Crunching Procurement Cycle Time Through Business Workflow Optimization
Business workflow plays a vital role and is one of the time consuming step in procurement life cycle. Shortening procurement life cycle has multi-faceted benefits such as faster procurement request processing, shorter procure-to-pay cycle time and processing cost, avail ling early payment discount enabling efficient working capital management, enhanced customer-supplier business relationship. Crunching procurement cycle time requires special attention in business workflow optimization and reduction in approval time.
In one of our customer's procurement landscape, there was an imminent need for revamping business workflow to shorten approval cycle time for better efficacy of procure-to-pay cycle. We adopted following steps in achieving business workflow optimization:
a) Categorization of commodities and approval limits to map to organization's approval requirements as per procurement policies and regulatory compliance requirements
b) Adoption of role based approval nodes for commodity category while configuring business workflow in procurement platform. This simplifies overall business workflow there by cut down overall approval time
c) Institutionalization of multi-dimensional approval authority (one person having multiple approval limits based on combination of factors such as commodity used, accounting hierarchy used in lineitem distribution, expense accrual general ledger) simplifies business workflow by cutting down number of approval nodes
d) Short-circuiting business workflow such as partial or no business workflow for change orders duly complying with organization's procurement policies for change orders
To reduce the overall approval time, business workflow optimization and quickening request approval process should go hand in hand. Accessibility of approval requests and on-time action on it will shorten the approval time. The procurement platform should be capable of accepting requests from email and handhelds. Purchase requests should be accessible via mail, handhelds so that approver can approve requests from anywhere without logging in to the system. Also periodic generation of approval cycle time reports, capturing details like time to hit approver's inbox and time to get out of approver's outbox, number of approval nodes, overall time required to fully approve the request is required to collect various approval process data. Regular circulation of system generated reports and emails capturing snapshot on pending approval requests to approvers would help tracking pending requests awaiting their approval. Such reports help in analyzing the overall approval process efficiency and identify scope for improvement and further tuning.
Adopting above mentioned combination of steps followed by aforementioned calibration mechanism, helped our customer to reduce approval cycle time by more than 50% and thereby improved the procure-to-pay cycle efficiency. The calibration mechanism is helping to consolidate the benefits further and easing business to adopt Procure-to-Pay cycle in other departments & business units.