Earlier this week, I gave a presentation at ADP P2P Solutions‘ Seminar “Game-Changing Advances in Finance and Payables” held in the conference area of Minute Maid Park in Houston, Texas before an Astros game. I discussed recent trends and performance in the AP market and may revisit that topic on CPO Rising at a later date. I was sandwiched between two P2P case studies delivered by two business leaders, one from Supply Chain, the other from Treasury. Today, I’ll share the highlights from my Supply Chain counterpart who works at a Fortune 100 company.
There are certain industries that rely heavily on third-party contractors and consultants to support their operations. The largest companies in this industry regularly have more contractors onsite than employees. Managing these contractors, their projects, and the underlying costs associated with the work can be overwhelming (from a volume standpoint) and complex (from a project and scope management standpoint). As you may imagine, tracking and managing the costs of these contractors using manual tools can be an extraordinary challenge. It is here that the case study begins.
The processes used to manage contractors at this company were fully manual and as a result, the state of contractor operations and cost management was less than ideal presented numerous and significant challenges. Consider:
- Project and material spend was captured up to 90 days after the costs had been borne
- Compliance to contracted pricing was nearly impossible to track
- Project and/or purchase order overruns would only be identified at the time of invoice receipt
- Spend analytics were non-existent
- Invoice reconciliations were done manually
- The P2P process required numerous touches from multiple resources
This process presented a huge opportunity for improvement and given the magnitude of spend that falls into this area, it attracted the attention of the company’s executive management who recommended that a cost management initiative be started and gave the following directions to this leader and his team:
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Increase cost competitiveness
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Get the most from what we have
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Build a culture of continuous learning and improvement
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Treat the company’s money like your own
From these directions, a vision for a new process that could enable all stakeholders to see, track, and manage their costs as a way to become more cost competitive was created. By setting this vision, the executive leadership clearly stated its belief that providing visibility into spend would have a positive impact on costs by increasing savings and driving compliance [Sidebar: Isn’t it great to see the non-procurement leaders at a Fortune 100 company supporting such a classic procurement value proposition].
After reviewing solutions in the market, this company deployed ADP’s P2P solution that includes a supplier portal which enables contractors (i.e. suppliers) to post their activity and costs on a daily basis (what the company calls eField tickets). With the new automated system, field-based project managers were able to reconcile the costs on each eField ticket against the underlying contract with any contract variances routed for approval to the appropriate contract manager.
The benefits that this company realized from its cost management initiative and the deployment of a P2P solution include:
- More efficient P2P process
- New real-time costing ability that enabled tighter contractor/project cost management
- Increased compliance to contracts
- Improved budget performance
- Reduced the use of “single PO” projects (where a PO with single lump sum value and no detail is used)
- Increased payment accuracy
- Enable invoice/cost issues to be resolved sooner and more effectively
- Provide comprehensive view into outstanding contractor/project liabilities
As I noted in my presentation that followed, more and more enterprises are thinking holistically about the P2P (or Source-to-Settle) process, It was great to see a supply chain leader so focused on both procurement and payables.