PROCUREMENT OPTIMIZATION BLOG

Direct Materials Through a P2P Platform: The Game of Communication

August 21, 2019

You’ve been tasked with implementing direct materials through a P2P platform. What does that mean? How do direct materials differ from indirect?

I have come to learn that purchasing/invoicing for direct materials brought with it an array of complex use cases to solve (auto-ordering, inventory management systems, receipt-based invoicing, inventory returns, to name a few). But of all the important pieces needed for successful direct materials implementation, one stands out above the rest: fluid communication between you, your customer and your SMEs.

Why is communication so important with direct materials? Because at every phase of the implementation, you’ll need to regroup and ask if anything was missed. If something is missed, you’ll have to adapt, adjust and re-plan.

Below are a few tips from each phase of implementation to help you effectively plan, communicate and get started.

Requirements Gathering – In addition to your regular prep, consider doing a deep dive into inventory management. Each industry has unique materials to purchase, but due to their direct nature, you will need to track all of them to determine how much material is on hand for manufacturing products. Go over the demand signals for purchasing direct materials, which will come from various avenues such as on-demand, sales orders, inventory replenishment, etc. Then go over goods receipt-based invoicing. Understand how invoices are reconciled against each ordered item. These items will be important in designing the solution.

Designing the Solution – Think “big picture.” Always. You will be invested in designing for each area, use case and requirement. Take a step back and ask yourself how it all will come together. There will be many loops of information that will need to be accounted for via integration, process and timing. Consider using a level 0 mapping approach to break down each unique process and then incorporate it into big picture. Share the design with all cross-functional teams to help identify gaps in the design. Remember each customer knows their business best and will help identify blind spots.

Testing – When you are ready for testing, keep an eye out for unit conversion and rounding. If you are importing orders from an external system, ensure their unit of measure in the external ordering system converts properly into the P2P platform and vice versa. Direct ordering requires meticulous inventory tracking and cost conversions to eventually calculate cost to create the end product. Communication among all teams is important during this phase to verify the solution is working end-to-end for all areas.

Move to Production – Testing is complete. Let’s move to production. Not so fast there! What about cutover planning? Direct processes are the organization’s most important day to day activities – what is the plan to transition to the new design? Will there be a freeze on ordering or paying invoices? Will two systems be running concurrently? Will one be sunset? How will end users prepare? Cutover planning will be critical to the success of any deployment and this will take time to plan.

You’ll need to determine all the directly impacted processes and teams, determine the timing for the team to transition and how they will exactly transition. Begin these conversations early, right after design. Careful planning and timed communications will ensure teams know when, what, and how to support cutover.

Go-Live – We always recommend having enough staff available to support this initial go-live and influx of questions. Now more than ever, is it important to have setup a support plan for incoming questions, end user issues and monitoring performance.

There’s so much that you can try to anticipate, but direct invoicing has high complexity that will need to be managed by all teams. Remember it’s a team effort, open communication between all parties will enable all teams to be successful.

By: Rocio Rodriguez, Senior Consultant