Implementing S2P for your indirect spend in 6 months? How?
The philosophy of this blog post: “If Rome was not built in a day, it is because perfection is the enemy of the good, and citizens have to be empowered to be creative and satisfied to live in and enjoy the city.” The same applies to S2P implementation and adoption.
We have to assume that you have this need for speed either because,
- you have limited resources to implement the solutions, either internal or external wrapped in a timed Statement of Work…
- you have an urgent need to get your indirect spend under control…
- you have decided to reduce or reorient the resources dedicated to processing S2P and this program is already being implemented; a reorganisation is underway…
- you have a need to ensure compliance due to an urgent audit requirement or report or,
- you are simply impatient…
Key points of attention:
- build a scalable S2P
- build an S2P which can be able to integrate with minimum customisation
- build an S2P which delivers on reporting with the level of granularity that allows you to improve your processes
- build an S2P which requires low maintenance
- build an S2P which is not restrictive (you can always restrict later when the issues occur)
- and most importantly build an S2P to make the users’ life easier and ancillary helps you to continue to make the users’ life easier…
Key obstacles which are in fact opportunities:
- your vendor master data is suboptimal – as you start using your S2P, you will be given ample opportunities to clean it up (disactivate, block suppliers and update supplier data and the vendor hierarchy).
- Examples: all suppliers not used within the next 12 months will be disactivated. All suppliers locations will be updated based on user requests under a parent vendor and all duplicates will be disactivated.
- users are not familiar with an S2P solutions, aim for “click & buy” and build on their current processes/knowledge. Sometimes, the process exists; it is just not documented or automated, start there.
- Examples: Users use P-cards and buy of the internet or expense, now they can buy directly from a marketplace which you make available to them. Users solicit 3 offers before placing a PO, now , they can perform “3 bids & buy” in the solution.
- it seems like there is a lot of maverick spend going on… how to be sure it is maverick and not tail ? You can identify the categories where
- 1)you don’t want any maverick spend taking place because you have preferred suppliers, contracts in place or specialised buyers. You can apply a differentiated approval flow for these or block these all together.
- 2) you don’t mind “maverick” spend taking place because you recognise it actually might be tail spend or the users are purchasing categories which are non-critical overall or peculiar to their line of work.
- your spend data is of poor quality: You receive a lot of invoices but have little knowledge on who buys what, what for, why, from whom, at what price and when… Offering users framed choices, allows you to gather information on the spend portfolio and pattern for you to decide in a second step whether you want to reorient this spend to a more structured S2P.
The good thing about indirect spend is that in most cases while it is critical to the users as they need it to go about their business objectives diligently, it is not necessarily as critical to the business from a revenue or risk perspective. In general, it is common to many companies in many industries so the knowledge about the spend categories is quite deep and widespread including from a marketplace perspective.
Start with categories such as: Office supplies, IT supplies, Software subscriptions, MRO, Facility Management (FM), Professional Services, Furniture, Courier services, translations, subscriptions, temporary staff, catering etc…
For specific categories, users and value thresholds, deploy easy buying channels such as:
- “3 bids & buy” : mainly R&D, repair quotes, PR campaigns for R&D, FM and Marketing with preferred suppliers.
- Marketplace: for bits & bobs, gifts, flowers etc… ex: every employee up to X Euros
- Recurrent contracts with fixed payments for the duration of the contracts including evergreen: rents, leases, ordinary maintenance – relieves users from raising blanket purchase orders every year, closing them, getting them approved etc…
- Punch-out catalogues with known suppliers: at the beginning not built/tailored to you but just extended to you… you will have time to work on refining them once you understand what users are buying, searching and needing.
- *eforms* to reduce free-text requests it is best to frame the options for the user but also to ensure:
- that the PR can be converted into a PO which can be executed by the supplier
- that data which is relevant to Sourcing and Procurement and Administration is collected to be able to approve, update, evaluate or reject the PR
- that the PR is complete e.g. kits example: letterhead with envelopes or laptop with mouse and docking station
By implementing these 4 buying channels and eforms, you should be able to cover between 20-40% of your indirect spend while gathering through reports the information which should allow you to optimise your S2P further. It also gives you additional key benefits:
- It buys you time to work on more important, critical and complex categories with regard to S2P.
- It allows you to make users’ lives easier and to get them to experience the “look & feel” for the longer S2P journey – hopefully satisfying…
- It sets the field for more complex buying channels both with users, Accounts Payables and suppliers who will grow with you to get involved with:
- non recurrent contracts
- Service Entry Sheets
- recurrent contracts with variable payments
- internal catalogues maintained or not by suppliers
- tailored punch-out catalogues
- user suggestions
My advice is at the outset make the choices as open as possible (you will have ample opportunity to reduce unwanted deviations):
- allow a maximum of categories
- authorise a maximum of users
- raise the purchase threshold to the maximum possible
- maximise automated approvals
- minimise goods receipts – prefer random checks
- minimise integration (move to SQL upload/download every 24 hours to update data incl. vendor to start and to integration later)
- minimise instances in which users are faced with error messages, which then trigger support requests which you have to attend to. (Believe me, many of these support requests will be basic and recurrent). You are proposing an improvement vs. past so make it true: avoid generating frustration is key to future adoption.
- request user feedback – they know more about their experience then you will ever… this should be done for every PO for the first 6 months.
Focus on the accuracy of the PR information, on the suppliers to make the delivery happen and increase the frequency of the reporting to the maximum possible to detect anomalies, anomalous behaviours, misalignment of configuration, on search parameters and work/approval flows.
At the end of the 6 months, you will hopefully have achieved the following to show to Senior management:
- on average 30% of your indirect spend is now in S2P and,
- you have reduced your maverick spend significantly and,
- used all the easy and quick win buying channels, and,
- your suppliers and users are now familiar with your S2P solutions and asking for more and,
- Accounts Payable workload would have been reduced and thus payment on time has increased, and,
- your vendor master data is cleaner and richer and,
- your spend reporting and visibility is increased and,
- you have a solid S2P plan for the remaining 70% of the spend and,
- you understand the integration requirements between your ERP and your S2P and are ready to integrate.
Please feel free to leave a comment.