sourcing solutions. This approach allows organizations to facilitate and integrate B2B activity more efficiently and see greater value in their technology investment. They can land a specific solution with opportunities to expand, unifying individual processes and solutions. This white paper offers an understanding of how and where organizations should bring technological transformation in procurement by integrating disparate procurement systems. Pressures faced by procurement Find more savings 51% Increase overall effectiveness and influences 40% Include supplier performance 23% Increase % of spend under management 18%
Introduction High Mobilizer Innovation driver Procurement Achievers Internal effectiveness (within procurement and with other function) Shaper Information Broker Cost Cutter Beginner Sourcer Strategist S P OF Low Low External effectiveness (within suppliers) High Less effective S Supplier More effective P Procurement Most effective OF Other function Figure Source - Atkearney "How to become procurement Champion" The above diagram shows how with low internal and external effectiveness an organization will stay in beginner's box whereas, as and when its interaction with the suppliers and other function gets stronger it moves towards being procurement achiever. The silo approach of an organization will hamper its internal and external effectiveness thus hampering overall growth.
What is wrong with silo approach? Let us first understand that why in the first place we need to shift from a compartmentalized approach to a more integrated approach? Organizations with low internal and external effectiveness are the ones that truly suffer from silo syndrome. They have weak interaction with suppliers and other functions of the organization. These kind of organizations are the one which suffer from performance issues, leading to lesser saving and more spend. Addressing the challenges with technology How Procure-to-Pay can help? As its name implies, a procure-to-pay (or purchase-to-pay) system is a fully integrated solution designed to support an end-to-end process that begins with goods and services, requisitioning and ends with ready-to-pay files for upload into an accounts payable system. The P2P system for organizations has evolved over the period of time offering what is more user friendly, has better adoption rate and steers users to right suppliers. Consumer style UI as compared to previous enterprise style UI AI-based classification for real-time spend analysis Guided buying to close the compliance for off - catalog requisition Better visibility into contract & budget compliance 80-90% adoption with minimum or no training
What is Strategic Sourcing Suite and how it helps? Strategic sourcing suite consist of solutions for sourcing, contract management, spend analysis and supplier management that would optimize an organization's supply base and improve the overall value proposition. What it is Getting the best product/service at best value Driven by a rigorous and collaborative approach Addresses all levers for savings Decisions based on fact based analysis and market intelligence Continuous process Getting the CHEAPEST product Ad - hoc activities involving just purchase Focussed on "beating -up suppliers Decisions based on opinion, unjustified preference, of complacency A time project or decision What it is NOT Figure Source - University of Michigan "What is Strategic Sourcing" This strategic sourcing suite helps by: Realising savings for capital reinvestment and further future transformations Helps to generate greater sourcing volumes Rationalize spend and supplier relationship
Benefits of integrating P2P Integrating P2P with other Strategic sourcing solutions For an organization to move out of its silos it has to take an integrated approach. The benefits of strategic sourcing solutions combined with Procure-to-Pay solution can in true sense help them to accentuate the effects of point solution deployed. The table below indicates few benefits of integrating both approaches. Strategic Sourcing Solution Benefits 1. Savings realization for capital reinvestment, further transformation 2. Greater sourcing volumes 3. Rationalized spend and supplier relationships Transforming the role of P2P from transactional and tactical to strategic with the role that s more aligned to a value-adding Source-to-Pay (S2P) model Evaluating the importance of integrating internal with external functions 1.Departmental alignment of processes, technologies 2. Closer, more effective collaboration 3. P2P, source-to-settle value chains linked Enabling procurement to influence and drive business change with more accurate and trustworthy management information Procure to Pay solution benefits
Benefits of integrating P2P P2P can be integrated with number of upstream solutions available in the strategic sourcing suite. Each integration has its own benefits. Example when you integrate contract management with P2P you get easy access to contract terms while ordering and paying. The following solutions on integration result into Strategic Sourcing +P2P gives To convert requisition into RFP/ auction for items or services that require sourcing Convert awarded bids to PO, once the sourcing exercise has been successfully completed Supplier management +P2P gives Requisitioner is guided to correct supplier Supplier gets visibility in terms of orders,invoices and payments Track & View supplier performance on critical parameters before making transactions Spend Analysis +P2P gives Real time visibility into contract and budget compliance Pro active budget utilization alerts
Vendor One or None A comparison Pros of Having an Integrated Software System from a Single Vendor To keep your business growing at the dramatic rates you plan for, it is essential to have your procurement business software solutions preferably from a single vendor. The advantages of a seamlessly integrated system yield tremendous cost savings and improved business productivity, including: Process Efficiency across Your Organization: Solutions from a single vendor reduces training for employees as the systems will have a similar interface. Having an easy and similar UI across the different procurement solutions also help increase the user adoption. Thus ensuring better compliance to the processes, improved and faster ROI and helping organizations redeploy its staff to higher-value activities. Dramatically Improved Visibility: When information can be accessed instantly from almost anywhere, without wasting resources on data extraction and tying data from different sources together, employees are better informed and can make more accurate, faster decisions. Significant IT Time and Cost Savings: With IT no longer having to procure, install, and maintain multiple systems from different providers as well as the various integrations between them, a significant reduction in operational costs can be realized while IT time can be spent improving the business operations. Cons of Having a Solution from Different Vendors When high-growth companies have several solution providers, there are many business challenges that arise. These challenges can become so severe, that they can cripple growth. Here is a summary of the main issues that can hinder your growth if you run a business with disparate business software systems: Lack of Real-time Visibility: Unintegrated software systems from different vendors, will lead to multiple, overlapping databases and cannot easily get a unified and accurate view of business performance in a timely fashion. Most companies simply give up on acquiring this information on a regular basis because of the amount of time it takes to source, extract and analyze this data. Reduced Employee Productivity: If your employees are bogged down with inefficient and disjointed processes, it increases errors and reduces efficiency from their more important core duties. Tactical processes such as order processing, invoicing, expense approvals and fulfilment, to name a few, can take a lot longer to get completed and are often erroneous. Integration Complexity and Cost: IT wastes an enormous amount of time and money on integrating, maintaining and acquiring these new disparate IT applications from different vendors. And once new versions from different sellers are purchased, even more integration and maintenance needs to be performed for all the different versions of software to work together. Consequently, valuable IT time that could be used to make the business more productive is wasted, while maintenance costs skyrocket.
Conclusion P2P and other strategic sourcing solutions have their share of benefits which can be helpful for organizations. But integrating these two would not only make procurement function achieve best results but also provide a seamless procurement system that will help Increase spend under management and thus a decline in maverick spend Increase budgetary and contractual compliance Provide guided support in buying and guidance to correct supplier. Provide better visibility in terms of supplier performance, orders and payments.
Zycus is a leading global provider of complete Source-to-Pay suite of procurement performance solutions. Our comprehensive product portfolio includes applications for both the strategic and the operational aspects of procurement - eprocurement, einvoicing, Spend Analysis, esourcing, Contract Management, Supplier Management and Financial Savings Management. Our spirit of innovation and our passion to help procurement create greater business impact are reflected among the hundreds of procurement solution deployments that we have undertaken over the years. We are proud to have as our clients, some of the best-of-breed companies across verticals like Manufacturing, Automotives, Banking and Finance, Oil and Gas, Food Processing, Electronics, Telecommunications, Chemicals, Health and Pharma, Education and more.