Everything you need to know to implement a new PO process successfully
With your business moving forward, you’ve realized it’s time to level up your purchasing and procurement processes. The first place you want to start—and rightfully so—is with the process of issuing purchase orders.
While this endeavor may seem clear-cut, there are actually a number of things that need to be accounted for when implementing a new PO process. For starters, each PO involves a number of various processes and stakeholders. These stakeholders need to be informed when action is required on their part, and they need easy access to all of the relevant information surrounding the PO. There’s also the question of how the team working on any given PO manages any changes that arise during the process.
Implementing a new PO process requires factoring all of these things and more. But by following the steps outlined here, you’ll be on your way to fast and efficient PO processes that make stakeholders’ lives easier while even improving your business’s bottom line.
Step 1: Define your goals
It’s always good to be clear about your goals before embarking on any major process transformation. When it comes to implementing a new PO process, different businesses have different key goals. Some goals depend on the business size, type (product or service, for example) or culture. Usually, at the core of implementing an optimized PO process is the need to get business spend under control. By properly managing the spend pipeline, you can gain visibility, accountability, compliance and early involvement from the finance and procurement teams, all while reducing manual tasks and mending broken communication channels.
Articulating these benefits to stakeholders and leadership is important. When everyone involved in the PO process understands the value of managing this process right, you can reap the rewards of a new PO process faster. It’s also important for you to be clear about the scope and timeline of this initiative; the faster it is, and the fewer people and resources it requires, the better.
Step 2: Get buy-in
Once you’ve defined your goals and timeline, the next step is to get buy-in from the relevant stakeholders. Depending on your company size, type, and culture, the relevant stakeholders might differ. Typically, they’ll be the CFO or VP Finance, the head of IT and systems, and often the head of Procurement or Operations.
Identifying your power users is another important step you should take as part of getting buy-in from your key stakeholders. Who are the people that buy often from a number of different vendors? It’s important to get these power users on board with your initiative to make the transition smoother.
Step 3: ERP, or ERP + a third party tool?
After defining your goals and collecting feedback from the different stakeholders involved, you’ll probably know whether you want to build your entire PO process on your ERP, or to separate operational and financial processes between the ERP and a complementary tool.
If your ideal purchasing process involves a number of non-finance users, you’ll be better off separating your financial and operational processes so that purchase requests and approvals are done on a third-party system while PO generation is done on your ERP.
If your ideal PO process involves a small number of users, most of whom are already using your ERP, then you can roll out the approval process directly on the PO in your ERP. This approach will most likely involve delegating “purchasing reps” in each major department and granting them ERP access if they don’t already have it.
Keep in mind that most PO modules included within ERPs limit you to opening POs only with registered vendors. This means that, in the case of a purchase from a new vendor, POs often become a sort of “rubber stamp,” rather than an actual pre-approval tool that helps manage spending.
Typically, for fast moving organizations, deploying PO processes entirely on the ERP isn’t the best choice. ERPs are technical, sensitive, expensive and often, slow. This makes them a poor choice for a widely used operation.
Step 4: Design the process
After defining your goals, getting buy-in from relevant stakeholders and clarifying which system (or systems) to use, it’s time to design your new PO process. A vanilla PO process involves PO submission, approvals, PO generation and transmission.
You’ll need to configure the PO fields, approval routing, and transmission policies. If implementing a new PO process is part of a broader purchasing initiative, you’ll also need to determine how to incorporate additional processes such as vendor onboarding and marking goods received.
As a rule of thumb, it takes real usage to achieve real insights. Therefore, starting with the vanilla version is often the smartest choice. After you get your new PO process in motion, you’ll be able to identify the necessary changes and implement them.
Step 5: Partner with the right PO vendor or consultant
Whether you decide to use your ERP for purchase orders and skip the purchase request stage, or leverage a third-party tool to use on top of your ERP, you’ll be best off partnering with the right vendor or consultant.
On the ERP front, you may have an internal expert or an external consultant. Make sure they understand the purchasing process well. Note that some ERP experts are solely focused on Finance’s considerations. You should get insight from someone familiar with combining operational processes with financial ones.
If you opt for a PO tool that will work alongside your ERP, you should look for a vendor whose solution covers the following:
- User experience (to drive fast and painless adoption)
- Flexibility (to support ongoing process and technology changes within your organization)
- Integrations (to connect with your ERP)
Step 6: Setup and preparing to launch
It’s time to execute!
Deploying a new PO process should happen in two stages: technical implementation, and change management. Technical implementation involves ensuring that your PO process is working as planned, including integrations and passing usability testing. In parallel to the technical implementation, you should prepare for change management. Keep key stakeholders involved in the implementation process, update them regularly, highlight your wins and ensure they relay important updates to their colleagues and team members.
Step 7: Deploy your new purchasing process
When the time to launch your new PO process arrives, ensure that your organization is fully aligned with the change and that users are embracing the new process. Sometimes, a “No PO, no pay” warning from the CFO can help get reluctant users on board. While getting everyone on board may take some time, stakeholders will quickly experience the benefits of the new PO process. In the meantime, supporting them in adopting the new process is paramount.