Expert Guide #3: eTrading - Facing the Challenge
The third blog in our series of e-trading for the Building & Construction industry by COINS P2P expert David Bullock. In the previous expert blog we discussed the various aspects of business transformation when adopting an e-trading approach and some of the challenges to overcome. However, this is just the start! In this final blog David discusses some of the wider Procure 2 pay challenges that construction companies face…
The Construction Industry is a complex sector with many risks and challenges: ensuring supply chain compliance with health & safety regulations, reducing paper-based (often error-prone) purchasing processes, dealing with multiple supply chain tiers, and ensuring prompt and fair payment to all supply chain partners.
While the construction industry has made significant progress on adoption of procurement processes and technologies, it still faces many challenges.
Too Many Disparate Systems and Processes
Businesses have their own processes and tools to manage procurement which makes data consolidation cumbersome. Sourcing, procurement, and accounts payable functions are usually run by different departments and these departments often optimize the process exclusively for their area. Companies also use ‘work-arounds’ or local solutions with lots of spreadsheets making it difficult to have a common source of truth for supplier and business data. These silos create inefficient processes that are all too often manual and error prone. In addition, processes requiring manual intervention are inefficient and costly.
In some organisations management perceives the procurement business processes as non-critical. This perception usually means focus on upgrading procurement processes and technology is low. Hence, any inefficiencies that creep in on a long-term basis either due to outdated technology or process is not given the requisite priority. Often key procurement processes such as spend reporting remain largely underutilised.
Lack of Compliance and Governance
Compliance and governance of procurement processes tends to be rigid and inflexible. Key governing principles such as ‘pre-approval of spend’ is sometimes perceived as unwanted bureaucracy. This lack of compliance often results in ad-hoc purchases and non-contracted spend.
Change management is understandably a difficult and complex proposition in large construction organisations. Users often complain that they are not consulted before changes are implemented in the system. A post-implementation situation may result when the solution may not meet or solve key user issues. Requirements change frequently making it difficult for the technology team to ensure quality and timely delivery.
Lack of Adoption
Users may find procurement systems difficult to use. B2C systems such as Amazon and Google have raised the bars of users’ expectation from B2B systems. Users expect a simplified and intuitive experience in their business environment. As procurement systems are designed by purchasing professionals who have higher threshold for complexity, the procurement systems are often high on feature yet low on usability. User training is inadequate, and they are not rightly advised on procurement policies. All these factors frustrate business users resulting in poor adoption of P2P technology and processes.
Your own P2P Challenges
Procure to pay means different things to different businesses, however there are several challenges that most construction businesses will identify with.
- Poor visibility- on what has been ordered for a project, what orders are outstanding and therefore the potential for duplicate orders being raised.
- Late deliveries- Struggling with lead delivery times or lacking visibility of availability.
- Inconsistent supply- Materials/goods not arriving when work should be starting, leading to delays and mounting additional/unplanned costs.
- Uncontrolled procurement- Maintaining an Approved Supplier List, yet requisitions are coming through with quotes from suppliers not on this list.
- Inaccurate details - Orders are raised on the wrong supplier accounts resulting in confusion and added time in fixing.
- Disorganised compliance - No central view of full supplier information, leading to incorrect or incomplete information which in turn leads to supply chain issues e.g. impact on repeat orders due to invoicing and payment problems.
- Complex approvals - approval process for requisitions is too painful. Far too slow, too many steps, resulting in delays, or work-arounds.
- Process black-holes - Lack of visibility of the current approval status leading to delays and poor/rushed purchasing decisions as you can’t see where the hold-ups are.
- Poor procurement decisioning - Inability to undertake accurate spend analysis which means that your procurement teams don’t have the tools to make informed purchasing decisions and long-term procurement planning.
- Little or no intelligence available - procurement reporting is difficult and time consuming for the procurement team so valuable intel is missed.
Managing your own P2P Business Transformation
Implementing P2P within a business involves planning, communication and investment from across the business. It is not a ‘one size fits all’ process. It is important to understand how P2P impacts the various parts of your business and uncover any ‘bad habits’ in order to engineer change at an appropriate time to facilitate a smooth-running P2P operation. Above all, implementing P2P within the business is about managing your business transformation.
COINS construction software helps you to manage your P2P Journey.
- To make P2P work make sure you get the basics in place, get them right first time.
- Appoint a single process owner empowered to make improvement decisions.
- Make sure that you have a communicated the P2P process to both your organisation and all your stakeholders.
- Ensure that P2P is viewed as an integrated cross-functional process which involves procurement, finance and other
- Make sure that clear P2P policies and procedures are in place and well designed. Think ‘no PO - no Pay’.
- Invest in early stakeholder engagement – it’s wider than just procurement.
COINS construction solutions experts are there to support you on this journey:
- The COINS team will help to investigate your P2P processes.
- We will support early engagement with finance, procurement and others to ensure that all stakeholder perspectives and requirements are taken into account.
- We'll communicate internally with your buyers and requisitioners, and externally with your suppliers to gain insight into shortcomings
- COINS will highlight opportunities for transactional efficiency savings.
- We'll help to ensure that this is aligned with your business strategy – collaboration is key
- COINS construction experts will integrate activity across functions and departments to avoid a silo mentality – this approach delivers maximum benefits
- COINS will work with you to articulate the benefits through to all stakeholders, gaining greater business acceptance and increasing momentum.
- We will measure progress.
- Our expert team will develop a set of management information about the end-to-end process for stakeholders to access
- We will check that data-capture supports the continuous improvement of your procurement process
- We will review off-catalogue (rogue) spending, making this more visible.
- We will help make sure your information, data and content is correct and that your procurement catalogues well-presented and accurate.
- Our team will review whether your supplier and material master data is correct, timely and accurate – we find that addressing master data issues creates a more effective P2P process.
- We will investigate options to reduce master data management options – such as could the extension of supplier self-service options help.
- COINS will ensure the process is engaging and simple.
- By creating opportunities for both suppliers and vendors to engage with your P2P process we will gain additional insight as to how to improve processes.
The COINS team will constantly seek ways to improve both internal and external relationships.
Have you started your Procure 2 Pay journey?
Successful Procure 2 Pay is about making life easy for your suppliers and vendors. Everything about Procure 2 Pay should be centered on reducing the transactional cost and boosting efficiencies for both your own business and your supply chain partners.
Ask yourself, Is the behaviour of your suppliers and vendors changing? Are they more likely to self-serve? Make it easy for your supply chain to self-serve with their own master data within your Procure 2 Pay process.
COINS construction software solutions will transform your supply chain into an integrated, tightly-woven unit – rather than disconnected, self-contained entities working on individual parts of a larger whole. It’s not just software that can be applied to construction - it’s specifically designed for it. Contact us to find out more - take a look at our supply chain solutions.
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