Digitization of strategic procurement processes and capabilities has been the biggest advance in the world of procurement over the past 10 years. This enablement allows companies and their suppliers to be more efficient, effective and accurate and hence significantly adds to increasing value across the extended enterprise. Read how a global oil services company went about improving the digitization of the source-to-pay process after a merger.
When the CFO heard the procurement team explain the importance of a software portal for suppliers to register and manage their banking and payment information, he had an “ah-ha” moment. Realizing a similar need for the company to register and use their customers supplier portals to ensure proper payment through the order-to-cash process, he understood the efficiency of the same process for a supplier portal to manage the company’s suppliers. This “ah-ha” moment provided the procurement team with a way to align with the CFO and other executives to continue developing their source-to-pay digital strategy.
As a result of a recently merged global oil services company with over $3 billion in annual revenue, the procurement team needed to implement a digital system to support the purchasing requirements across multiple business units and ERP systems. This need was driven by two factors. Frist, because of the merger, prior procurement software licenses expired and second, the newly merged entity started to experience significant operational problems processing supplier payments. These factors had a cascading impact on the central procurement’s team capability to manage supplier relationships necessary to meet delivery and cost reduction goals.
Given these factors, executives including the CFO, COO, CIO and VP of Procurement appointed a team to evaluate and recommend system and process improvements. To lead this effort, the client brought in OnDemand Professional Network member Dave Stowe to work with the VP of Procurement, the Director of Global Procurement Operations, Director of Accounts Payable Global and other staff members to evaluate processes, issues, offerings and the market for comprehensive Source-to-Pay (S2P) platforms.
The evaluation process was broken down into four parts and conducted over a period of months to ensure a comprehensive understanding of the impact to process, systems and organizational responsibilities.
|1||Procurement Operating Model Analysis||Current process mapping and efficiency documentation|
|2||Socialization Process||S2P digital vision development, workshops|
|3||Request for Proposal (RFP)||Solicit proposals and negotiate with finalist|
|4||Business Case||Document costs, benefits and calculate ROI|
Within each one of these parts, the team collected detail information, analyzed and discussed findings as well as solicited feedback from the operational steering committee. This four part structure facilitated organizational feedback, input and support.
CRITICAL SUCCESS FACTORS
Given the magnitude of this project in terms of financial cost, resource requirements and organizational impact, the team met with several stakeholders across functions, business units and countries to understand and solicit input. Time spent meeting with stakeholders from IT, Accounts Payable, operations, plant buying, Tax, Legal, and others were extremely valuable. As a result of these meetings, there was better clarity of the proposed changes to the procurement and sourcing process, organizational responsibilities, process improvements and systems.
By understanding the comprehensive structure of their sourcing and procurement processes, systems and organizational responsibilities across business units and ERP systems, the team was in a good position to conduct a RFP and develop the business case. Important process improvements and software selection criteria were identified and use cases were developed to facilitate software evaluation.
This process resulted in the following accomplishments:
- Evaluation of three S2P software platforms across:
- Platform features
- License fees
- Implementation costs
- Change management requirements
- Business case outlining costs, benefits and return on investment yielding:
- Positive NPV
- 24.7% IRR
- 2.4 years for payback
- Organizational support for implementation resources
- Executive level approval
MEET DAVE STOWE
OnDemand Professional Network Member since 2005
Dave works with clients to create value through strong supplier relationships. He has developed and implemented procurement organization models bringing together organizational responsibilities, policies, systems and metrics in both industry leadership and consulting roles. In addition, he has sourced global goods and services for multiple direct and indirect categories in life sciences, healthcare, aerospace and industrial products. Dave earned his MBA and a MS Industrial Engineering from the University of Michigan and a BS Industrial Management from Purdue University.