The Biggest Challenges with Procure-2-Pay (P2P) Implementations – Supplier Master Data
Everyone wants to have great spend control and a high degree of automation but recent findings from our customers which use many of the leading P2P solutions shared some very common problems. Often a grand vision and dream is sold to CPOs and CFOs who don’t understand the real challenges of having a centralized P2P solution and costs quickly escalate out of control and timelines are delayed.
In the perfect world you would probably be live with a P2P solution in 2-4 months, the reality is that they normally take 12 months and many of them stall and the projects die after massive investments.
The common thread here is data and system integration challenges. Integration in itself is not complicated in principle. Inevitably though, the problems arise due to poor master data and a lack of data governance. This internal finding was also backed by a survey carried out by sharedserviceslink. which focused on the P2P part of the source-to-pay process. In order to collect their data they surveyed around 100 senior stakeholders from Finance, Procurement and AP functions, all representing large enterprise businesses with high volumes of transactions.
There were some refreshingly revealing findings from the survey, which also reflect our experience:
- Lack of ownership – most, organisations admit that they don’t maintain good master data on suppliers. One of the main reasons is that ownership is not clear between procurement and finance. Typically the vendor master has a lot of garbage and no one wants to tackle the clean-up process.
- Lack of data governance – Even if ownership is clear, which normally starts off with Finance, there is no governance around data and the purpose and use of data is not communicated therefore the data which is maintained is not fit for how the organization would like to use the data – for example to load it into a P2P solution or in a spend analysis tool or a contract management system
- Inability to enable suppliers – according to the data, most respondents struggle to actually engage and onboard their supplier population in any meaningful way. Among the respondents, only 19% had roughly half of their suppliers connected – with the majority having a far worse ratio. This figure is pretty shocking considering “number of suppliers” is the most important cell in the business case spreadsheets used to justify these systems.
If you have off the record discussions with organisations that have invested in P2P suites, apart from organisations that have a complete green field system landscape, they will tell you that it’s critical to first address the issue of supplier master data. This is normally passed over by P2P suite vendors because they would never be able to sell the solution if the issues were explained fully and as such it is left to the last minute of the project implementation.
In most cases you will find that P2P suites take the data from the ERP and you end up with garbage in / garbage out scenarios. Sometimes even worse if you have multiple ERPs as they require that the same supplier has the same vendor identification across different ERPs, which is clearly a massive undertaking – a several month long project on it’s own.
Many organisations, particularly B2B manufacturing organisations have scaled back their P2P implementations and now only load catalog suppliers which have high volumes of orders and invoices and where they see the most value. In many cases having a robust supplier onboarding process in place provides better control than purchase orders with a lot less complexity.
If you are embarking on a P2P project or S2P project there are a few key questions an organization should ask themselves:
- How does the P2P suite expect my data to look?
- How does it handle remit-to versus ordering addresses?
- Do all my suppliers across multiple ERPs need to have the same vendor number?
- Will I see duplicates in the P2P solution?
- Where is the real value from having purchase orders issued outside of my ERP? In our experience this is limited to catalog suppliers but this can vary by industry if they have a lot of professional services spend.
- Do I need to do everything in a single system? Why?
- If my data is integrated with cleansed master supplier data in all systems maybe I can benefit by having best of breed solutions which will deliver better value to each of my functions with dedicated functionality?
- Is starting off with the P2P process the right starting point for my procurement/finance transformation project or is addressing supplier master data governance a better place to start by implementing a robust supplier onboarding first?
- Ultimately if my suppliers are already enabled in a supplier information management portal will I not see quicker ROI on my P2P investment?