Best Practices in Supply Management Journal

71st Edition, June/July 2015

Articles In This Issue

Founder Appearances and Articles, and Job Opportunities for Our Readers:


June 18th, along with Pierre Mitchell of SpendMatters, Mark Trowbridge will co-present for the ISM Indirect/Services Group a webinar on the topic of Buying Everything as a Service (XaaS).  Click here for details at Webinar Link (if prompted, enter webinar number 141-966-891).

Mark Trowbridge was interviewed by John Hall of MyPurchasingCenter in that publisher's 2015 Sustainability Report about leading green practices affecting the procurement and supply chain field. Click the following link to view that in-depth article at Article Link

Dubai Training Workshop - at 4 or 5 Star Hotel August 12th to 13th, Mark Trowbridge will teach a two day conference in Dubai on Capturing Increased Value Through Supplier Performance Management. Click here for more information Dubai Event Link

Hong Kong Training Workshop - at 4 or 5 Star Resort - Aug
ust 24th to 25th, Mark Trowbridge will teach that same workshop in Hong Kong (Capturing Increased Value Through Supplier Performance Management)Click here for more information Hong Kong Event Link

September 7th to October 16th, Mark Trowbridge will teach and moderate a six-week long online training forum on the topic of Expert Strategic Sourcing - Driving Quality, Lowering Costs. Weekly web videos and online class discussions & assignments will be part of this forum.  Click here for registration information  Online Course Link (ESS)
October 5th to November 13th, Mark Trowbridge will teach and moderate a six-week long online training forum on the topic of Strategic Contracting. Weekly web videos and online class discussions & assignments will be part of this forum.  Click here for registration information Online Course Link (SC)

November 2nd to December 7th, Mark Trowbridge will teach and moderate a six-week long online training forum on the topic of Technology Contracting - Innovative Practices. Weekly web videos and online class discussions & assignments will be part of this forum.  Click here for registration information Online Course Link (TC)



























































This electronic journal is distributed bi-monthly to 
nearly 14,000 Supply Management Professionals around the globe. Note that our educational articles are 'in depth', unlike most online publications.  We hope you enjoy this edition. Feel free to forward to your SCM colleagues!  And keep SPS in mind when your organization needs top quality Supply Management Consulting, Employee Skills Testing & Training, P2P Efficiency Reviews, Cost Reduction Support or SCM Staff Augmentation/ Recruiting Services.



"Ways for Procurement to Accomplish More with Accounts Payable" - by Mark Trowbridge, Principal, CPSM, C.P.M., MCIPS

Supply management organizations are often judged by the efficiency of a process which they often don't completely own.  The Procure-to-Payment (P2P) [or Source-to-Payment (S2P)] process is a series of activities which includes:

  • Sourcing
  • Contracting
  • Transactional Procurement
  • Receiving
  • Payment Processing
  • Supplier Management

But how can we hold Procurement responsible for a function it doesn't directly manage?  In a large portion of companies and governmental agencies, the Procurement organization reports to a different senior officer than does the Accounts Payable organization.  And while Procurement groups do sometimes fall under a Chief Financial Officer, they rarely report to the same person who directs Accounts Payable.


But some companies and governmental groups are beginning to benefit from the consolidation of Procurement and Accounts Payable under the same leadership chain-of-command. 


For example, one of Strategic Procurement Solutions' clients (a large publishing company with global operations) experienced significant benefits from transitioning their "Corporate Procurement" group into a P2P organization named "Expense Management".  They combined the staff and operations of Sourcing, Contracting, Procurement, Travel Management, pCard Program Management, and Accounts Payable together into a single combined group that seamlessly supported the entire P2P process.  Political/organizational roadblocks were eliminated.  Staff shared responsibilities and worked collaboratively to accomplish shared goals.  Supplier relationships flourished because commercial compliance was combined with efficient processes.  And considerable savings resulted.


This article will discuss four ways Procurement and Accounts Payable can work more-collaboratively together: 


Method 1 - Shared Goals Create Cooperation:  How often have we seen supplier leveraging opportunities minimized because of poor payment performance (late payments, non-captured payment discounts, penalty financing).  Let's be honest, sometimes this occurs because Procurement isn't working pro-actively with AP and other departments to resolve 'matching' errors that prevent timely supplier payments.  But often it is because the Accounts Payable group reports to a manager who does not grasp the importance of on-time payments to the supplier community.


Often, management enforces inefficient delegation of responsibilities by making Procurement responsible for resolving all 'matching' issues.  I've observed a tendency for some accounting managers to push all matching responsibilities back onto the Procurement group rather than empowering Accounts Payable to resolve certain categories of matching errors themselves.  This ends up creating additional work for both the Accounts Payable and the Procurement staff members.  For example:

  • Divided organizations often make AP responsible for notifying Procurement about missing receipt postings.  AP is not allowed to contact the Receiving group to verify delivery quantities, so the AP person has to explain the situation to the Procurement person (usually in the form of a written email message), who then has to contact the Receiving employee themselves.  Any questions or answers then require the Procurement person to reconnect with the AP person. 
  • Similarly, many Procurement professionals find themselves solely responsible for directly-contacting suppliers about every matching issue; which are usually matters that could efficiently be handled by Accounts Payable personnel if they were just empowered to contact suppliers themselves.  Just like the missing receipt example in the foregoing paragraph, collaborative sharing of responsibilities can eliminate a lot of redundant/unnecessary work for both Procurement and Accounts Payable.

But what if the two groups sat down and cooperated to develop the "best" way to work as a team to resolve matching problems? Of course, if both groups report to the same director who challenges them with overall process-improvement objectives, this is much more-likely to happen.  But collaboration can occur through a pro-active approach to teamwork.  Shared objectives for Procurement and AP might be KPIs like:

  • Payment of >95% of supplier invoices "within terms";
  • >95% of matching errors corrected within two weeks;
  • Successful capture of >85% of available payment term discounts;
  • Electronic processing of >65% of supplier invoice line items; or
  • Increase of pCard supplier rebates captured.

If the two groups don't share objectives, the tendency of separate management chains-of-command is to politically-push activities toward the other group...resulting in continued gridlock.


Method #2 - P2P Improvements Require Involvement by Multiple Departments


One governmental client organization is facilitating a procurement transformation initiative.  Their various project teams have reported impressive results, including the 'Billing/Payment' team.  That team is a cross-functional group made up of Procurement, Accounting, and Information Technology personnel that is working to improve the efficiency of the city's payment/settlement process.


In just ten meetings of just one-hour each, the team has already (i) targeted 30+ Thousand suppliers for inactivation in the ERP system; (ii) identified a way to automate nearly 50% of total supplier billings; (iii) developed a strategy to increase capture of payment term discounts; and (iv) developed a methodology to increase electronic payments to suppliers.


Formation of a special project team isn't as necessary if Procurement and Accounts payable report into the same organizational leader.  The natural synergies of shared reporting will drive cooperation and avoid political gamesmanship.


Method #3 - Improved Supplier Relationships:


Many 'accounting leaders' fail to understand the significant impact of timely payment upon supplier performance.  There are many ways to motivate superior supplier performance, but too often companies and governmental groups underestimate the simple message relayed by of paying supplier invoices on time.


As a popular boutique consultancy, Strategic Procurement Solutions has the advantage of choosing with which of our customers we'd like to continue working.  In a few notable cases when a customer failed to pay bills on time, our firm's leadership decided to either (i) to increase that client's fees; or (ii) to discontinue working with them.  One of these clients was unfortunately one of the world's largest technology firms which had outsourced their accounts payable operations to a third-party firm located in another country...and was running six months in arrears on their supplier payments.


When my colleagues and I train corporate and governmental groups about techniques that improve supplier performance, we bifurcate positive incentives (the "carrot") from negative incentives (the "stick").  Unfortunately, procurement professionals use the "stick" more often than the "carrot".  We put SLA penalties into contracts, threaten to cancel contracts, say we'll not renew purchase orders, etc.  But a buying organization's timely payment of invoices is a free way to enhance the perception of the supplier's management team about the value of our firm's relationship. 


It also communicates our organization's financial stability to the supplier.  Our readers should not underestimate the importance of timely payments in supplier relationships.  Numerous court actions around the world are beginning to treat timely payments a matter of increasing importance.  For example, in the United Kingdom the passage the Late Payment of Commercial Debts (Interest) Act was designed to ensure that debts are paid on time by allowing for high rates of interest to be charged on commercial debts which are not paid on time. The law allows companies to charge 8% over the Bank of England's base rate of interest...whether or not that finance charge is stipulated in a contract between the supplier and their customer. Similar governmental acts or studies are currently underway in the EU and United States.


But again, failure of an organization to harmonize the perception of Procurement and Accounts Payable leadership about the importance of timely payments to the supplier community is a roadblock to P2P performance.   


Method #4 - Better Float Management:  


As I've written in prior journal articles (available for complimentary download on the Publications page at, there needs to be balance between the Procurement and Accounts Payable groups regarding their combined approach to "float" management of the supplier payment stream. 


Different approaches to float management certainly exist; just compare the payment timing abilities of a company with great liquidity versus one with constraints on its cash assets.  The former company may orchestrate a strategy to solicit and capture supplier payment discounts while the former might seek to increase liquidity by extending payment terms.


But the execution of the foregoing types of approach require Procurement and Accounts Payable to work together in a close strategic manner.  And one of the best ways to do that is if they both report into the same senior director.


A month ago, I traveled to present additional training sessions for a large health care sector client with which our firm has worked for the last five years.  I was pleased to see that this firm (which is rated by Gartner as having one of the top supply chain organizations in the healthcare industry) has recently moved their entire Accounts Payable team to be co-located with their Sourcing and Procurement organizations.  Several comments arose in the training sessions about the benefits of being able to work more-closely with the Accounts Payable group.


Strategic Procurement Solutions helps private and public sector organizations find many other ways to save money across the entire Procure-to-Payment (P2P) process.  If you would like information about a simple P2P efficiency review, or tailored training programs, we'd be happy to send a PDF brochure which summarizes our techniques.  Information can be requested at


About the Author - Mark Trowbridge, CPSM, C.P.M., MCIPS is one of Strategic Procurement Solutions founders. His 30 years in procurement leadership began in the Manufacturing, Airline, and Financial Services sectors...culminating in a role leading three-quarters of the strategic sourcing activities, and all of the contracts management responsibilities, for Bank of America (then, the USA's third most-profitable company). During his final two years with Bank of America, Mark's areas of responsibility delivered a Quarter Billion Dollars in cost reductions. During the last 15 years, Mr. Trowbridge has worked in the consulting field with many leading corporate and governmental clients. His business travels have taken him throughout North America, Europe, the Middle East, and Asia. He is a frequent author on supply management topics, with articles appearing in publications like Supply Chain Management Review, Inside Supply Management, IFPSM's eZine, eSide Supply Management, and Strategic Procurement Solutions' own Best Practices in Supply Management Journal.  Mark's  is among the top 1% Most-Viewed LinkedIn profiles.

"Maturing Marketplaces - Raising the Bar in Global Regions"... by Robert Dunn, MBA, C.P.M., Principal

For many of our readers in various global regions, the maturity of your particular marketplace(s) will determine the strategic sourcing approaches which you can apply. 


Many of our readers are in 1st World economies which have condensed the difficulty of differentiating supplier performance. My own procurement career originated in North America where great consolidation is occurring in different market segments as large suppliers are systematically buying up their competition in "standard" market sectors.  For example, during the last decade the US office supply market has consolidated from five major players (Boise Cascade, Office Max, Office Depot, Staples, and Corporate Express) down to just two (Office Depot and Staples).  And those final two are currently in merger discussions subject to US anti-trust review by the government. As a result, a growing number of regional office supply distributors is reversing the centralization trend and now capture >48% of the US office products industry.


Similar supplier consolidations are occurring throughout North America and Europe as other mature markets condense inwards.  These consolidations will necessitate selection of advanced strategic sourcing approaches to fit the respective marketplace's evolutionary stage.  And with consolidations of markets will continue a trend away from competitive and towards collaborative sourcing approaches, thus requiring a higher degree of expertise by procurement leaders in negotiations.


But other regions of the globe require sourcing techniques that take advantage of rapidly-changing marketplaces.  For example, even though the second-largest macro-economy in the world (China) has progressed immeasurably over the last quarter-century, no single logistics/trucking firm possesses more than 1% of the marketplace there.  There are more than 62,500 trucking firms in mainland China and even the four largest firms (COSCO Logistics, Shanghai Jiao Yun, Dazhong Transportation, and Guangxi Yuchai Logistics) collectively impact less than 3% of the total trucking marketplace. This creates great challenges for sourcing professionals trying to optimally move products throughout the nation....including moving them from a manufacturing facility to the wharf for maritime shipment.


Emerging countries in regions like Africa, the Middle East, Asia, and South America likewise require innovative sourcing techniques to leverage a wide diversity of geographic and marketplace challenges to select the optimal mix of qualified suppliers. 


These less-advanced marketplaces often offer greater sourcing opportunities due greater differentiation of the supplier community.  Mature markets provide greater challenges and less differentiation of supplier capabilities.  As billionaire Warren Buffet once observed about the evolution of a marketplace, "First come the innovators.  Then come the imitators.  Then come the idiots."


Strategic Procurement Solutions trains customer groups in marketplace evaluation techniques in our
Advanced Procurement Negotiations TM,
Expert Strategic SourcingTM and
Governmental SourcingTM onsite workshops (3 days each).  Our instructors also teach online eLearning courses on these topics.  Contact us for more information at

About the Author:  Robert Dunn, MBA, C.P.M. is one of Strategic Procurement Solutions' founders.  His 40 years in procurement leadership covered management positions in the Government, Technology and Financial Services sectors; culminating in a role directing all of BankAmerica Corporation's procurement operations.  He has served as President of two ISM/NAPM affiliates, and taught supply chain management at the post-graduate level for California State University - Hayward and St. Mary's College - San Francisco.  He has also worked with major corporate and governmental clients in the consulting industry for the past 18 years, and was one of the founders of Strategic Procurement Solutions.   Robert has worked on major procurement initiatives in North America, Latin America, Europe, and Asia.  He is a noted author, with articles published in publications like eSide Supply Management and Strategic Procurement Solutions' own Best Practices in Supply Management Journal (the latter of which is now distributed to over 13,000 readers).

Copyright 2015
Strategic Procurement Solutions, LLC - All Rights Reserved