No prelude for part three of this miniseries on the Future of P2P – eProcurement – other than to say part one which looked the key problems and future of supplier enablement and user adoption is here and part two which looked at usability (i.e. “clicks”) and content is here. Our view of the future continues…
Compliance
Compliance is not a four-letter word but it can be confusing in the context of procurement since it could be referring to process compliance, regulatory compliance and/or contract/pricing compliance. All are important and all can be aided by an eProcurement system. In fact, compliance concerns created the demand for eProcurement at more than few enterprises.
Process compliance today is not managed as elegantly as it could be in current eProcurement systems but will be improved in the future through usability enhancements. Simplifying approval set-ups, improving notifications and messaging, and creating more features for mobile workers are a few areas where we will see change in the future. Part of the process problem today is the fault of the end-users who feel the need to over-design and over-think their processes – more on that topic can be found here and here. But ultimately, process compliance is not a major challenge today.
Regulatory compliance will continue to be a driver of demand for eProcurement. Jurisdiction/tax/reporting issues will continue to change – you can bet the house on that. Labor issues that cut across the supply chain will also play a factor. The future solutions will enable greater configuration or extension of fields to capture the necessary compliance information at the transaction level that will flow back to the supplier profile information or vice versa. For example: (1) a W-9 submitted with an invoice by an independent contractor/supplier is automatically linked back to the original PO and to the supplier profile and (2) “tagging” POs with extraneous information that can help auditors better understand the transaction could be another example.
Contract/Price compliance is where the big advances in the future of eProcurement will bear the most fruit. When you talk to the post-payment audit recovery specialists, they will tell you that where they find the most “gold” isn’t in the duplicate or over-payments made by AP, but rather with issues between the contract pricing and the PO pricing. This makes sense since part of the AP process matches POs to invoices. It remains very difficult for most procurement departments to check/match/reference requisition pricing against an underlying contract even when a contract management and eProcurement system are in place and it is practically impossible to do so manually (As an example, one company I am working with on a solution selection project, has contracts with thousands of lines or skus and pricing. I won’t get into the details of how they manage this problem, they do, but without a set of technology tools, it would be impossible). This is a real problem and I believe that earlier this year, I referenced this audit by the state of California that identified $2.5 million in overcharges by Office Depot on $57 million in total spend – that’s a 4.4% overage. The eProcurement solutions in the future will be able to pull item and pricing information from a contract management system and stop mispriced requisitions from becoming a PO. Some companies can enable the basic capability that I just described, but it is clearly not a capability within most eProcurement systems today. EProcurement solutions in the future will flag catalog items that are non-compliant and trigger alerts to supplier and buyers so an immediate correction can be made and a discussion of how the error happened can be held. The future systems will also be able to put strict “blinders” on requisitioners to ensure that “non-approved” items and services from “approved” and “non-approved” suppliers; unless of course the ability to ‘punch-out’ to the internet and pull what is basically a B2C transaction into the eProcurement system is desired. The future eProcurement solutions will also be able to aggregate other orders in real time to calculate and present volume discounts at the order or contract level and make suggestions to the requisitioners and procurement staff where points of leverage or savings exist. Contract pricing that is tied to some moving baseline (for example: a commodity index or a defined discount to list/catalog pricing) will be matched at the requisition by pulling a real-time feed of the baseline pricing and performing the appropriate calculation as a check. Ultimately, non-price compliant POs will never be generated by the eProcurement system in the future.
Ok, so that’s compliance and where we see it going in the future. I hope this series is getting your P2P juices flowing and getting you to think about your requirements for your new or revamped eProcurement initiative and what you would like to see on your provider’s roadmap. At this point, I see two more articles in the series: one on integration, networks, and true P2P; the second on complex categories of spend. Am I missing anything? Besides a definition of “P2P juices,” that is…
You’re absolutely right that compliance to price and contract is the key.
It surprises me that after over a decade of eProcurement evolution, many companies see eProcurement as building a web based or screen based purchasing and approval process. Catalogues are often seen as a nice to have enhancement. And it is the catalogues that deliver the compliance.