Have you heard the old riddle about the cabin in the woods?
It goes like this: You are alone walking through the woods and you spot a cabin in a clearing up ahead. You are tired, cold and hungry and it is getting dark. You do not see or hear anyone in the cabin and decide you would be within your rights to show yourself inside and take shelter. In the fading light you can see:
- A stove where you could cook your small ration of food
- A fireplace with enough wood to get you through the night
- A lamp with enough Kerosene to last until morning.
The problem is that you only have one single match. So the question becomes – which among all of these things should you light first?
Pause for dramatic effect.
And of course the answer is “the match.” (Please, no groaning. I am building to a point, I promise.) You see, before you can use any of these other devices you need to light the match and then apply that flame to whichever tool you have prioritized as the most critical. In essence, without the initial spark those other items are never going to operate at their optimal levels.
Perhaps it is a stretch, but I sometimes think about this riddle when I contemplate the Procure-to-Pay cycle. In many ways, heads of AP and Procurement are like the tired and hungry traveler from this story. Their P2P environment is like the cabin, but instead of a stove, a fireplace and a lamp – their dwelling is populated by a host of automation initiatives.
Some of the questions that face the different agenda setters in the P2P cabin are: Should you automate payables? Should you put a contract management system in place? Should you implement a spend analytics platform or a supply chain financing portal? Should you find a sourcing tool? and so on and so forth; the possibilities go on and on and there doesn’t seem to be one definitive answer.
With the rapid escalation of automation options in the last ten years this corner of the enterprise has become a little cloudy in terms of what to do first and how to maximize value from supplier interaction. In the past several years, many large companies have implemented automation solutions in their P2P environment, and a strong theme has arisen. There is a lot of value to be generated from all of these technologies, but nothing seems to be completely hitting its potential.
We hear about this theme a lot from larger enterprises that wish they could see more supplier adoption and drive more revenue or savings from their investment. We especially hear about this from sales reps at the software companies that are selling these solutions. Think about it… they are the one bearing the brunt; low supplier adoption and reduced transaction volume on their software often means the sales folks are not maximizing their commissions – or the value for their clients.
So what is the problem? Nobody ever took the time to light the “match.” And in this case the “match” (or the spark) is the data quality or Supplier Information Management (SIM). Focus on the data first and then everything will flow from there. Too often companies will implement a very powerful system like supply chain financing or e-invoicing or spend analytics and they settle for only 20% of suppliers (or transactions) to flow though the software. This is crazy, and more than that, it’s very costly! Engaging your supplier data first and then letting that perfect data flow into all of your systems is not only better for your overall operations but this will also dramatically increase the savings or the earnings from your P2P automation initiatives by a magnitude!
In reality this logic is nothing new. The old saying used to be, “before you can automate any process… you need to optimize that process first.” Like most things that old saying needs an update, “Before you can automate, you need to optimize, and before you optimize, you need to have quality date populating your system.”
Light the “match” first. Data quality is the spark that ignites everything else in your P2P cycle.