Purchase to Pay, which usually goes by the abbreviation of P2P is a set of business processes relating to the tasks of requisitioning, Purchasing and Payment. As with many business processes they may vary from company to company but do contain some key common steps. For an appropriate example see here

The process can be significant, without both control and visibility of the purchase to payment process organizations will fail to optimize company funds – without efficiency employees will be faced with a bureaucratic process that fails to meet business need.

Whilst not explicitly referring to the use of technology P2P in today’s world is often used in relation to software tools such as e-procurement, e-invoicing etc. P2P concepts will typically be applied in improvement or streamlining activities.

Existing purchase to pay processes can be inhibited through poor regulation and visibility. Where companies are lacking proper controls and disciplines this can lead to:

• Spend occurring without appropriate authorization
• Loose budget controls and codification
• Failure to optimize use of company funds
• Failure to capitalize on agreed supplier contracts
• Lack of visibility on committed spend resulting in poor cash planning
• Lack of appropriate management information

These issues can be substantial as can the impacts on both productivity and the cost of process. Significantly the less robust the process, the greater impact.

Improving the purchase to pay process

These days many companies look towards software solutions to help automate and improve controls in their purchase to pay process. These software solutions can manage the whole end to end process within one system (while integrating with existing ERP and Finance solutions) and can manage:

• Requisitions and Ordering
• Authorization and coding
• Invoice matching and payment authorization

Such automation can help in a number of ways

Efficiency – the process can be simplified and standardized for all users throughout the activity. Configurable workflow can be established to ensure compliancy with company policy whilst reducing administration (and overhead cost) through the removal of paper reduced errors.

Efficiencies are not just seen in the buying function either – automated 2 or 3 way matching coupled with auto-coding can greatly reduce the load on bought ledger functions – allowing time to be better spent on value add activities such as cash management.

Ensuring compliancy – Enforced authorization and sourcing compliancy can help organizations control cost and increase savings by reducing spend that is either inappropriate or off-contract.

Visibility – As processes become transparent a key benefit is management information. Detailed spend analysis data can be readily available and access to key performance indicators simplified. Increased visibility on spend can help facilitate improved budgeting and cash forecasting resulting in better cash utilization and mitigating the typically reactive “ we only see cost when the invoice turns up” style of cost management.

Summary

Purchase to pay is not without its challenges – however there are an increasing numbers of vendors and consultants in the market and with effectiveness and ROI demonstrable more and more private companies and public sector organizations are deploying P2P improvement projects.

Role of Project Management within procurement and supply chain

Filed Under Blog | Comments Off on Role of Project Management within procurement and supply chain

Project management principles are essential in order to successfully manage business change. Initiatives, either improvement or strategic, are commonplace. This is especially true within the supply chain function. For example consider the activities that are carried out as part of improvement programs in many organizations these may include:

• Outsourcing key activities like assembly or manufacture
• Moving from a local to global supply chain
• Supplier rationalization
• Deploying corporate deals
• Cost reduction programmes
• Lead time reduction programmes
• Inventory rationalization
• Technology deployment

These sorts of activities require complex co-ordination of resources to deliver a defined objective within a set timescale – in other words they are a project. Those leading the initiatives need the appropriate skills and techniques as well as the detailed supply chain experience if the initiative is to be a success.

An all too common issue is where businesses appoint personnel who have no formal project skills or experience to deliver. This lack of experience and use of appropriate tools and methods can dramatically impact cost and schedule and more impact heighten the risk of project failure.

So what disciplines does project management provide and why is this an advantage? Consider the following

Scheduling and Planning:

One of the key facets of project management is developing and maintaining accurate delivery schedules that take into account project dependencies and resources.

Risk Management:

Understanding risk and more importantly having an appropriate risk management plan can prevent both cost and schedule over run and in the case of many supply chain projects ensure continuity of supply.

Business case and financial awareness

Both developing the rationale for undertaking the project and ensuring that the costs for executing it are covered are a key task. Subjective assumptions regarding business initiatives can result in projects failing to deliver to expectations. A robust business case will provide the rationale for proceeding with the initiative together with a sound understanding of likely benefits.

Quality Systems:

Integral to project management is ensuring that quality systems are built in to any project and this is of relevance to the supply chain process. There is no point in securing goods in a strategic manner with low costs, if they are not fit for purpose and meet business need.

Roles and Responsibilities:

Any good project manager will ensure that responsibilities are clearly set out, with key personnel identified as being responsible for specific items within the schedule. This ensures the smooth running of the initiative.

Communication

A key element of business change that is often overlooked by inexperienced personnel is stakeholder management and communication.

Project Management is fundamental to successful supply chain initiatives.

In a sense then, project management offers the procurement executive the foundations upon which he or she can build a good, strategic procurement plan. Without the foundations of project management there may be a strategy but no basis upon which to deliver in with the results ad hoc, sporadic and poorly delivered.

Next Page →