By John Becker
Companies are in constant search of new ways to reduce costs. Since their emergence in the late 1980s, integrated business systems such as MRP or ERP systems have been key components of the overall strategy to optimize supply chains and cut costs.
Today, the drive to reduce costs and improve responsiveness fuels ongoing demand for enhanced functionality, leading to a spectrum of new products that are either new modules integrated into a larger ERP system or standalone programs. Tools for everything from supply chain management, supplier relationship management, procure to pay (P2P) suites, B2B e-commerce tools, specialized software products supporting MRO and other indirect spend are being released all the time.
The questions are: What does your company need? And how involved should you be in plugging any of these tools into place?
Throughout your supply management career, you’ll likely be involved in many implementations or major upgrades of business systems. Each event can represent significant opportunities for you and your team to drive real value. Your challenge is to understand your unique responsibilities as part of a project team and ensure that after implementation, the project meets its objectives and delivers ongoing value.
Supply managers are business process owners (BPOs). As such, they own most of the P2P process — which has a direct impact on production planning and supply management. Any new system or enhancement must support all the steps or activities in this process.
Your active engagement in the entire project life cycle — project charter/business case development; requirements definition, design and development; test/verification and validation; data cleansing and transformation; change management; and transition to production, post implementation support and value recognition — significantly improves the probability of the project’s success.
Let’s examine each area of the project life cycle and what your involvement as a BPO might be:
Project charter/business case development. Getting in on the ground floor of a project is a great opportunity to help shape the project and fully understand and accept the assumptions of the business case. Companies invest based on the anticipation of increased revenues or reduced costs, so if you have an opportunity to help build the business case, seize the chance. Even if you don’t participate, you need to understand the value that procurement is expected to produce once the system is live. This will help you determine whether the design of the product is effective. For example, if the new system anticipates the elimination or simplification of purchase order approvals, then lead times should be shorter and inventory levels can be lowered. Depending on the degree of improvement, fewer people might be able to do the same volume of work. Maintain a clear picture of what the system needs to function and why it is better than the status quo throughout the project.
Production, MRO and services. Procurement needs to be able to meet all the company’s needs, so be sure to actively participate in requirements-gathering workshops that include members of other business units. Review upstream and downstream requirement documents to ensure that all inputs to, and outputs from, the process are aligned. And ask lots of questions. For example, review the production-planning documents that outline how engineers will determine whether to make or buy a part. Learn the downstream processes associated with how the quality system will handle returns to suppliers based on in-process inspection. Finally, make sure the requirements support other strategic initiatives your company is pursuing that will drive process changes.
Requirements definition. Defining requirements for the system is both critical to the success of the project and foundational to the system design. Typically, a BPO works with a business analyst to document all process requirements, and the analyst does most of the work. However, it’s your responsibility to ensure correct documentation of the requirements.
Business requirements and functional requirements documents need scrutiny. Check the workflows and ensure that decision/approval points are clearly identified. Think about what reports are needed to support decision-making and include them in the requirements. For example, if you have approved sources of supply, the new system should prevent orders with unapproved suppliers. Or, if you have a specialty procurement group for services, make sure a purchasing group is established with the corresponding workflows.
Early insights into design and development. The project’s technical team does the work of creating and implementing the system design. However, you need to stay engaged as development progresses. Having insight regarding the look and feel of the new system and its functionality can give you a sense of whether the design is fit for purpose before it launches. Ask for demonstrations of workflows like PO approval and business logic in advance of testing. Early engagement will also give you an idea of the level of change the system will demand of your staff. If you are moving from one system to another, some people will find that new or different input screens or features like drop-down menus can be intimidating. The more complex the change, the more you need to ensure that your staff can accommodate it. Factor in orientation and training time before a system goes live.
Test/verification/validation. A rigorous testing and robust validation process verifies that the design meets requirements. While technical resources can test basic functionality, BPOs and their subject-matter experts need to develop a rigorous test program.
Practitioners of the craft are the only individuals who can think of the most complex scenarios that the system should support. As an example, there’s a contract with a third-party manufacturer that receives both company-owned inventory and supplier-managed inventory to manufacture a complex assembly. This assembly is tested by a third party and finally drop-shipped to a customer distribution center as consigned material. The system must differentiate between company-owned, supplier-owned and consigned inventory. It will need to track the movement and transfer of inventory both inside and outside the facility. In addition, the system must have capabilities to accrue costs to inventory. Value is added by outside processing and inspection, enabling customer shipments from multiple sources, including direct shipments from a third-party.
Data cleansing and transformation. Procurement also needs to validate that the data brought into the system is complete and accurate. First, define what data must be brought in. For instance, do you want to include all suppliers that have ever worked with the company, or only those that have done business recently? Do you need to have access to completed orders or only open orders? Once you have defined what data is needed, work with the data team to ensure the data is cleansed. The data should be free of duplicates, incomplete fields and inaccurate fields.
Companies that lack robust data-quality programs generate bad data over time. Supplier addresses are an example. There are likely ship-from addresses that are no longer used, are improperly entered (common with international addresses) or are duplicates. Data that does not currently exist but is required for the new system must be generated in a controlled manner. Again, consider addresses for other countries. The new system may require a regional identifier in addition to a street address, city and country. These regional designations and the associated ZIP code equivalent can be difficult to determine — so be observant.
Once the new system is loaded, procurement must validate the data’s arrival at its destination intact. In many cases, you will review reports that compare the input file to an extract from the new system. You’ll need to sign off that the data has been extracted, transformed and loaded correctly, requiring multiple verification checks throughout the project duration. Your signature is a testament that the new system will start with clean data.
Change management. It’s one thing to ready the system for the business; it’s another thing to ready the business for the system. For procurement BPOs, the challenge is even greater, especially if the new system directly involves suppliers or other third parties. As a BPO, you need to determine how you will accommodate the changes. Accommodations could include changes to organizations, processes, roles/responsibilities and decision making. You will craft communications to employees, managers, and suppliers — this could mean writing new policies, procedures, work instructions, job descriptions, then disseminating the information in a timely fashion.
Supplier symposiums may be appropriate throughout the project. New meeting structures and KPIs to reflect the changes may also be required. For example, if the company expects shorter lead times, you will want to measure lead times going forward at a granular level. This might mean looking closely at how the system handles PO placement times to ensure it accounts for time to convert requisition to an order, supplier lead times, goods receipt and inspection, and dock-to-stock times.
Finally, you will need to be directly involved in developing a training curriculum and materials. Your department’s ability to deliver expected value rests on the effectiveness of the training. Be ready to act as a gatekeeper. Training is often shortchanged because of the challenge of logistics, costs, and time to correctly execute.
Transition period and post-implementation support. Bringing a system online is challenging, so planning is critical. Procurement should briefly stop handling transactions. Once the system goes live, your team will complete a final validation of the data. It’s crucial to do this in a timely manner because once transactions start, fixing data is difficult. Take the time to ensure that master data is correct. Be sure to focus on items that may impact company financial performance, such as open PO pricing. Once you have personally confirmed that your data is good, you may authorize transacting.
You will need to align and work with the communities you support to accommodate any disruption. This may mean actions such as pre-emptively accelerating deliveries and having a window where no material is shipped. You will need to anticipate the impact to operations as your team works through the learning curve — for example, receipt processing, invoice payment and/or order placement will be slower at first.
A critical preparation is arranging for post-production technical support. Having power users trained and the technical staff on call after the system is live is essential. (The No. 1 problem on the first day of a new system is people needing their passwords reset.)
Value recognition. You and your team are responsible for some level of value delivery. Thus, you should have metrics in place and monitor performance actively once the system is up and running. While the technical staff handles problems with the system, you need to quickly recognize if the design is not performing as promised or planned. If it isn’t, the issue needs to be raised immediately to the technical support team as a break. Consider the system broken if it isn’t delivering the intended value.
In my experience, supply managers who engage in systems implementations or upgrades on a continuous and active basis ensure a robust design and help their organizations transition to the new systems with minimal disruption. While they assign some of the most knowledgeable staff to the project, they also take an active, hands-on role. This may mean attending status meetings as stakeholders and participating as project managers. Being involved in the day-to-day details is an effective risk-mitigation strategy.
In the end, when you own the business process, you must own the system and data with confidence and clarity to ensure project success.
John Becker, PMP, MBA, is a supply chain and IT consultant for Kennett Consulting Services. He is based in the Houston area. The author would like to acknowledge Rahul Bhutani, business and system integration senior manager at Accenture, and Gregory Brice, director commodities at Baylor Scott & White Health, for their assistance with this post.