World-Class Spend Control: Taking Action (Part 3)

Charlotte Sutton
Charlotte Sutton,
Regardless of where you are today in your spend control programs, one approach is to think about the overall framework of what you are doing and where you want to go as a set of 5 inter-related elements.
Regardless of where you are today in your spend control programs, one approach is to think about the overall framework of what you are doing and where you want to go as a set of 5 inter-related elements:
  1. Spend Categories
  2. Source-to-Contract (S2C) process
  3. Purchase-to-Pay (P2P) process
  4. Employee adoption
  5. Supplier adoption.
What is 100%? Well, theoretically 100% on all dimensions would be ‘utopia’ – achievement of world-class spend control as we previously defined in our earlier blog post (Part 1).

So what is 100% for you? It’s what is ‘important’ but also ‘realistic’ for your organisation. This will vary by business & sector.

Let’s look at this in more detail and consider where you stand today:

You may have started with a S2C focus. This is quite common in Public Sector where there is a need to achieve transparency, visibility & control of the Sourcing process, to ensure governance of dealing with framework agreements & working with SMEs, third sector etc. Organisations may have adopted many tools, including government initiatives, but tend to need greater coverage of spend & deal with more suppliers electronically.

Alternatively, you may have started with a P2P focus. Often this is to simplify the purchasing process, establish an organisational compliance rule book and streamline the Accounts Payable function.

Increasingly we are seeing an integrated focus of all of these elements being adopted. This tends to be: Organisations that have progressed their initial spend control programs over some years and/or as the market matures, organisations signing up to a more holistic approach to spend control.

So let’s have a look at each of the dimensions, and what is important, starting with the business process of S2C.

Source-to-Contract (S2C) Processes

Q. What is 100% for you?

A. It’s all the procurement-driven related activity that is needed to capture savings and mitigate risk across categories.

The key thing is to keep in mind that…
  • Standardisation based on best practice = quality of process (effectiveness)
  • Automation & efficiency = volume of process possible (e.g. sourcing events)
  • Of course, you need to use the right tools for the job/ category
Spend Categories

Q. What is “100%”?

A. All the spend categories that are either
  • Critical to your organisation
  • Represent significant risk to your organisation
  • Offer notable cost savings
You have probably got a pretty good idea of how your spend lays across these categories and focused in some way on your high value categories, but you know even low value items:
  • Can represent significant opportunity for savings
  • Represent significant risk
  • Consume a lot of manpower and resources to process
One approach is to identify different types of spend: CapEX/OpEx and one-time or recurring and prioritise the categories that are ‘overall’ most important to you – based on Value/Risk. This will enable you to:

Prioritise the categories you want to focus on
Tell you what combination of S2C & P2P processes you need for each category

Purchase-to-Pay (P2P) Processes

Let’s now look at P2P (value capture)

Again: What is “100%”?

A. It’s the best balance of control, responsiveness and efficiency you can achieve.

Clearly the process will be quite different for the purchase of low value goods (self-service), a new desktop (expert help & framework contract), an IT consulting project (expert help & RFx process), and a utility bill (contract match only, but complex cost allocation). The workflow and mechanics of P2P will not be the same for each category, but what you need for each one is not hard to outline.

And keep in mind…
  • Quality of workflow & business rules = effectiveness
  • Level of electronic information = efficiency
  • Easy access to process & information =(e.g. suppliers & catalogues) = adoption = volume of spend going through the system

Employee Adoption

Now let’s look at the ‘employee’ dimension – or more fully stated: organisational adoption.

Goal: maximise spend that goes through the P2P process (and hopefully going through S2C prior)

Q. What is 100% for you?

A. That is a very different dimension, but again, depends on who needs what and with what controls.

Think about the type of employees you want & need to involve, including requestors, dept managers, category experts, professional buyers, AP & finance personnel. Think about the role each plays and the workflows for each category.

Think about the logical and practical stages of expansion, so from pilot group to all of HQ, branch locations, more divisions, regions etc. up to global.

No problem – right? There can be lots of reasons why people don’t immediately flock to a new system. It takes conscious and sustained:
  • Communication
  • Policy mandate
  • Process flow design
  • The level of information (e.g. suppliers and catalogues – you make available to them).
That takes much more than technology.

Supplier Adoption

Finally, let’s have a look at the ‘suppliers’ dimension – or more fully stated supplier adoption & enablement.

This is essentially about working with suppliers through a supplier portal as opposed to traditional means such as mail, fax, phone. When you are engaging with 100s to 1000s of suppliers the cost of just communicating with them can be huge. The result of suppliers adopting electronic means of communicating with you is greater capacity for savings. A big part of the goal here is to free-up time.

Q. What is 100% for you?

A. You know the answer. It varies by different types of suppliers at different levels. Think about the types of suppliers you have in terms of characteristics such as: Transaction volume; on-going, periodic, one-off; capital items or operational supplies; goods or services; their IT capabilities and you relationship with them. How important are they to you and you to them?

Think about the range of interactions involved, like: registration, profile updates, tender access and response, catalogue updates, account enquiry, various invoicing methods.

Like, with employees,, there can be lots of reasons why suppliers don’t flock immediately to your new supplier portal – don’t know the capabilities exist, have existing habits, too large – don’t need to agree and don’t want to make investment.

But just like employees, each of these issues CAN be addressed if thought about upfront. But it takes conscious & sustained:
  • Communication
  • Mandate where practical
  • Process flow & design