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8 steps to deliver margin gains by improving your P2P process

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8 steps to deliver margin gains by improving your P2P process

As companies are seeking to move beyond procurement into fully deployed supply chain systems, there are significant opportunities to widen their margins by improving efficiency in their procure-to-pay cycles for many of their contracted services.

We typically find that major challenges where field associates are working from manual or electronic systems, requisitioning onsite services for maintenance or other activities, to ensure that the information is captured effectively. In addition, further challenges exist to ensure that the proper service level agreement is fulfilled, the correct price is charged, the purchase order is transmitted correctly, the invoice matches, and finally, that the supplier is paid the correct amount for the actual services delivered.

The impact of these challenges is additional processing costs, often hidden in the overall ‘central’ cost/ management cost budgets. However, these costs can be reduced and in some cases removed altogether and the great thing is, is that any savings fall straight to the bottom line and increases your margins.

In re-engineering the procure-to-pay process, we recommend that you apply the following 8 stage approach:

1. Secure top management support for the initiative and budgeting for the project. Develop a list of key benefits and deliverables that will occur as a result of the improvements. Document the cost of leaving the system “broken” in its current state.

2. Map existing processes and problems with the P2P cycle. Identify where the breakdowns are occurring and why they are occurring.

3. Understand the needs and requirements of the various user groups. Many of the people involved — maintenance, planning, project management, suppliers, accounts payable, buyers, etc. — have specific issues that prevent them from using the existing system. Also, many of the specific sites may have issues that need to be considered in designing the new system.

4. Team “redesign workshops” should be used to bring together key subject matters experts from each of the business units. Suppliers should also be invited to attend and participate, as they may have solutions they have adopted with other customers that may prove to be efficient and simple to use (i.e., why re-invent the wheel?).

5. Explore existing technology solutions with your ERP solution, as well as bolt-on applications. Map out the business requirements, and ensure they are aligned with the technology solutions that are available. Begin to estimate cost of deployment, and ensure that adequate planning and due diligence is taken at this step.

6. Following the workshops, define the new process and begin to pilot using a planned technology. Ensure that it takes place in a “real” environment, with actual non-trained users involved in the pilot, before cutting over to the next process.

7. Train and deploy other users based on the new processes and systems. Be sure to make the training appropriate to the specific functional unit and user groups.

8. Monitor, update, and improve the system, ensuring that catalogs are kept up to date. Hold periodic meetings with suppliers and user groups to solicit input and identify problems with the systems.

As technology and business requirements evolve, the P2P cycle will probably need to be revisited from time to time to ensure it is meeting the needs of internal customers, and that suppliers are satisfied with the system.

Once you have established a standardised P2P process, you are able to measure the key metrics and implement a continuous improvement approach.

I have helped many clients to widen their margins through improved P2P processing. For a no obligation discussion with one of our consultants, to see how you could benefit, call us today on +44 (0) 161 408 4614.

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