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.

Can supply chain benchmarking deliver improvements?

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Benchmarking is the act of comparing ones business, its performance and its processes, with others either within the same company (depending on its size), the same industry or in a different industry. It’s typically used to identify and absorb best practice.

Benchmarking can be carried out on most if not all company activities including the supply chain. Whilst its successes are heavily dependant on its planning and execution, benchmarking, through looking outside the company, can facilitate innovation and market knowledge. The best elements from within the industry (or outside it) can be merged forming new more efficient processes delivering increased value.

The supply chain benchmark process

Benchmarking is all about understanding and comparing. Supply chain activities can be many from planning, sourcing, procuring, forecasting to managing assets. Given these spread of activities it’s important to understand:

• Which processes you intend to benchmark
• What performance criteria/ measures/data you will compare

For benchmarking to be successful it must not be subjective – using data and KPI’s ensures a relatively level playing field when comparing peers. For example I may wish to review the performance of my suppliers so may focus on benchmarking my Delivery schedule adherence with a view to understanding the key processes peers use to drive and sustain higher results than mine.

What aspects of my supply chain should I review?

The key is understanding what processes are utilized– a good start is to firstly carry out a diagnostic of your own organization.

1/ Analyze the performance that is delivered to your customer
2/ Analyze the performance that is delivered through your supply chain
3/ Analyze the cost
4/ Analyze the processes and policies that are used to deliver the services that you provide.

Once you have a level of understanding regarding your own performance you can then understand areas of weakness or areas where you suspect improvement would deliver the desired objective (i.e. greater customer satisfaction).

The success rate of your benchmarking activity will vary – preparation is key – when benchmarking ensure that:

• Analysis is relevant to ensure that the results are relevant
• Analysis is sufficiently detailed (it’s as important to know how peers obtain their results as just knowing the results).
• Consider your peer selection carefully – consider what you are trying to achieve and whether the candidates you have selected can deliver on that.

Benchmarking partners

Finding appropriate and willing benchmarking partners can be a key barrier. Where industries are highly competitive peers are less likely to wish to participate – trade associations may help but in some cases the granularity of data being shared may not be sufficient and certainly where processes contribute to competitiveness they are less likely to be open. Careful understanding and resolution of these issues must be considered prior to carrying out your benchmarking activity.

One consideration (and one which to some extent mitigates peer resistance) is to consider outsourcing your benchmarking activity. There are numerous consultancy companies and associations that specialize in supply chain benchmarking, many with proven track records and with access to large peer groups.

Summary

Benchmarking undoubtedly has a role to play in both understanding and improving your supply chain. It can be a difficult thing to get right and there are some key barriers. Done correctly it will provide an opportunity to ascertain where your organization stands whilst receiving leading edge information on what best practices are in use and understanding how these can be utilized to improve your business.

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