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- January 16, 2018
- Spend Management
2018 looks to be banner year for sourcing and procure to pay. The field has been on a decade-long trajectory of change and redefinition. It’s becoming more digitally enabled, and as a result, it is also becoming more mature, more strategic, more essential. That’s the picture that emerged in a series of conversations with consultants at our partners Acquis, Cross Country Consulting, The Hackett Group, and The Shelby Group. Here’s what they had to say about the trends, opportunities and challenges they see in year ahead.
Growing interest in P2P
Procure to Pay has become a major topic in organizations of all sizes, and I think we’re going to see that continue in 2018.
Why now? After the crash of 2008, companies cut back on everything. They’ve been recovering over the last eight to ten years, but investment has been limited. Now that the economy is finally doing okay, companies are starting to invest again, but rather than hiring headcount to process transactions, they’re investing in systems that automate the transactional and provide data and analytics to support people in more strategic roles. If you’re looking for areas where you can make business processes more efficient and leverage people more strategically, P2P is an obvious place to look.
— Harpreet Narula, CrossCountry Consulting
Digital technology takes the lead in P2P transformations
P2P transformations involve people, process, and technology. What we're starting to see is that organizations undertaking these transformations are leading with technology, for a couple of reasons. First, because they’re looking at digitization across the entire business, and trying to meet the expectations set by consumer technology. But also, we’ve reached a tipping point where people really believe they can digitize their entire source to pay process.
Getting to 100 percent electronic invoices, 100 percent electronic purchase orders, getting paper out of the process altogether has always been the goal, but it’s hard to realize those more aggressive vision statements without a backbone technology platform. Now, we’ve gotten to where people aren't just talking about it, they’re doing that and more. They’re using artificial intelligence to get better insights from all the data they can gather, and using RPA to automate non-strategic, repetitive tasks.
It’s similar to when an Olympic record gets broken—it sets new standard and opens up new possibilities. People are finally starting to believe, and we’ve seen more requests for help with digital procurement transformations in the last six months than we ever have.
— Bob Derocher and Tim Yoo, The Hackett Group
Ten or even five years ago, people were of the opinion that they should have one system that does everything across the entire company. Now that CFOs and CIOs have finally gotten comfortable with security in the cloud, organizations are becoming less enamored of megasuites, and more open to considering best of breed cloud solutions to address end-to-end business processes such as procure-to-pay.
One reason is that technology has gotten better, so integrations have gotten a little bit easier. Even so, the way people are thinking about it now is that even if the technology integration is a little bit difficult, that should no longer be an obstacle to getting the right system for the job.
— Harpreet Narula, CrossCountry Consulting
Organizations that have modern Source to Pay platforms will search for new avenues to evolve the org structure of Procurement, AP and even IT to extract greater value out of their investment.
Practitioners have contemplated this forever. However, modern technology is pushing the conversation to a more practical realm. When you initially implement a new platform, you’re going to improve processes, update policies, and offer stakeholders benefit through measurable, early wins. However, once the dust settles on the implementation and supporting this new tool, the realization sets in that further program and people change is not just possible, it’s necessary in order to continue to mature.
Additionally, the platform brings common ground to Procurement, AP, Finance and Operations, who were most likely operating in silos. Organizations will think more about the intersection of roles and responsibilities in a completely different way. For example, once organizations move to a procurement-led model where corporate citizens handle their own transactions and Procurement professionals can be leveraged outside of transactions, what is the next step? What do you do to be successful in vendor management, category management, sourcing execution, and procurement operations?
Whatever choices you make, platform adoption allows you to concentrate on business outcomes rather than transactions.
— Jim Kandilas, The Shelby Group
Catalogs for everything
The latest manifestation of the Amazon effect is that clients are trying to figure out how to build a catalog for everything that they buy—goods, services, everything. We worked earlier this year with a big oil and gas company that was implementing 1,000 plus catalogs—and not all for goods.
In the past, most companies haven’t implemented anywhere near that many. They might have had people punch out to a supplier’s website and then bring it back into the procurement system to finish the order, or have them do freeform purchasing—writing what they want on a purchase order and letting procurement pick the supplier.
There's a move towards presenting a true shopping cart experience, not just for things like office supplies and IT hardware. This results in a strong collaboration with suppliers to communicate their offering in such a way that it can be put into a catalog, and into a shopping cart.
— Bob Derocher, The Hackett Group
The franchising of global e-procurement transformations
The majority of our work at The Shelby Group is with global enterprises outfitted with lines of business and operations across multiple regions and dozens of countries. These companies operate with manifold complexity, whether it's regulatory, tax related or simply disparate and challenging operating conditions. These companies are seeing more and more benefit from investing in e-procurement, but it’s difficult for an organization to drive change regionally let alone globally. However, things are changing for the better and here is why:
Historically, an e-procurement technology transformation would be staffed “in-country,” where requirements, design, and eventual configuration were bespoke to that country or region. These teams often favor the style and preferences of said country, which sacrifices the benefits of global standardization.
Nowadays, we’re seeing a trend toward what I’d call the franchising of the technology transformation. We are guiding companies towards the assembly of a global core project team. Think of this core team as the Global Project Charter Owner and Change Ambassadors. They are responsible for building an 80 percent or more common, global core program that is widely adopted, while partnering with in-country resources for the roughly 20 percent bespoke remainder.
In essence, we are creating the McDonald's menu for the globe, which covers 80 percent of everyone’s needs and maps to the enterprise-wide goals, and regionalizing the rest of it. You’re going to offer the burger and fries everywhere, but if you need a veggie plate, we can make you a veggie plate. If you want extra cheese, we can add extra cheese. The main difference is, we’re not going to start off by saying, "Hey, what do you want to eat?" This requires careful planning up front, but provides a much more scalable and desirable outcome for the enterprise as a whole.
— Jim Kandilas, Shelby Group
AI, AR and VR make inroads
Artificial Intelligence, Augmented Reality and Virtual Reality are going to impact the procurement function in 2018. We’re already seeing projects in retail and manufacturing. Nobody is an expert on this yet; most companies are just starting to think about what they’re going to do with these technologies. Big tech companies are investing heavily in these areas, and there are a lot of venture-backed startups out there as well. The supply base is rapidly developing.
You need to think not only about how to use these technologies within the procurement function, but more importantly, consider what needs your internal customers will soon have. Procurement organizations need to start understanding the applications and supply markets across their business units and functions, and developing the expertise to lead and/or accompany their internal customers on their AI/AR/VR journeys. The earlier companies can start getting prepared for this, the better.
— Sean Park, Acquis Consulting Group
The corporate tax rate cut is going to free up a lot of cash, and allow offshore cash to be repatriated at a much lower tax rate. That means there's likely to be a lot more M&A activity. Sourcing organizations in companies that are likely to go on a buying spree need to be prepared so they can quickly take advantage of the increased leverage they will have in the supply market. They'll also need to prepare internally for what the new organizational structure might look like.
Start talking to the CFO and Corporate Development groups now, and see what they might be thinking about. If M&A is on their minds, are they thinking about global expansion? Are they going to buy another company in the same vertical, or expand outside of it? It’s never too soon to think about how you might structure a global organization, support new products and integrate quickly and effectively.
— Sean Park, Acquis Consulting Group
Investment in training
Given the changing nature of procurement and the need to digitize, companies are trying to upgrade people's skills, and they're not finding the new, digital savvy resources they need to do that. I don't think that's procurement-specific. Finance is having trouble with it as well.
One of the outcomes is going to be investment in classes or certifications to try to help to fill that gap. If you need procurement people trained in digital technologies or deep analytics, and you can’t find them in the market, you may have to build your own.
We’ve started our own Analytics Institute for those very reasons. We’re going to see a lot of automation and artificial intelligence, but until the tools can think for themselves—which is a long way off—organizations need people who understand what the tools can do, what are the right questions to ask, and what to do with the answers.
— Tim Yoo, The Hackett Group
Sean Park is Group Practice Lead, Procurement and Strategic Sourcing at Acquis Consulting Group. Harpreet Narula is a Partner at CrossCountry Consulting. Bob Derocher is Principal, Sourcing and Procurement Consulting Practice Leader at the Hackett Group. Tim Yoo is a Principal at The Hackett Group. Jim Kandilas, CPA, is Executive Vice President and Principal at the Shelby Group.