How do we acquire process intelligence?

This is the second of three posts on the Functional Fast Track session that I conducted at the 21st Annual North American Shared Services and Outsourcing Week entitled Digitizing the P2P Process to Create Process Intelligence and Better Customer Experience

March 8, 2017, Lowes Royal Pacific, Orlando, Florida

There are four areas in our process performance management system that we need to get right in order to advance from process visibility towards process intelligence.

  • Well-designed KPIs

The first of these components are well-designed KPIs. KPIs are dynamic — changing in usefulness over time depending on the company’s strategy. KPIs are only as good as the underlying tracking system designed for the purpose.

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  • Timely alerts for quick decisions

Real-time in-process alerts prompt process owners to evaluate detailed process data feeds. Alerts are often signals that something’s gone wrong. Some process alerts flag events that we wish to monitor because they possibly signify a breach of acceptable process variation.

Alerts may be visual, audio, or mechanical and cover the range from a notification of a low-level glitch, a warning of a mid-level problem, or an alarm of a major failure. The table below lists some examples of what may be monitored using alerts.

Alerts examples

  • Process Analysis

Performance tracking should enable a continuing assessment of the process along the dimensions of speed, cost, quality, quantity and risk. This analysis should lead to prompt decisions about the best mix of vendor, item, location, price and terms.

This assessment is often done against benchmarks. An example of benchmarking would be a comparison of two or more regions or locations as a way to discover the failure modes within a process.

  • Stakeholder relevance

While process owners are the primary beneficiary of process intelligence, there are other functional stakeholders who need decision-relevant information.

One important stakeholder is the supplier. As more companies seek to move into fully deployed supply chain systems, some even argue that key suppliers should be elevated as a customer or a partner of the P2P process. Providing suppliers with information can certainly help in keeping the P2P process humming along. Sometimes, this is as simple as providing online information on why an invoice is not being approved. A further example: sharing demand forecasts to suppliers of services to help them plan the deployment of their technical people.

These four focus areas enable us to think about the business in process terms – what we earlier referred to as this process visibility – and marshal process action for the right tasks at the right time – which is process intelligence.

Process intelligence 2

In the next blog post, we will will tackle the project steps in designing a process performance management system and end with some practical pointers to smooth the digitization journey leading to process intelligence.

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Digitizing the P2P Process to Create Process Intelligence and Better Customer Experience (Part 1)

This is the first of three posts on the Functional Fast Track session that I conducted at the 21st Annual North American Shared Services and Outsourcing Week.

March 8, 2017, Lowes Royal Pacific, Orlando, Florida

Introduction

I have been involved in many transformation projects and have found a niche as a Business Process Management (BPM) professional. Wearing this hat, I have viewed P2P as an area that’s ripe for the introduction of some BPM practices. In the past, the BPM principles were applied almost exclusively to core business processes. The global trend towards digitization brings with it an excellent opportunity for the application of BPM techniques to P2P.

Many procurement or finance professionals are either planning or may have already started a digitization program for their P2P process. Having seen how the digital revolution is disrupting the way business is done across many industries, executives want to be on the front foot as the changes filter into the procurement world. Some may have lingering doubts about rushing with the digitization herd. After all, process improvement fads seem to bring their own set of problems as the “war stories” of many of our managers can attest.

In this post, we will tackle how to look inward at our P2P process, choose the internal information to track for greater process efficiency and, hopefully, bring us closer to the holy grail of customer centricity.

What digitization entails

The best opportunity to digitize data happens with the roll-out of a new P2P system. However, a full ERP implementation that covers the entire P2P cycle takes years of planning and execution and is not a commonplace project. Further for many Asian organizations, the reality is that manual processes endure either because of more pressing budget priorities or a lack of time and people to tackle a full automation project.

Happily, digitization is not the same as business process automation. You can achieve meaningful digitization, say, by the creation of electronic forms to receive transaction data without significantly affecting the pre-existing manual workflow.  After all, the idea is merely to convert process and transaction details – whether originally in text, pictures, or sound – into a digital form that can subsequently be processed by a computer for further analysis.

I also use the term digitization to refer to a new ability to tap into previously inaccessible information, perhaps, in some obscure legacy database. I use the term in this liberal sense because we are essentially drawing upon the same principle of enabling data analytics.

There are many other initiatives where digitization may occur:

  1. Earlier, I mentioned the creation of electronic forms to replace physical documents as an example of a pure digitization play. E-forms will typically be dialog boxes in a web-based user interface although we are seeing more and more mobile-phone based interfaces.
  2. Expanding on the concept of e-forms, Vendor Management Portals digitize transactions and other information about the vendor relationship. Vendor Portals also allow self-service for tasks that normally require interaction between a vendor and the company.
  3. In recent times, there’s been a lot of discussion on Robotic Process Automation (or RPA) which together with other desktop productivity tools (like Open Span) provide the ability for screen scraping, copying and pasting, or sometimes even tracking cycle times and volumes;
  4. Reporting software can now combine and connect information from multiple data sources. This will include business intelligence visualization tools such as Tableau or SAP Crystal Reports;
  5. There is an impressive selection of interim options for affordable, off-the-shelf procurement software while we wait for the full implementation of that big ERP project. Many of these applications are now offered as a cloud-based service, and on pay as you go terms, thus avoiding the need for any capital expenditure.
  6. Lastly, electronic invoicing services. This has not reached the Philippine market but I understand that in the USA there are already over 30 service providers.

What can digitization offer?

As you embark on that digitization initiative, the project team should agree on what needs to be achieved. The low-hanging fruit is obvious – to be able to ditch the paper clutter and to simplify documents archiving and retrieval. Beyond this, what else can digitization offer?

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  1. Creating insight. Digitization offers a chance to create a “single source” of information reflecting an end-to-end view for all the process users. This is powerful because process owners can then easily identify who is performing a particular task, how often, and with whom, as well as delve into the corresponding response and throughput times. A process owner signs up for a prospective digitization project looking for answers to his most pressing questions such as “How can process logjams be prevented?”
  2. Target more effective compliance and control. Digitization also offers an opportunity to optimize controls available in a new system. Discover how to switch these controls on – ranging from validation checks to computer-assisted filters to dashboard warning lights. One easy example of automation-assisted control is using digitized invoice information to identify duplicate invoices or duplicate reimbursement submissions, replacing otherwise tedious and error-prone manual tasks.

Many systems now allow conditional controls including flexible approval processes that enhance process compliance without extending cycle times. By this we eliminate the restrictions that limit the purchasing team’s ability to secure the best price on products and services.

Thirdly, the digitization of information is increasingly crucial for regulatory compliance.  For instance, the US Department of Treasury’s Office of Asset Control requires that all payments be checked against its Specially Designated Nationals list. This is especially burdensome if not chancy if performed manually.

  1. Attaining efficiency. Digitized information offers opportunities for automated routines. With process map on hand, we can configure our applications to enable auto-create and auto-populate functions.  This will apply to tasks like PO creation which can be based on either the PRs or some pre-specified Purchase Order preferences.  Another example is enabling automated accruals for items received but not invoiced.

Automatic warning signals can also be used to avoid lost cash discounts. With suppliers getting increasingly meticulous about rejecting discount claims after the discount date, a fail-safe, automatic flag before the last day can spell a big difference.

Manual tasks often mean processing the same information multiple times. We can avoid a lot of that rework by digitized data capture at the outset. For instance, vendor portals present an opportunity to update vendor contact information otherwise received via a letter or an email. With a trouble-free process, vendors will strive to update their information because they want to get paid promptly – saving the effort to capture the data ourselves. The risk of errors due to transactions mapped against outdated information is also greatly reduced.

The best value from digitization, though, is creating a single, consistent thread of P2P process data emerging from the previously unruly mass of Excel spreadsheets, reporting tools and non-integrated applications that held unusable, untapped or to a large extent duplicative, unreconciled data. This consistency enables cross-referencing, comparing, aggregation, trending, correlation and analysis. The resulting process visibility allows us to figure out conditions or situations that lead to errors and interruptions, where operational gaps and barriers can be removed so that actions and decisions can be made in real time.

  1. Achieving agility. Process awareness enables us to monitor the process trends, gain insight into evolving organizational relationships and uncover avenues for better cooperation. Regular adjustment or modifications in the process activities become the new normal, leading to a permanent optimization loop. An opportunity like dynamic discounting is almost impossible to optimize without the agility that digitized information engenders.

In short, process visibility brings about insight to engage people in the process in the right way for the right tasks at the right time. This is what we mean with the term process intelligence.

Process intelligence

In the next blog post, we will focus on leveraging digitized process performance information in order to harness process intelligence.