Posts Tagged ‘Contracts’

IoRIT, Internet of Really Important Things

March 1, 2016

beryl2

Just recent I published a post entitled “The Three A’s of Predictive Maintenance” https://www.linkedin.com/pulse/three-predictive-maintenance-graham-smith-phd?trk=prof-post basically discussing the importance of maintaining assets in these current economically volatile times. The post does contain some references to IoT (Internet of Things), but here I want to concentrate what is really important, so I am going to steal the phrase from Mr Harel Kodesh, Vice President, Chief Technology Officer at GE, who introduced the phrase in his key note speech at the Cloud Foundry Summit in May of 2015 (http://youtu.be/cvIjvbjB7qo)

We build huge assets to support our way of living and these assets are the REALLY important things that without maintenance will disrupt everything if left to the “fix it when it breaks mentality”. Mr Kodesh uses two examples which I have explained in the table below, we have the Commercial Internet and we have the Industrial Internet.Both are equally as important as each other, but impacts on business and environment are much greater in the Industrial Internet and could have far reaching consequences.

table

When we wake in the morning we tend to think about having a shower and getting ready for work, cooking our breakfast either via electric or gas. We don’t think about the Water Distribution system, We don’t think about power generation or it distribution and we certainly don’t think about gas extraction or it’s distribution.We don’t think about the fuel or where it was made for the fight across the world for us to do business in another country. We are not sure about where the petrol or diesel comes from that powers are cars or trucks.

Well it’s reasonably simple to define, all of these commodities come from huge assets that may power other assets and have to be maintained. We are talking here about Oil & Gas Drilling and Production platforms, or Oil Refineries, or Power Stations. All of these asset include other assets which have to be maintained.

beryl

Above is a good example of what we are talking about and one that I was intimately involved with. Some 195 miles out to sea, the first concrete platform (Condeep, built by Aker in Stavanger, Norway ), the Beryl Alpha, was given a life expectancy of 20 years when it was installed by Mobil, now part of ExxonMobil, on the Beryl oilfield (Block 9/13-1) in 1975. Now 41 years on and being purchased from ExxonMobil By the Apache Corporation there is no sign of it being decommissioned and the addition in 2001 of facilities to process gas from the nearby Skene gas field has given it a new lease of life.
beryl1.jpg

At its peak in 1984, Beryl Alpha was producing some 120,000 bpd. It is still pumping an average of 90,000 to 100,000 barrels of Beryl, a high quality crude (Beryl) named after Beryl Solomon, wife of Mobil Europe president Charles Solomon. Gas production is around 450 mm cfpd, representing nearly 5 % of total British gas demand or the needs of 3.2 mm households. Today “The challenge is the interface between technology 41 years old and new technology.”

So here we are thinking now about “The Internet of Really Important Things” and how we can use technology of today with the technology of yesteryear? Doing more with less, sweating the assets to coin a phrase! Compliance to specifications and rules and regulations, this is where we need tools and techniques such as Predictive Maintenance (PdM).The link specifications is a snapshot of specifications for the Beryl, monitors and sensor ensure that data is captured which as a result can be used to highlight problems before they occur, this information is being collected in realtime.

To achieve what it is called World Class Maintenance (WCM), it is necessary to improve adopted maintenance processes.Various tools available today have adopted the word maintenance. It is important to note that these are not new types of maintenance but tools that allow the application of the main types of maintenance.

 

 

Everything has Big Data, Big Data Has everything

February 24, 2016

During the course of 2015 and on into 16 I have been studying, researching as well as working. My study, research has been on various topics from IoT, Sustainability, Environment, Food Security, Complex Decision making, Supply Chain Management, Cyber Security, In memory Computing, Statistics to name but a few(FutureLearn). Work wise I have been a Consultant for Enterprises Solutions(Trobexis), Enterprise Asset Management, Enterprise Content Management (OpenText) in a variety of Industries, which include, Oil & Gas, Utilities, Construction, Maintenance even Banking. Here is the thing though, what do all these study, research and work all have in common? Simple BIG DATA!!!! That’s getting bigger everyday.

T1

If you want to be successful with big data, you need to begin by thinking about solving problems in new ways. Many of the previous limitations placed on problem-solving techniques were due to lack of data, limitations on storage or computing power, or high costs. The technology of big data is shattering some of the old concepts of what can’t be done and opening new possibilities for innovation across many industries (SAP S/4 HANA.)

The new reality is that an enormous amount of data is generated every day that may have some relevance to your business, if you can only tap into it. Most likely, you have invested lots of resources to manage and analyse the structured data that you need to understand your customers, manage your operations, and meet your financial obligations. However, today you find huge growth in a very different type of data. The type of information you get from social media, news or stock market data feeds, and log files, and spatial data from sensors, medical-device data, or GPS data, is constantly in motion.

These newer sources of data can add new insight to some very challenging questions because of the immediacy of the knowledge. Streaming data, data in motion, provides a way to understand an event at the moment it occurs.

Working with TROBEXIS over the last 12 months we have built a model which has big data constantly in motion, which is both structured and unstructured, coming from a variety of sources, in a variety of formats. The data is constantly in motion and events occur when you least expect them, giving rise to exceptions and causing problems to occur in the best laid plans. Some of the questions that we have found ourselves asking are:

– Do we have the right people, with the right skills, in the right place, at the right time, in the right phase of the project, with the right materials, for the right service, at the right cost, in the right numbers, against the right contract, for the right client?

– What if we do this job, in a different phase of the project, using a different contractor, with a different set of numbers, an alternative process, with a higher cost?

– Are we buying the right materials, through the right channel, at the right cost using the right process?

Data in Motion – a real world view.

To complete a credit card transaction, finalise a stock market transaction, or send an e-mail, data needs to be transported from one location to another. Data is at rest when it is stored in a database in your data center or in the cloud. In contrast, data is in motion when it is in transit from one resting location to another.

Companies that must process large amounts of data in near real time to gain business insights are likely orchestrating data while it is in motion. You need data in motion if you must react quickly to the current state of the data.

Data in motion and large volumes of data go hand in hand. Many real-world examples of continuous streams of large volumes of data are in use today:

✓ Sensors are connected to highly sensitive production equipment to monitor performance and alert technicians of any deviations from expected performance. The recorded data is continuously in motion to ensure that technicians receive information about potential faults with enough lead time to make a correction to the equipment and avoid potential harm to plant or process.

✓ Telecommunications equipment is used to monitor large volumes of communications data to ensure that service levels meet customer expectations.

✓ Point-of-sale data is analysed as it is created to try to influence customer decision making. Data is processed and analysed at the point of engagement, maybe in combination with location data or social media data.

✓ Messages, including details about financial payments or stock trades, are constantly exchanged between financial organisations. To ensure the security of these messages, standard protocols such as Advanced Message Queuing Protocol (AMQP) or IBM’s MQSeries are often used. Both of these messaging approaches embed security services within their frameworks.

✓ Collecting information from sensors in a security-sensitive area so that an organisation can differentiate between the movement of a harmless animal and a car moving rapidly toward a facility.

✓ Medical devices can provide huge amounts of detailed data about different aspects of a patient’s condition and match those results against critical conditions or other abnormal indicators.

The value of streaming data

Data in motion, often in the form of streaming data, is becoming increasingly important to companies needing to make decisions when speed is a critical factor. If you need to react quickly to a situation, having the capability to analyse data in real time may mean the difference between either being able to react to change an outcome or to prevent a poor result. The challenge with streaming data is to extract useful information as it is created and transported before it comes to a resting location. Streaming data can be of great value to your business if you can take advantage of that data when it is created or when it arrives at your business.

You need to process and analyse the streaming data in real time so that you can react to the current state of the data while in motion and before it is stored. You need to have some knowledge of the context of this data and how it relates to historical performance. Also you need to be able to integrate this information with traditional operational data. The key issue to remember is that you need to have a clear understanding of the nature of that streaming data and what results you are looking for. For example, if your company is a manufacturer, it will be important to use the data coming from sensors to monitor the purity of chemicals being mixed in the production process. This is a concrete reason to leverage the streaming data. However, in other situations, it may be possible to capture a lot of data, but no overriding business requirement exists. In other words, just because you can stream data doesn’t mean that you always should.

How can you use data to change your business? In the following use cases, look at how organisations in several industries are finding ways to gain value from data in motion. In some situations, these companies are able to take data they already have and begin to use it more effectively. In other situations, they are collecting data that they were not able to collect before. Sometimes organisations can collect much more of the data that they had been only collecting snapshots of in the past. These organisations are using streaming data to improve outcomes for customers, patients, city residents, or perhaps for mankind. Businesses are using streaming data to influence customer decision making at the point of sale.

Use Cases

2015 became the age of the data driven organisation. Thanks to the rise of easier collection mechanisms and the ubiquity of available data sources, savvy organisations are now implementing data in new and novel ways that address real business issues. Here are just a few worth a mention: –

Objective: Operational Analysis; Efficiency Enhancement & Risk Elimination

Organization: Siemens

Article title: Using Big Data and Analytics to Design a Successful Future

Overview: Siemens Mobility Data Services division is capitalising on big data and analytics to ensure transportation around the globe is fast, reliable and more energy efficient. Innovation that includes predicting failures, ensuring a seamless supply chain for parts to reduce or eliminate downtime and use weather data to differentiate problems in the same train model in different regions.

URL: http://blogs.teradata.com/customers/siemens-using-big-data-analyticsdesign-successful-future/

Objective: Cost Analysis & Reduction, Operations Analysis, Risk Elimination

Organization: N/A

Article title: Could Big Data be the Solution to Clean Technology?

Overview: Big data analysis is extraordinarily useful and powerful in terms of identifying ways to reduce waste and improve processes. There is a massive amount of data available today that can be used to predict energy needs, improve energy production methods, build more energy-efficient structures, and even curb consumer energy consumption.

URL: http://blog.syncsort.com/2015/04/could-big-data-be-the-solution-to-cleantechnology/

Objective: Efficiency Enhancement, Market Sensing & Predictive Analysis

Organization: IBM

Article title: Big Data & Analytics adds to the power of Renewable Energy

Overview: Sophisticated weather forecasting and analytics matures renewable energy market

URL: http://www.ibmbigdatahub.com/infographic/big-data-analytics-adds-powerrenewable-energy

Objective: Cost Analysis & Reduction, Risk Elimination

Organization: N/A

Article title: Use Big Data to Survive Market Volatility

Overview: For every single well they own, executives in the oil and gas industry must know full lifecycle costs, from exploration to abandonment. Data is the foundation of this understanding; even at a basic level it requires looking at everything from geophysical exploration data to real-time production data to refining operations data to trading data, and more.

URL: http://data-informed.com/use-big-data-to-survive-market-volatility/

Objective: Operations Analysis; Revenue Generation / Customer Acquisition

Organization: Panjiva

Article title: The global import-export data you need to take your business across borders

Overview: From import-export trends, to the tally of cargos for individual shippers or consignees, right down to the details of each transaction – you are just clicks away from information you need to gain market insights

URL: http://www.panjiva.com/

Objective: Risk Elimination

Organization: N/A

Article title: How advanced analytics are redefining banking

Overview: Innovators are using big data and analytics to sharpen risk assessment and drive revenue.

URL:http://www.mckinsey.com/insights/Business_Technology/How_advanced_analytics_are_redefining_banking

Objective: Efficiency Enhancement

Organization: Nutanix

Article title: The Impact of Big Data on the Data Supply Chain

Overview: The impact of big data on the data supply chain (DSC) has increased exponentially with the proliferation of mobile, social and conventional Web computing. This proliferation presents multiple opportunities in addition to technological challenges for big data service providers.

URL: http://linkis.com/flashglobal.com/86eXA

Objective: Market Sensing / Predictive Analysis

Organization: DHL

Article title: “Big Data in Logistics: A DHL perspective on how to move beyond the hype”

Overview: Big Data is a relatively untapped asset that companies can exploit once they adopt a shift of mindset and apply the right drilling techniques.

URL:http://www.dhl.com/content/dam/downloads/g0/about_us/innovation/CSI_Studie_BIG_DATA.pdf

Objective: Operations Analysis

Organization: N/A

Article title: Making Big Data Work: Supply Chain Management

Overview: The combination of large, fast-moving, and varied streams of big data and advanced tools and techniques such as geo analytics represents the next frontier of supply chain innovation. When they are guided by a clear understanding of the strategic priorities, market context, and competitive needs of a company, these approaches offer major new opportunities to enhance customer responsiveness, reduce inventory, lower costs, and improve agility.

URL:https://www.bcgperspectives.com/content/articles/technology_making_big_data_work_supply_chain_management/

Objective: Efficiency Enhancement

Organization: Transport for London

Article title: How Big Data And The Internet Of Things Improve Public Transport In London

Overview: Transport for London (TfL) oversees a network of buses, trains, taxis, roads, cycle paths, footpaths and even ferries which are used by millions every day. Running these vast networks, so integral to so many people’s lives in one of the world’s busiest cities, gives TfL access to huge amounts of data. This is collected through ticketing systems as well as sensors attached to vehicles and traffic signals, surveys and focus groups, and of course social media.

URL: http://www.forbes.com/sites/bernardmarr/2015/05/27/how-big-data-and-theinternet-of-things-improve-public-transport-in-london/

 

And one of my particular favourites being a lover of Starbucks……

Objective: New Product Creation

Organization: Starbuck’s

Article title: How Big Data Helps Chains Like Starbucks Pick Store Locations – An (Unsung) Key To Retail Success

Overview: The reality is that 94% of retail sales are still rung up in physical stores, and where merchants place those stores plays an outsized role in determining whether their chains fly or flop.

URL: http://www.forbes.com/sites/barbarathau/2014/04/24/how-big-data-helpsretailers-like-starbucks-pick-store-locations-an-unsung-key-to-retail-success/

Collaboration in SCM

January 16, 2013

Over the years, many technologies have evolved to support both asynchronous and real-time collaboration. Most of the older technologies, such as teleconferencing, video conferencing, e-mail, etc., have major limitations that lower their value in product development environments. The newer and still-evolving technologies that enable PLM allow the management of product information and the processes that are used to create, configure, and use the information in a manner never previously thought of before.
We talk a lot about collaboration, but do we really understand what it means? In general, collaboration is an iterative process where multiple people work together toward a common goal. Methods of working collaboratively have existed as long as humans have joined together to accomplish tasks that could be done better by a team than an individual. Early man is probably the best example of collaboration when hunting for food for the village or the tribe.

There are two modes of collaboration: synchronous and asynchronous. Users working in an asynchronous manner carry out their assigned tasks and then forward the data to the next person. This way of working is serial in nature and only allows users to participate one at a time. Communication among collaborators is normally carried out using telephone or e-mail. Effective collaboration requires an area of storage for information from which product definition data can be shared with all those that require it. This shared area is commonly referred to as a data vault. Flow control and task execution is performed in an asynchronous way using workflow and project management tools. These tools allow data to be routed to users and progress to be monitored.

Synchronous or real-time collaboration enables users to view, work with 2D (e.g., specifications, drawings, documents, etc.) and 3D data (e.g., mechanical CAD models), and carry out interactive communications with each other in real-time. In addition, PLM-enabled collaborative solutions often support the ability to view, rotate, add notes and annotation pointers, and some also offer functionality to change the 3D design model data. This provides the same communication effectiveness as having all participants in the same room, at the same time, looking at the same data.
The following describes some of the processes commonly supported by PLM-enabled collaborative technologies.

Supply Chain Management—The move to a partnership-oriented supply chain means that suppliers, partners, sub-contractors, and customers are all involved in product definition. For companies to embrace the true potential of the distributed supply chain, collaborative tools can be used to manage data and processes across a distributed environment.

Sales and Bidding—Opportunities exist for sales, engineering, purchasing, and manufacturing to engage in collaborative sessions where product options, alternatives, and concepts are reviewed by each discipline at the same time. This is faster, more efficient, and can produce more accurate and cost-effective bids.

Maintenance and Support—The application of collaborative tools in maintenance and support activities is gaining acceptance in a number of different sectors such as aerospace and defense, automotive, process, and machine tools. For example, animation and simulation tools are being used to demonstrate how products are operated and maintained.

Change Management and Design Review—Adopting a different design review process, where project teams join a shared collaborative review session can result in significant benefits as potential conflicts and errors can be identified early in the product development lifecycle.

Senior Managers in the business world understand economic cycles are a known fact of life. The key to success is the way managers and organizations adapt to these cycles. Since they are a fact of life, we know that we can’t just ignore downturns and hope for a better day. So instead, those that are successful learn how to become more efficient while still ensuring that they deliver the best value to the markets they serve (i.e., making available the right product, at the right price, to the right market, at the right time, at the right quality, (The 5 Rights!)).

Driving collaboration through Contracts Management

January 2, 2013

The contracting process has always been a major point of discontent between procurement and legal functions within an organisation. The goals of the legal department to achieve control and compliance often clash with procurement’s objectives to build collaborative relationships with suppliers. This has become extremely pronounced now, that procurement feels that it needs to become a strategic value contributor pushing the business performance of the organisation rather than simply focusing on getting the lowest price. A collaborative culture of contract authoring can be built using the right contract management technology, which can bring together the two functions and drive compliance and control while at the same time foster better supplier relationships, which in turn can deliver real savings with minimal risks to the supply chain. This paper takes an in-depth look at the reasons for the collaboration challenges between procurement and legal departments and the technology and process initiatives that can bridge these gaps.

Procurement and Legal at loggerheads

A recent study by IACCM throws up several results that suggest that the relationship between procurement and legal teams are less than cordial in most organisations. Nearly 70% of the study respondents felt that the relationship between the two functions needed to improve. It is not surprising that the primary reason for discontent between the two functions was the contracting process. The biggest fear that most legal departments have is the whether the procurement function can actually ensure that the contracting terms
will be adhered to post contract awarding. This may seem like a paradoxical situation. If the procurement function gets into contracts with suppliers in the first place, why would it not want to adhere to them?

There are several factors that result in maverick or off contract purchases. A majority of these occasions are primarily ad-hoc purchases, where buyers resort to buying from whichever supplier is available quickest and at the most opportune time. More maverick spending means higher total procurement costs and fewer on-time orders which is clearly not a recipe for achieving procurement efficiency. A research by APQC says that organisations with 16% maverick spend spend on an average nearly $17,000 more per procurement FTE as compared to organisations with maverick spend of 1%.. In fact even the on time delivery percentages for such organisations was nearly 6% lower than their peers. It is therefore definitely not surprising that legal teams have their doubts over the correct execution of contracts by the purchasing / procurement department. In the IACCM report referred to above governance of contracts post award and the ability of procurement to effectively manage contracts was cited by nearly 60% of the participants as a critical factor causing high level tension between procurement and legal functions.

Conflicting approaches with a common need for change

Analysing from an organisational perspective Legal and Procurement teams approach the contracting process from two very different angles. Legal teams look at contracts as tools to streamline processes and establish strict controls while procurement looks at it as the first step in establishing cost savings and supplier relationships. With the economy becoming vastly different – with supply chains becoming growingly interconnected and vast- these disparate perspectives of the contracting process have brought their own unique challenges for both the departments. Legal teams now have to handle a much larger number of contracts in multiple languages and with a wide variety of, at times very specific and unique contracting terms and conditions. The increased workload and the looming threat of non-compliance to several contracts makes it imperative for legal teams to manage contracts more efficiently and leverage the right automation to maintain control. Standardising the contract creation process is often made the primary goal.
Procurement, no longer a tactical function, needs to develop long term strategic relationships with suppliers and add more value to the company’s bottom line. This needs contracting to be more flexible to generate additional savings and contribute in value creation. This may include insertion of necessary clauses that help them take advantage of dynamic marketing conditions – say for example escalation and de-escalation clauses for highly volatile commodities. This of course becomes the first bone of contention between the two functions as one aims to standardise while the other needs more flexibility. The pressure between the two teams is to create a contracting process that not only helps procurement generate savings and account for frequent renegotiation but also helps legal enforce compliance in contract execution and get better outcomes out of the contract resulting in sustainable savings.

An often neglected area of discord between the two teams is the time taken to create contracts. Procurement with its need to take advantages of prevalent market conditions and the supplier’s disposition to discounts at the time of negotiation needs the contract creation and execution cycles to be as short as possible. Legal teams on the other hand have a primary responsibility to ensure every contract is free of risk to the organisation and hence may take frustratingly long periods to go through minute details in all clauses within the contract. This may result in procurement missing out on additional savings based on time discounts or market variations. Automated contract authoring technology that provides standard clauses and templates is the the answer to not only reducing the time for contract creation and approval but also ensuring that risk mitigation is easy.

The need of the hour

The need of the hour is for the contracting process to enable collaboration between the procurement and legal functions rather than be a cause for dissent. At a strategic level there is a growing need to redefine the relationship between the two functions. The contracting process needs to ensure

Real and incremental savings

Improved contract outcomes

Better process streamlining and compliance

Mitigation of risks while taking advantage of dynamic market conditions and better
renegotiation

Proactive and collaborative management of change

Powerful analytics that deliver strategic value

Getting the right solution

All this is easier said than done. It is imperative that a process is created within the organisation that makes contract authoring, creation and management simpler. Although getting buy in from employees in the procurement and legal teams is important, the first step to have an effective process in place to invest in the right technology. A contract management solution should be able to foster collaboration by providing clause libraries and standard contract templates that ensure contracts don’t miss out on any mandatory clauses and terms. This will help in reducing the time for legal review as well as ensuring minimum exposure to risk. Although it should provide a sufficient collection of standardised clauses and templates the contract management solution should also have customisable workflows that permit the insertion of clauses that help organisations take advantage of market conditions and supplier discounts. There should always be room for renegotiation especially for volatile commodities. This can be achieved by putting clauses like escalation/de-escalation clauses or conditions on contract renewal based on prevalent commodity market prices that insure the organisation against volatility risks

Technology as an enabler:

An ideal solution to this collaboration conundrum would be a solution that streamlines all the steps of the contract management process

A typical contract management process can be divided into three major stages.

Contract Authoring

The solution should be able to create contracts with pre-defined workflows that not only incorporate feedback from all relevant stakeholders during the contract creation process but also take care of exceptions and approvals. The authoring process can be made easier and more compliant by having a central template repository that contains all pre-defined clauses. Legal teams should have access to this repository to continuously update the latest clauses and ensure that the organisation has no unforeseen risk in getting into the contract. All contracts should be housed in a central repository where they can be tracked and managed. The contracts should also be easily available through simple search processes to ensure easy access to all necessary stakeholders.

Contract Negotiation

Contracts should contain well-defined service level agreements (SLA), which are transparent to suppliers. The contracts should be the basis of all supplier performance measurement and should be the guiding factor to defining the KPIs for all supplier performance management processes. Alerts should be configurable within the contract management system for tracking compliance both for users within the organisation as well as supplier performance to contracted terms. Besides compliance alerts the solutions should also have alerts for contract renewals so that evergreen contracts don’t get renewed repeatedly without the scope of renegotiation-something legal teams always have on their cross hairs. Contracting solutions should be able to match contracts with spending data to help track any maverick spend and in turn provide potential opportunities to save. Analytics should also be provided on supplier performance in term of discounts adhered to and quality.

Contract Sign Off’s

Electronic signatures have to be mandatory for any contract management solution implemented and should be enabled during various stages of the contract creation and approval process.

Reaping the desired results

An effective contract management process if setup as mentioned above can result in the following benefits

Reaping the desired results
An effective contract management process if setup as mentioned above can result in the following benefits

Risk mitigation due to increased visibility into existing contracts

Improved contracting process and reduction in overall cycle time

Adherence to regulatory compliance requirements due to increased tracking of contract compliance

Increased compliance to terms and conditions

Spend compliance ensuring sustained savings. In fact a recent survey of nearly 600 procurement professionals suggested that doubling contract compliance leads to a near 600% increase in savings generated through spend management activities

Better collaboration due to standardised processes and agreed SLA’s between Legal and Procurement as well as procurement and suppliers

In closing an effective contract management solution can help organisations generate sustained savings and build effective supplier relationships. But one of the major benefits of implementing a robust contracting solution-that both stores and authors contracts-is increased collaboration between procurement and legal working to the benefit of both. Procurement is able to drive sustainable savings and meet its goal of being a strategic value contributor to the organisation while legal teams are able to mitigate risks to the organisation and ensure control and compliance.

Planning and Scheduling in the Supply Chain

December 28, 2012

Before relying on an ERP system to manage planning and scheduling activities, all companies should first make sure that the right processes are in place, standardized and uniformly used across the enterprise. Robust processes and policies will allow the company to generate accurate and timely data. Only then will a company be in a position to use an ERP system to improve planning and scheduling activities.

Major companies have invested heavily in ERP implementations and have suffered business disruptions whilst implementations have taken place. Despite good intentions, most companies haven’t come close to realizing the value achieved by those featured in various ERP case studies across the globe. Revenues have not increased by 20%. Operating costs have not fallen by 15%. Finally, on-time deliveries have never reached record highs of 95%.

So what is stopping companies achieving ROI? In my mind it is very clear that companies lack understanding and commitment! Firstly, the understanding that business value is inherently linked to business change, not systems change. From the commitment side it’s all about executing a good plan. However, this is another story! What we are confronted with now is that we have an ERP that is implemented which may or may not have achieved its ROI. Now we have got to get down to the operational level and try and recover what may have been lost or disrupted during the implementation however long ago it was.

The opportunity we are now presented with covers the whole enterprise and should allow the company to gain post implementation value, this area I am referring to is the whole Supply Chain, starting at the front end with Planning and Forecasting all the way through to settlements (including cash flow management). The area that we will concentrate upon here of course is replenishment planning, which by its very nature covers nearly all aspects within Supply Chain Management. This is where a company’s supply meets its demand!

Companies that plan well are more likely to:

·         Anticipate demand and respond nimbly to unforeseen market shifts

·         Have higher customer satisfaction rates

·         Have less cash tied up in obsolescing inventory

It’s where forecasts are converted into purchase and/or production orders. Planning activities influence inventory levels and, by extension, cash flow. The sad truth is that most companies’ ERP systems issue poor planning recommendations – ones that, if acted upon, would lead to a huge mismatch between supply and demand. Because those system-generated recommendations don’t reflect true operating realities; planners, purchasers, materials managers, production managers and others often ignore system-generated planning signals and advice.

Almost always, however, poor planning advice has little to do with the software itself. Software is made up of a bunch of 0s and 1s, and simply generates outputs from formulae and rules. In all likelihood, the formulae and rules were programmed just fine. Rather, poor recommendations are usually the result of inaccurate and untimely base data.

The good news is that any company can significantly improve its planning and scheduling activities. And, if it does, it’ll go a long way to generating that seemingly elusive ERP-related business value. From a high level, there are three key success factor to planning. They are:

·         Accurate Item and Movement Data – The system needs accurate data to simulate a company’s operating reality. Key data requirements include item-level order modifiers), bill of materials and routings.

·         Accurate Inventory Data – If inventory counts and movements are not accurately reflected in the system, the planning engine will either make recommendations that cause the company to 1) prematurely order inventory or 2) deliver items beyond the due date. The former case constrains cash flow and unnecessarily increases the value of a depreciating asset class. The latter case leads to higher rates of customer dissatisfaction and turnover. In our experience, a planning engine will only be capable of issuing meaningful planning recommendations when a company:

o    Has accuracy rates of 95% for its on-hand inventory

o    Maintains accurate demand and supply forecasts

o    Knows its minimum inventory level requirements (safety stock)

·         Timely Recording of Material Movements – The status of purchase orders and production orders varies over time, as materials flow through supply chains and production. To ensure that planning signals and recommendations are meaningful, the company needs to update the system promptly. Businesses can choose to do this a couple of ways – through manual input or in an automated fashion.

Vendor Rating and Management

December 20, 2012

Vendor rating is the result of a formal vendor evaluation system. Vendors or suppliers are given standing, status, or title according to their attainment of some level of performance, such as delivery, lead time, quality, price, or some combination of variables. The motivation for the establishment of such a rating system is part of the effort of manufacturers and service firms to ensure that the desired characteristics of a purchased product or service is built in and not determined later by some after-the-fact indicator. The vendor rating may take the form of a hierarchical ranking from poor to excellent and whatever rankings the firm chooses to insert in between the two. For some firms, the vendor rating may come in the form of some sort of award system or as some variation of certification. Much of this attention to vendor rating is a direct result of the widespread implementation of the just-in-time concept  and its focus on the critical role of the buyer-supplier relationship.

Most firms want vendors that will produce all of the products and services defect-free and deliver them just in time (or as close to this ideal as reasonably possible). Some type of vehicle is needed to determine which supplying firms are capable of coming satisfactorily close to this and thus to be retained as current suppliers. One such vehicle is the vendor rating.

In order to accomplish the rating of vendors, some sort of review process must take place. The process begins with the identification of vendors who not only can supply the needed product or service but is a strategic match for the buying firm. Then important factors to be used as criteria for vendor evaluation are determined. These are usually variables that add value to the process through increased service or decreased cost. After determining which factors are critical, a method is devised that allows the vendor to be judged or rated on each individual factor.

It could be numeric rating or a Likert-scale ranking. The individual ratings can then be weighted according to importance, and pooled to arrive at an overall vendor rating. The process can be somewhat complex in that many factors can be complementary or conflicting. The process is further complicated by fact that some factors are quantitatively measured and others subjectively.

Once established, the rating system must be introduced to the supplying firm through some sort of formal education process. Once the buying firm is assured that the vendor understands what is expected and is able and willing to participate, the evaluation process can begin. The evaluation could be an ongoing process or it could occur within a predetermined time frame, such as quarterly. Of course the rating must be conveyed to the participating vendor with some firms actually publishing overall vendor standings. If problems are exposed, the vendor should formally present an action plan designed to overcome any problems that may have surfaced. Many buying firms require the vendor to show continuing improvement in predetermined critical areas.

CRITERIA FOR EVALUATION

Vendor performance is usually evaluated in the areas of pricing, quality, delivery, and service. Each area has a number of factors that some firms deem critical to successful vendor performance.

Pricing factors include the following:

  • Competitive pricing. The prices paid should be comparable to those of vendors providing similar product and services. Quote requests should compare favorably to other vendors.
  • Price stability. Prices should be reasonably stable over time.
  • Price accuracy. There should be a low number of variances from purchase-order prices on invoiced received.
  • Advance notice of price changes. The vendor should provide adequate advance notice of price changes.
  • Sensitive to costs. The vendor should demonstrate respect for the customer firm’s bottom line and show an understanding of its needs. Possible cost savings could be suggested. The vendor should also exhibit knowledge of the market and share this insight with the buying firm.
  • Billing. Are vendor invoices are accurate? The average length of time to receive credit memos should be reasonable. Estimates should not vary significantly from the final invoice. Effective vendor bills are timely and easy to read and understand.

Quality factors include:

  • Compliance with purchase order. The vendor should comply with terms and conditions as stated in the purchase order. Does the vendor show an understanding of the customer firm’s expectations?
  • Conformity to specifications. The product or service must conform to the specifications identified in the request for proposal and purchase order. Does the product perform as expected?
  • Reliability. Is the rate of product failure within reasonable limits?
  • Reliability of repairs. Is all repair and rework acceptable?
  • Durability. Is the time until replacement is necessary reasonable?
  • Support. Is quality support available from the vendor? Immediate response to and resolution of the problem is desirable.
  • Warranty. The length and provisions of warranty protection offered should be reasonable. Are warranty problems resolved in a timely manner?
  • State-of-the-art product/service. Does the vendor offer products and services that are consistent with the industry state-of-the-art? The vendor should consistently refresh product life by adding enhancements. It should also work with the buying firm in new product development.

Delivery factors include the following:

  • Time. Does the vendor deliver products and services on time; is the actual receipt date on or close to the promised date? Does the promised date correspond to the vendor’s published lead times? Also, are requests for information, proposals, and quotes swiftly answered?
  • Quantity. Does the vendor deliver the correct items or services in the contracted quantity?
  • Lead time. Is the average time for delivery comparable to that of other vendors for similar products and services?
  • Packaging. Packaging should be sturdy, suitable, properly marked, and undamaged. Pallets should be the proper size with no overhang.
  • Documentation. Does the vendor furnish proper documents (packing slips, invoices, technical manual, etc.) with correct material codes and proper purchase order numbers?
  • Emergency delivery. Does the vendor demonstrate extra effort to meet requirements when an emergency delivery is requested?

Finally, these are service factors to consider:

  • Good vendor representatives have sincere desire to serve. Vendor reps display courteous and professional approach, and handle complaints effectively. The vendor should also provide up-to-date catalogues, price information, and technical information. Does the vendor act as the buying firm’s advocate within the supplying firm?
  • Inside sales. Inside sales should display knowledge of buying firms needs. It should also be helpful with customer inquiries involving order confirmation, shipping schedules, shipping discrepancies, and invoice errors.
  • Technical support. Does the vendor provide technical support for maintenance, repair, and installation situations? Does it provide technical instructions, documentation, general information? Are support personnel courteous, professional, and knowledgeable? The vendor should provide training on the effective use of its products or services.
  • Emergency support. Does the vendor provide emergency support for repair or replacement of a failed product.
  • Problem resolution. The vendor should respond in a timely manner to resolve problems. An excellent vendor provides follow-up on status of problem correction.

In an article produced by Supply Management states that while pricing, quality, delivery, and service are suitable for supplies that are not essential to the continued success of the buying firm, a more comprehensive approach is needed for suppliers that are critical to the success of the firm’s strategy or competitive advantage. For firms that fall into the latter category performance may need to be measured by the following 7 C’s.

  1. Competency—managerial, technical, administrative, and professional competence of the supplying firm.
  2. Capacity—supplier’s ability to meet physical, intellectual and financial requirements.
  3. Commitment—supplier’s willingness to commit physical, intellectual and financial resources.
  4. Control—effective management control and information systems.
  5. Cash resources—financial resources and stability of the supplier. Profit, ROI, ROE, asset-turnover ratio.
  6. Cost—total acquisition cost, not just price.
  7. Consistency—supplier’s ability to exhibit quality and reliability over time.

If two or more firms supply the same or similar products or services, a standard set of criteria can apply to the vendor’s performance evaluation. However, for different types of firms or firms supplying different products or services, standardized evaluation criteria may not be valid. In this case, the buying firm will have to adjust its criteria for the individual vendor. For example, Honda of America adjusts its performance criteria to account for the impact of supplier problems on consumer satisfaction or safety. A supplier of brakes would be held to a stricter standard than a supplier of radio knobs.

AWARDS AND CERTIFICATION

Many buying firms utilize awards and certification programs to rate vendors. Attainment of certification status or an award serves as an indicator of supplier excellence. Certification and awards-program recognition represents a final step in an intense journey that involves rigorous data collection under the total-quality-management-rubric as well as multitudes of meetings with suppliers and purchasing internal customers. Serious buying firms view these programs as an integral part of their overall efforts to improve the total value of the company.

The attainment of a supplier award usually serves as an indication that the vendor has been rated as excellent. Intel awards their best suppliers the Supplier Continuous Quality Improvement Award (SCQI). Other firms may utilize a hierarchy of awards to indicate varying degrees of performance from satisfactory to excellent. DaimlerChrysler awards its best suppliers the Gold Pentastar Award. Several hundred vending firms receive this award per year. However, only a handful (less than a dozen) of DaimlerChrysler’s vendors are good enough to garner the Platinum Pentastar Award.

For other firms, supplier certification is desirable. Supplier certification can be defined as a process for ensuring that suppliers maintain specific levels of performance in the areas of price, quality, delivery, and service. Certification implies that participating firms have reached a level of excellence that other firms were unable or unwilling to achieve. For example a quality certified firm maintains a level of quality such that customer-receiving inspection may be utilized with decreasing frequency up to the point where it is eliminated altogether. Theoretically, this will ensure that all of the supplier’s products meet the customer’s product specifications. In this case, the goal of supplier certification is quality at the source.

While it is uncertain whether individual firms are consistent in the manner in which they certify vendors, a quality certification would likely require that the vending firm be part of a formal education program, utilize statistical process control (SPC), and have a quality assurance plan (set written procedures).

BENEFITS

Benefits of vendor rating systems include:

  • Helping minimize subjectivity in judgment and make it possible to consider all relevant criteria in assessing suppliers.
  • Providing feedback from all areas in one package.
  • Facilitating better communication with vendors.
  • Providing overall control of the vendor base.
  • Requiring specific action to correct identified performance weaknesses.
  • Establishing continuous review standards for vendors, thus ensuring continuous improvement of vendor performance.
  • Building vendor partnerships, especially with suppliers having strategic links.
  • Developing a performance-based culture.

Vendor ratings systems provide a process for measuring those factors that add value to the buying firm through value addition or decreased cost. The process will continually evolve and the criteria will change to meet current issues and concerns.

For example, today the supplier evaluation must now reflect the strategic direction of the buying company’s environmental initiatives. As a result, some firms have recently developed supplier evaluation systems that place significant weight on environmental criteria. It is now an important criteria for the evaluation of suppliers that they have firm CSR programmes in place and that they are observant of governmental rules and regulations.

Compliance, Compliance oh no!

December 18, 2012

It probably seems to you like every time you want to talk about compliance, everyone runs away and hides, they ignore you and hope you go away, or they fuss and moan. Compliance is a fact of business life, however. Your company must comply with:
Your customers’ requirements (quality, safety, performance specifications, quantity, price, prompt delivery, etc.);

Industry or other standards and guidelines (ISO 9001,IFRS, etc.); and/or Regulations (e.g., 8th EU Directive, Food Safety Modernization Act) in order to get or to keep business.

And therein lies the problem: compliance is like healthy eating or exercise. We know we have to, but well, it’s so hard to either make the time or get enthusiastic about it!

Why is it that “have to” and “want to” always seem to be inversely proportional to one another?

How do you sell yourself and your employees on the notion that compliance is something you want, not something you merely put up with?

How do you turn “got to” into “want to”?

First, you have to…

1. Sell yourself on the idea. You’ll find in life  that is, if you haven’t already that if you don’t have a deep and firmly held belief in your company, your product, or your people, you won’t sell your product or your service. If you lack enthusiasm, conviction, self-discipline, vision, perspective, and some of the other characteristics that define leadership, you won’t have many followers.

2. Your customers are your ultimate critics. If you don’t meet their requirements, you’re out of business. It won’t matter what other requirements you fail to meet if you fail to meet your customer’s. Have your priorities in order — listen to your customers first.

3. Include your staff in the development of Policies and Procedures that will ensure your company’s compliance, because: (a) you can’t do it all by yourself; (b) they know more of the day-to-day tasks, operations, and processes than you; and (c) you need to show that you value and trust their judgement if they’re to grow (i.e., micromanagers never win).

4. Give everyone in your firm the resources they need to do their jobs effectively.
5. Ensure that your employees are more than adequately trained and experienced. Make sure they know what they’re doing and why they’re doing it.
6. Keep the lines of communication open all the time. Communicate effectively and continually with all levels of your organization. Get out of your office! Regularly address your employees first hand, directly and openly.
7. Listen, then turn what you’re hearing into something your employees, and your customers want to act on.
8. Make a habit of meeting with suppliers, subcontractors, and everyone who has a hand in getting your product or service into the hands of your customers. You might not be able to do this often but you shouldn’t let a year go by without visiting with your valuable partners. Communication is key!
9. Look at failures as opportunities for improvement. Don’t go looking for the guilty party every time something doesn’t go according to plan! You want to keep failure to a minimum, yes, but keep things in perspective. Not every mistake requires Draconian countermeasures!
10. Share success. Compliance goes beyond merely observing standards or laws — compliance can help you win business! When it does, spread the wealth. Acknowledge the part everyone played in making your company a success, especially those who had a direct hand in your victory.
Sell yourself, then sell everyone else on the importance and value of compliance. Make them want it! Your customers do.

Automation will reduce risks in Accounts Payable Fraud.

December 7, 2012

This is a topic that I have blogged about before, but I still believe that the topic is as relevant today as it ever was due to the increase in the numbers of enterprises launching into the world of Supplier Relationship Management and looking at ways to streamline process and reduction of operational costs.

By the elimination of as many Human “Touch Points” in the Accounts payable process and adherence to strict business rules is a critical success factor in the reduction of Accounts payable fraud. In short, the solution to most of today’s current AP fraud risks and processing

Inefficiencies involve the implementation and proper management of automation tools.

A key issue in regard to most forms of AP fraud is that there are so many opportunities open in the manual process for dishonest employees acting either alone or in collusion with dishonest outsiders to defraud a company. Specifically, in a conventional manual AP function, enforcement of business rules is based on after the fact audits, whereas AP automation offers the opportunity to enforce these rules duringthe process.

Taking it a step further, automation of the AP business process eliminates most if not all of the non-value-adding manual activities that consumes time, driving excessive invoice costs and undermines vendor relationships resulting in the loss of discounts.

Here is a short summary of the more common AP fraud types in two categories:

 

EXTERNAL AP FRAUD

 

The most common forms of external AP fraud are those committed by dishonest vendors, by individuals or organized fraudsters posing as vendors. Invoicing schemes are the key “weapon” in the arsenal of fraudulent vendors. Typical schemes are:

• Double billing.  The Dishonest vendor will submit a duplicate invoice a month or two after the initial legitimate one was submitted and subsequently paid. The duplicate invoice will have a different date or a consecutive number, a clear red flag of fraud. This tatic is based on the vendor’s expectation that the organization’s AP processes lack controls to screen for duplicate invoices and that the second fraudulent invoice will therefore be approved and paid without  question.

• Creating False vendors. The basic idea behind most external phony vendor schemes is simple: Create a fictitious company name. Register it with the company, give it a false address  either that of the fraudster,  a friend or relative, or a P.O. Box, using a home PC to create false invoices with all of this vendor information plus a description of the items or service being invoiced. Set up a bank account in the “company’s” name and then wait for the payments to be made. If the victim company has strong internal AP processing controls, the false invoices will be flagged and rejected as fraudulent before they are paid. If not, the fraudster gets the payment and is encouraged by this success, will probably repeat the process using the same or a different vendor name. Unfortunately, many of these frauds go undetected for long periods of time, sometimes up to several years. That’s why AP automation which incorporates optimized preventive controls is such powerful anti fraud solution.

• Delivery of substandard goods at full price. Some of the goods and services an organization orders for completion of projects for clients, for its own operations, or both are ordered from vendors with which the organization has had a longstanding relationship due to good service, quality products, and favorable pricing. Other orders may be made based on competitive bidding. Either way, it’s a risk to assume that every vendor you do business with is completely honest. There is a handfuls that take advantage of weak controls within

procurement or accounts payable processes to deliver products that are below the quality

specified in a contract or purchase order and then invoice the organization for the higher quality

and higher priced goods. The difference in price will go straight into the dishonest vendor’s pocket.

INTERNAL AP FRAUD

 

Unfortunately, statistics show that the majority of fraud against large organizations is committed by their own employees. According to PricewaterhouseCoopers,  61% of all fraud is committed by company employees. Therefore, AP managers and senior managers should be familiar with the more common and costly forms of internal AP fraud.

• Invoicing schemes. The types of invoicing schemes commonly committed by outsiders as described earlier are also a serious threat internally tothe organization. Due to the fact that procurement, AP staff or managers are more conversant with the companies AP processes and procedures and its weaknesses it is easier for them to abuse their payment approval authority to execute these schemes. If an employee is notin a position with the authority to approve phony invoices, the fraudster may try to initiate a collusive scheme with a colleague that does have the authority.

Another fraud to be aware of is employee creation of phony purchase orders (POs) for goods or services the company buys on a regular basis. The only difference is that the “vendor” is a shell company set up by the employee rather than an outside fraudster. Once the PO is successfully falsified maybe with the use of basic home computing equipment the employee simply forges an authorized manager’s signature. The Fraudster will then generate the matching phony invoices for the shell company and gets paid. One of the most common internal forms of phony vendor fraud involves creating a shell company with a name very similar to a legitimate vendor the organization regularly issues payments, but with a different address. Another common form of Invoicing scheme involves employees making unauthorized purchases and diverting the goods. These schemes are often simple to execute if the employee is a professional in a specialized area and the manager approving purchase requests is not familiar with the nature of the goods being ordered.

Potentially the most dangerous employee Invoicing fraud is the called the “straw vendor” scheme. Also known as “pass-through vendor” scheme, these crimes occur when an employee with invoice approval authority sets up a bogus company and orders goods from a legitimate vendor that the company actually requires. Once received and paid for by the dishonest employee, the goods are then sold to the company at inflated prices. The fraudulent invoices are approved by the fraudster. The fraudster may even could even generate bogus refunds or rebates to the straw vendor, which is under the fraudsters control. The latest state-of-the-art AP automation technology eliminates this risk by automatically flagging potentially erroneous or fraudulent invoice information and routing it to an appropriate remediation expert.

• Purchasing card fraud. If the organization uses procurement cards, commonly referred to as p-cards, or corporate credit cards, it is probably not breaking news that these are abused for personal benefit. The key reason that organizations initiate p-card programs is to save money on the cost of processing business related purchases. Because it costs as much to process a $250,000 order as it does a $250 order using the organization’s normal procurement process.

With an automated solution, the human “touch points” involved in invoice processing are minimized, in turn minimizing the opportunity for dishonest employees to falsify invoice data or otherwise manipulate the AP process for personal gain. At the same time, the entire procure to pay process is streamlined, reducing the time to process individual invoices, improving relationships with vendors, and, of course, reducing overall AP processing costs.

Risks in eAuctions

November 30, 2012

Today I want to continue on the theme of eAuctions, this has been a topic of mine for well over a decade since I first introduced the concept into the Shell Group of Companies in Oman. Still today eAuctions are not widely understood in terms of the risks involved to both the buyer and seller, however. with careful planning and engagement between the parties and stakeholder engagement the eAuction tools and techniques can be a win win situation for both parties. As an implementer, executor, researcher, mentor on the subject of Sourcing I have highlighted what I consider to be some of the most critical issues to consider when embarking on the eAuction journey.

1. Incomplete Evaluation Criteria.

No two auctions are the same, even if they are for the same good or service. Market conditions change over time which affects the evaluation criteria; therefore it is important that you engage with potential bidders well in advance of the planned event to ensure that all the factors and weightings are complete and appropriate.

2. Understanding of the Bid Rules.

Well before the event and once the Strategy, event type and evaluation criteria have been established, each bidder invited to participate in the event should clearly understand the bidding rules. This will avoid complications either during or after the event. Many companies who engage in eAuctions now require that the invitee sign and return a bid acceptance showing that they understand the bid rules completely to the event administration coordinators.

3. Stakeholder Politics & Policies.

It is important to engage at the most senior level to ensure that stakeholder politics or policies do not disrupt the event or the use of eAuctions in general. This is not only true for the buyer side, but also for the seller side. Many CEO’s on the sell side only see half the story about the use of eAuctions and in many cases will go out of their way to get the event changed back to a more traditional process. There is a fear that they will give away their competitive advantage in an eAuction. The only way to address this is by education and engagement at the most senior levels ensuring that they understand the benefits for both Buyer and seller alike. This is also true for Government tender Boards as well.

4. Minimal Engagement.

All too often companies are in a rush to get the good or service procured to meet a customer demand and therefore forfeit investment in time to engage properly with the community. Buyers will often select a short list of people to get the job done quickly, this poses a risk to the buyers in that they are favoring a restricted group of bidders. The result of this action is that the rest of the community will disregard future request and possibly boycott the whole eAuction process in the future.

5. Education and Training.

This is an important Critical Success factor for any eAuction provider or Client who are administering auctions themselves. It is perceived that the low adoption of eAuctions across the Globe is due to not enough education and training even at the most senior levels right down to ground level of buyers and sellers alike. Solution providers do not provide enough expertise in the use of eAuctions which is based upon their lack of understanding of the business in general. Continuous training and education is missing in many of the solutions being provided today.

6. eAuction Administration.

In many instances there is a perception that the eAuction administration is collaborating with the buyer and placing bids behind the scene in order to drive the prices down. It is important the administration of the auction is seen as completely neutral and serving the best interests of the buyer and seller alike.

7. Backup Process

Where auctions are being run in remote area or in areas of low infrastructure, there is a risk of the auction failure. Adequate provisions and procedures should be employed to ensure that the auction can continue. In the bid rules backup procedures and processes should be spelt out and agreed.

8. Bidding Strategy (Supplier).

The supplier (bidder) should have his own strategy when going into the event. He should understand his own supply chain and the costs involved in order that he will know when he has placed his final bid, unable to go lower. This will ensure that a fair market price is obtained for the good and service rather than just the lowest price. Without this strategy there is a risk that the supplier will not actually be able to execute the good or service without claiming additional funds after the award.

9. Event Feedback.

Once the event has been concluded and a subsequent award to the winning bidder, feedback should be given to all that participated (winners and losers). This will show that the event was fair and open and the losers will see what they have to do in subsequent events. This is a critical success factor in maintaining supplier confidence in the process.

Procure-to-Pay, tips for the Enterprise

November 12, 2012

As more companies are seeking to move beyond procurement into fully deployed supply chain systems, a key challenge for many companies is in the area of improving efficiency in their procure to pay cycle for many of their contracted services, especially in the area of facilities maintenance and on-site contract management. There exist multiple challenges in environments where field associates are working from manual or electronic systems, requisitioning on-site services for maintenance or other activities, and ensuring that this information is captured effectively. In addition, there exist significant challenges 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. While many enterprise systems claim that these elements are simply defined within their structural logic, the truth is that there are plenty of opportunities for error, and that without a planned process for managing the procure to pay cycle, the organization may be bearing significant costs due to non-compliance to system or process requirements.

So here are a few tips that should help

• Develop common processes and procedures for the P2P process, and roll-out training at site level to ensure that people are comfortable with the approach. Be prepared to modify minor elements the process to accommodate site-level requirements, but keep the essential elements of the process flow intact. Emphasize the importance of this approach to the entire P2P cycle, including accounts payable, invoicing, and blocked and parked invoices. Explain the impact of lack of adherence to process – and that the supplier will not be paid in a timely manner for their work if errors occur in the process.
• Improve master data robustness and integrity. Whether this involves ensuring proper audits of external vendor catalogs, or internal content management, clean master data is a mundane but critical element to supply management and P2P best practices. Minimise opportunities in the P2P process for keystroke and free text errors to occur, by error- proofing the system and mapping the process to identify where errors are occurring. Recurring training will also ensure that errors are reduced.
• Explore punch-out roundtrip and other approaches to exploit external content management approaches. This is especially important to ensure that the most efficient buying channel is selected.
• Exploit the use of procurement cards for high transaction volume, low transaction value purchases. Pcard technology has evolved significantly, and companies need to identify opportunities for hard dollar savings through this approach via rebates.
• Be sure to update master data and pricing rates on an on-going basis. In particular, attention should be paid to units of measure, appropriate industry-standard nomenclature, updating of labor rates based on market conditions, and on-going clarification of requirements against existing contracts.
• Establish how you are buying products and services, and document the buying channels through which these purchases are occurring. Inevitably, you will discover that purchases are occurring through improper or less- efficient channels, which is detracting from your team’s ability to engage in strategic value-added approaches. Get out of the transaction management business! To do this, you need to establish standard processes and procedures, and commit to a change management plant to ensure that people are using the right buying channels for the different types of spend.
As technology and business requirements evolve, the P2P cycle will certainly need to be re-visited from time to time to ensure it is meeting the needs of internal customers, and that suppliers are satisfied with the system.