The Source-to-Pay Automation Playbook

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Source-to-Pay (S2P) automation can deliver huge benefits to the procurement organization and the wider enterprise. Procurement Leaders Magazine is sharing authoritative insights and practical advice on what to do AND not do in a new handy guide – The Source-to-Pay Automation Playbook. The report features leading S2P technology experts and enterprise users from leading global enterprises. To know more about source pay software and technology visit SMART by GEP -


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3 Procurement Leaders THE SOURCE-TO-PAY PLAYBOOK INSIGHT THERE’S A DIVISION between how sourcing should be and how it often works. Decisions get made without the right justifcation spend gets managed carelessly or not at all and monitoring and managing compliance is done on an ad-hoc basis. Of course many have turned to automation to solve this mismatch of activities in essence trading one series of manual activities for another but crucially adopting activities where procurement can play the role of decision-maker and controller of an automated process rather than the far less productive pastime of policing unco-operative stakeholders. Anyone who’s been through the implementation process will tell you that while automation may not be a silver bullet an approach which combines the transactional effciency of the right software system with a stakeholder-aligned spend management strategy has the potential to redefne the limits of the function. Steve Hall Editor Procurement Leaders © A Procurement Leaders publication In association with GEP All rights reserved PERMISSIONS AND REPRINTS Reproduction in whole or part of any photograph text or illustration without written permission from the publisher is prohibited. Due care is taken to ensure that the content of this publication is fully accurate but the publisher and printer cannot accept liability for errors and omissions. Published by: Sigaria Ltd Unit 5 tun Yard Peardon Street London SW8 3HT UK Source of hope The wealth of spend data lost in the sourcing process could instead create big savings writes Malcolm Wheatley IN EARLY 2014 California- based facilities management company SBM Management Services saw that it needed to improve its sourcing and contract compliance processes. Across a broad front of activities recalls SBM procurement director Bruce Capagli it appeared that there were opportunities to improve effciencies reduce risk achieve greater control and  compliance and seek out pricing improvements. Sourcing for instance was very manually intensive with RFPs being prepared in Microsoft Word and mailed to subcontractors that SBM was already aware of or who had been located through online searches or Yellow Pages listings. Contract compliance was similarly manually intensive with no central repository to store customers’ and subcontractors’ contracts no automated way to pass customers’ contractual requirements on to the subcontractors assigned to those customers and no way to effciently collect and store all the documentation necessary to prove that subcontractors were indeed in compliance with customers’ requirements. But turn the clock forward to today says Capagli the Æ

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4 Procurement Leaders THE SOURCE-TO-PAY PLAYBOOK INSIGHT situation is very different. Thanks to an investment in a number of modules from GEP’s ‘SMART by GEP’ cloud-based source-to-pay S2P procurement software SBM’s pain points have been signifcantly eased. The sourcing module for instance has delivered an automated sourcing process connecting SBM with both existing suppliers and suppliers of which it had no prior knowledge – and in the process throwing up undoubted pricing improvements. Enhanced contract management meanwhile has reduced risk by providing an assurance that SBM and its subcontractors are meeting all the insurance and legal screening requirements imposed by its blue-chip customer base. Matter of scale Just as importantly SBM can now solicit bids from track and manage its minority supplier base – an important plus in a facilities management marketplace where many customers have formal obligations imposed through government contracts and other binding commitments to place specifed percentages of spend with minority groups. “From the point of view of my team S2P has given us the ability to scale what our function can achieve as the business grows without increasing headcount” sums up Capagli. “We can move from RFP to fnal contract incredibly quickly with a digitally-enhanced workfow huge reporting improvements and signifcant operational improvements and effciencies.” Impressive certainly. But not necessarily representative WHAT I LEARNED: CPO EXPERIENCE You’ve chosen a vendor and signed the contract. Now what Talk to S2P veterans and it quickly becomes clear that an S2P project isn’t quite like other corporate IT projects – such as ERP for instance. In part that’s because – rightly or wrongly – while ERP projects are seen as enterprise- wide transformation projects with a project team and reporting structures to match the responsibility for S2P projects tends to be devolved downwards often to within the procurement function itself. The result Some interesting war stories from procurement executives who’ve served on the front lines. SBM Management Services’ procurement director Bruce Capagli for instance urges businesses to take advantage of the often protracted vendor selection process to begin cleaning data sources as early as possible. The argument is of all S2P projects everywhere. Because talk to those close to S2P implementations and it’s not diffcult to hear of S2P experiences that are very different from the one enjoyed by SBM. Simply put even when businesses set out with the best of intentions it’s all too easy for an investment in S2P to turn into an expensive mistake. So what goes wrong Right across the board it seems S2P projects are vulnerable to risk. System selection risk. Implementation risk. that irrespective of vendor choice you’re going to need clean data so there’s nothing to be gained by waiting. “We would have done a faster and better job of implementation if we’d cleaned our data upfront and might have been able to shave two months off the implementation timescale” he says. At cable television and telecommunications company Cox Communications meanwhile Julie Moran senior manager within the company’s sourcing centre of excellence highlights the unforeseen impact of Cox’s corporate document retention policy on the implementation timescale of the contracts module of GEP’s S2P suite. “We were surprised at the sheer number of contracts that we had to load into the module” she says. “Our document retention policy meant we had to hold onto contracts for up to 10 years after contract expiration with the exact timescale dependent upon ‘Expectation’ risk where the wrong goals have been targeted and the wrong targets pursued. And signifcant risks in operational usage arising from fawed business processes low user adoption and a strategic failure to understand just what S2P entails and how it can help the business. “There’s a lot of confusion in the marketplace” acknowledges Hugh Williams managing director at supply chain consultants Hughenden Consulting. “S2P tends to be more appropriate for

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5 Procurement Leaders category. In all there were more than 8000 contracts or contract- related documents to be loaded which we’re eating into at about 150 per week.” Change management too is another area where hard-won lessons have been learned. “It’s one thing to have a system go live and it’s quite another to have people actually use it” says one CPO. “S2P is not just an intellectual exercise it’s an emotional exercise: you’re changing how people do things and what their day looks like.” “Even though it will make people’s working lives more effcient and productive they’re not necessarily going to see that on ‘day one’. I felt that it was a no-brainer and that our team of procurement professionals would naturally want to embrace the new technology. But even though we’d had people sit at computers and try things out during the system selection process we could still have done a better job of transitioning people onto the new way of working.” the transactional end of the procurement spectrum rather than on relationships which are more focused on collaboration and shared development. The danger is that S2P can institutionalise a transactional relationship making it more diffcult for a business to do  something more strategic and collaborative.” “It’s important for purchasing departments to retain an appropriate level of control” adds Cindy Jutras president of analyst frm Mint Jutras. “Automating transactions is one thing automating decisions is quite another. So it’s vital to be very clear about what you’re automating – and why – and also what you’re not automating.” Flawed goals too lead to businesses focusing their S2P implementations on the wrong metrics leading to a strategic mismatch between what S2P can deliver for the business and what it does actually deliver. where the major share of the gains from S2P will come from. “For us it’s about strategic sourcing and the opportunities to merge multiple purchase agreements into one by fnding out what we’re spending who we’re spending it with and what we’re actually buying with that spend” he sums up. “It’s fair to say that while some suppliers have welcomed the move seeing in it the prospect “For us it’s about strategic sourcing and the opportunities to merge multiple purchase agreements into one...” “Many companies are very tactically focused when purchasing or implementing S2P“ says Ann Grackin chief executive of supply chain analyst frm ChainLink Research. “They will have very limited goals such as reducing the cost of the procurement department or making the procurement people more productive. That is good as far as it goes but is insuffcient. A more important goal is to increase ‘spend under management’ which leads to a greater understanding of total spend so that frms can then decide how and where to reduce spend.” All under one roof It’s a view endorsed by Tim Banks vice president of procurement at ABM Facility Solutions Group a division of ABM Industries. Already a user of GEP’s spend analysis toolset and also in the process of rolling out the company’s SMART by GEP S2P solution he’s in no doubt as to of higher volumes others have realised that it threatens their ‘divide-and-conquer’ strategy with individual salespeople being very protective of their margins relationships and commissions.” Indeed even where operational effciencies can result from S2P capabilities such as workfow these should pale into relative insignifcance compared to the higher-level gains from those same capabilities reckons Julie Moran senior manager within the sourcing centre of excellence at cable TV and telecommunications company Cox Communications and another GEP customer. “Cox has never had a central repository for contracts: they’ve been fled physically or stored on a shared drive or retained within sourcing teams” she explains. “Having a common storage location helps deliver the holistic visibility that we were looking for – not necessarily in terms of individual contract monitoring Æ

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6 Procurement Leaders THE SOURCE-TO-PAY PLAYBOOK INSIGHT but in terms of understanding how much spend was under contract or when contract expiration dates were due.” So what then represents best practice when selecting and implementing an S2P application How should businesses go about the process of framing and articulating the benefts and improvements that they are looking for How should they manage the S2P implementation itself to keep it on track for delivering these improvements And what steps can they take to avoid risk – specifcally the risk of an investment in S2P that ultimately fails to deliver on its promise And importantly too what advice is available on the specifcs of an S2P project – as opposed to general project management dictums that might apply to ERP implementation or indeed almost any IT-based corporate cross- functional project Controlled release As might be expected it turns out that GEP together with some S2P-savvy customers and experts isn’t exactly short of just such advice. For instance says Gopinath Bharathi GEP associate director for technology it’s important to defne – very early on in an S2P project – exactly what success looks like. “Success isn’t defned as the tool going live instead it’s levels of user adoption and results that matter” he insists. “So fgure out what it is you want the tool to deliver and then work to build the S2P processes and levels of user adoption that will deliver those results.” Typically for instance a company might want to drive down maverick spending – and therefore increase spend under management. So it’s important says Bharathi to create streamlined processes that not only encourage compliance – by making compliance easier than non-compliance – but which also contain the controls necessary to police that compliance. “An organisation will have multiple modes of procurement: fax mail telephone e-mail and so on” he points out. “By making them all go through a single tool you’re not just enforcing compliance with contracted pricing from contracted vendors you’re also gaining spend visibility. A good process doesn’t just encourage and enforce compliance yielding pricing improvements it also helps to capture non-price benefts such as spend visibility data capture and automated invoice matching.” So how then should such a process be created While the existing procurement process

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7 Procurement Leaders “Success isn’t defned as the tool going live instead it’s levels of user adoption and results that matter.” is a starting point it’s best to treat it just as that – a starting point stresses Shibhu Nambiar director of product management at GEP. “Think afresh don’t just carry forward the way that you do things at present” he urges. “Take the time to work out how things should happen taking a holistic view across functional and geographic boundaries and build a process that’s ft-for-purpose. It’s almost always a mistake to just overlay automation and technology on top of an existing process S2P isn’t about making a broken process run faster.” Even so this can be easier said than done he adds. It’s not unusual to fnd companies determined to adhere closely to their existing processes even though those processes are by now quite outdated stemming from the existing use of equally outdated tools. “Like most S2P providers we’re happy to provide help and guidance in both cases – retaining an existing process or moving to something closer to contemporary best practice” he notes. “The takeaway for any business looking at S2P is to make sure that their proposed provider has an application that is fexible enough to support how the client wants to build their process even if that process isn’t best practice. Because an S2P process that isn’t refected in the appropriate S2P application simply negates much of what the business is trying to do.” In use or irrelevant Equally of course an S2P process and S2P application that simply aren’t used has a similar ROI-sapping effect. So it’s critical to ensure that both an S2P project’s system selection and implementation phases are frmly targeted on high levels of user adoption. “It’s easy to underestimate the change management that’s involved” says Don Klock professor of supply chain management at America’s Rutgers University and a former CPO at consumer products company Colgate Palmolive. “You’re talking about users – potentially scattered right across the organisation – flling- in forms online entering Æ

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8 Procurement Leaders THE SOURCE-TO-PAY PLAYBOOK INSIGHT details that they’ve never previously really thought about and seeing chains of approval populated with names that they’ve never seen before all to generate back-offce savings elsewhere in the organisation. In short they don’t see it as something that is going to help them.” So communication and training are key he emphasises – although for an S2P project team it can sometimes be diffcult to identify just who that communication and training should be targeted at. “It’s not always clear who a requisitioner is” points out Klock. “You can spend a lot of time training a manager only to fnd that they delegate the job of purchasing to their administrator who hasn’t been trained and so who doesn’t understand what they are supposed to be doing.” Continual improvement That said adds Santosh Reddy a director in GEP’s technology team while training is vital what is just as important is that any training doesn’t end at the point of go-live when the original implementation team disbands. “Whether training is carried out by the project team or through a ‘train the trainers’ cascade-based approach you have to remember that the system will continue to evolve and that the provision of training will need to refect that” he advises. “At GEP a best practice that we recommend is to create and train ‘super users’ who are experts in the task at hand and can pass on that knowledge updating it as the system evolves. And in our “Start building and cleaning your vendor master data ... as soon as you’ve decided to go for an S2P application.” experience having a greater number of ‘super users’ leads to more extensive and faster levels of user adoption.” And so too with suppliers he stresses: the need for effective and timely communication doesn’t end at the four walls of the enterprise. “Typically companies know that they need to communicate internally” he points out. “But it’s important that they also communicate with suppliers

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9 Procurement Leaders   MAPPING THE S2P APPLICATION The best-kept secret of a successful S2P project is process mapping says Santosh Reddy a director in GEP’s technology team. Partly he explains that is because process mapping helps businesses to fgure out the most effcient and most appropriate S2P process for their own particular circumstances. And partly too it’s because process mapping shines a bright and uncompromising spotlight on S2P data: what data is required where it is to come from what will be done with it and which other systems the S2P application is to update once it has processed a particular piece of data. “In any new S2P process there are a lot of decisions to be made” he points out. “Where are the best points in the process for approval to take place What approval levels should apply Which orders should go through which routings An organisation chart helps with some of this not all of – and mapping the process helps the implementation team to see what decisions need taking and where.” Likewise he adds in today’s connected enterprise no system is an island. But knowing that doesn’t of itself help to identify where the data linkages are – or whether they are inbound to the S2P system or outbound from it. Critically too there’s the question of data cleanliness and completeness to consider. “Just because there’s a feld in the ERP system for a particular data element doesn’t mean that it will be flled-in accurate or current” emphasises Reddy. “Someone from within the sourcing function for instance might not care that the supplier data they have captured is insuffcient and cannot be used to process a supplier’s invoices or pay them. But from the point of view of the overall S2P system accurate and complete data is vital and process mapping helps to identify data shortcomings before it’s too late.” often and early. And in particular those suppliers should be made aware if they aren’t already that the cost of building a ‘punch-out’ catalogue has fallen dramatically in recent years and it isn’t diffcult for suppliers to do. The cost of processing a punch-out catalogue order is much cheaper than processing a normal requisition and order – so communicate with suppliers well in advance and you might be surprised at the response.” Likewise adds Reddy early attention to data sources tends to pay dividends as well irrespective of which S2P provider a business eventually elects to use and who is eventually assigned the task of extracting and cleaning that data. “Typically the data aspect of an S2P project takes longer than businesses think – and the difference between assumed and actual timescales can be enough to throw a project off schedule” he warns. “So start building and cleaning your vendor master data item master data and cost centre data as soon as you’ve decided to go for an S2P application. You’re going to need them whatever the eventual S2P application that is chosen.” SBM Management Services’ procurement director Capagli ruefully concurs citing SBM’s own implementation as a case in point. “Get your data built and Æ

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10 Procurement Leaders INSIGHT THE S2P PLAYBOOK cleaned beforehand – we would have had a quicker and smoother implementation if we’d been able to do this” he urges. “It’s a mistake to think that you can build and clean data at the same time as you’re implementing the solution. In our own case we had our customer contracts spread out over multiple fles with little to indicate which was the most current version or if there were addendums or amendments of which we needed to be cognisant.” Flow with it In short it’s easy to become daunted by the long list of what needs to go right if an S2P project is to succeed. But don’t be. Because usefully sums up Terry Mackay an independent procurement and supply chain consultant a frm focus on the S2P workfow itself acts as a unifying ‘glue’ – helping to deliver an effective S2P process driving user adoption and helping to identify data requirements and links to other systems from which S2P data is sourced and fed back. “You need a workfow that works underpinned by a process that makes sense for your business...” “Think through the workfow and the roles that are played by the people within it” he sums up. “You’re in effect ‘industrialising’ your S2P process and so you need a workfow that works underpinned by a process that makes sense for your business and good master- level data – item-level data supplier-level data and catalogue-level data. And of course strong links to and buy-in from your category management and sourcing activities.” “But get all that in place  and  can S2P be a success Absolutely.” n ABOUT OUR PARTNER GEP is a diverse creative team of people passionate about procurement. We invest ourselves entirely in our client’s success creating strong collaborative relationships that deliver extraordinary value year after year. We deliver practical effective procurement services and procurement technology that enable procurement leaders to maximize their impact on business operations strategy and fnancial performance. Honored as Best Supplier at this year’s EPIC Procurement Excellence Awards GEP regularly wins accolades as both a provider of a broad range of procurement services and innovative procurement technology. GEP has been named Leader and Star Performer in Everest Group’s Peak Matrix of Procurement Services Providers Leader in NelsonHall’s NEAT Matrix of Global Procurement BPO Service Providers and Winner in the HfS Blueprint Report on PO Providers. Clark NJ-based GEP has 12 offces and operations centers in Europe Asia and the Americas.. CONTACT DETAILS: Tel: +1 732-382-6565 Web: Email:

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INSIGHT 11 CATEGORY HEAD Procurement Leaders

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