Delegated authority model for procurement

Context

Agrii is the biggest subsidiary of Origin Enterprises, a group of companies that operates in the agricultural sector. Origin Enterprises grew by acquisitions and Agrii is no exception: effectively, each of its major product line is alike to a separate company, with radically different business models and internal processes. These range from seed processing from field to bag, to resale of crop protection products, to fields satellite imagery on a subscription basis. Agrii has four major product lines and over half a dozen minor ones, each with its own peculiarities.

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Requirements

Prior to the implementation of D365 F&O, no formal approval existed in Agrii for procurement. The only upfront approval was on purchase requisitions for indirect materials, while the bulk of approval was carried out downstream, with invoice matching. This was a source of concern, so the finance department requested a solution that ensured upfront approval of every single purchase order.

Certain Agrii departments are time-sensitive to placing purchase orders, due to scarcity of supply and price sensitivity. In the most extreme cases, a delayed purchase order receipt would wreak havoc on the production schedule. Naturally, the introduction of a similar approval model was a source of concern, and thus resistance, from some key stakeholders. We facilitated the conversations across a set of meetings to reduce the divide between the finance department and the operational key stakeholders.

Eventually Agrii reached the compromise of pre-approved yearly procurement budgets. Such budgets would be supplier-specific, span a whole year, and approved once by a key stakeholder (as high as the board) to ensure that any subsequent purchase orders linked to it would skip approval, to avoid the risk of delays. Any other purchase order not linked to a budget would be subject to manual approval.

This major process change was dubbed “delegated authority model”.

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Complications

The standard D365 F&O system does not offer any form of operational procurement budget. When procurement approval (change management) is introduced, every single purchase order is subject to approval. The purchase order approval workflow editor offers the ability to set up auto-approval conditions, but not as complex as those required by the finance team.

On top of this, an IT|Fandango dedicated analysis revealed a high fragmentation in the procurement process in Agrii, complicated by the radically different business processes between departments.

To limit the extent of customisations, a third-party consultant proposed the use of purchase agreements as a form of internal budget. This was relatively controversial and stirred some heated discussions within the functional team. However, the finance department was thrilled by the idea and refused to explore other options, accepting the risk of never using purchase agreements for its intended standard D365 F&O purpose.

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Our solution

IT|Fandango’s role spanned three major tasks:

1. Facilitate the conversations between key stakeholders to reach a meaningful agreement, defined as a solution that is satisfactory for all parties and is also feasible at IT level;
2. Finalise the design of the delegated authority model on paper, ensuring that the solution is robust and all possible scenarios are handled;
3. Write functional specifications and implement the model in D365 F&O, making it operational.

This case study focuses on point 3, so we will skip any details about our facilitation work as well as our method to ensure the creation of robust software solutions.

Implementing the delegated authority model in D365 F&O included the configuration of the procurement approval workflow, as well as some minor customisations to transform purchase agreements into budgeting tools and to handle borderline cases.

At its completion, the procurement approval workflow looked like this (details blurred for client privacy):

The logic of the workflow, simplified, is as follows:

For every purchase order:

1. Major branch one: auto-approval
   • If it’s a direct delivery, auto-approve.
   • If it’s a project-based, auto-approve.
   • If it’s linked to a purchase agreement, check purchase agreement validity
     and, if passed, auto-approve.
2. Major branch two: indirect procurement
   • If below minimum threshold, auto-approve.
   • If between the two thresholds, route to cost centre for manual approval.
   • If above maximum threshold, route to cost centre for manual approval. If no cost centre is specified, route to site manager for manual approval.
3. Major branch three: direct procurement
   • Check the purchase order type¹, and route according to it.
   • Check the purchase order amount¹, and route according to it.
   • Assign to the retrieved approvers group.
4. Exceptions handling:
   • If no pool is specified, auto-reject.
   • If no site manager is present, route to a generic group of approvers for manual approval.

In total, the workflow handles just short of 50 different scenarios, including exceptions.

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Conclusion

The delegated authority model IT|Fandango designed managed to find balance between the finance department requirements of authorising any purchasing disbursements, and the business operational requirements of avoiding delays during the procurement phase.

Three months after go-live, a total of XXX purchase orders were processed via the delegated authority model workflow, without significant blockers and issues beyond the hypercare period.