Procurement Transformation: Automation in P2P
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By Shashi Jina Research Director SAPInsider Supply Chain
As we move towards a digital economy, supply chain organizations are faced with finding new and innovate ways to transform and drive efficiencies — either through elimination or automation A focus area for many of these organizations is repetitive and/or administrative low- to non-value-added tasks. A prime candidate for this initiative is the procure-to-pay process (P2P). In a series of articles, SAPinsider will provide insight and trends on the different elements of the P2P, along with critical best practices for implementation. We will provide some insight on SAP solutions and partner technologies that are currently in use within the SAPinsider community
The P2P process within supply chain is filled with large amounts of time-consuming, repetitive, administrative tasks. These tasks are often driven by back-and-forth paper trails, with process gaps, compliance issues, and cost leakages. Reinventing the P2P process with intelligent rules-based automation will improve efficiencies, reduce costs leakages, boost compliance, and enhance supplier and user experiences. This is become especially important as most organizations reassess their supply chains post-COVID-19, moving from single source to multi-source procurement relationships to mitigate supply chain risks.
As an end-to-end process, P2P consists of four basic steps:
- Purchase ordering
- PO receipt
- A/P invoice
- Payment supported by a vendor master data and item master data set.
In addition, capabilities to support vendor management, spend analytics, and contract management are essential. Often, these functions and capabilities are organized in silos and driven by manual processes. Opportunities exist to combine process knowledge with digital technologies to break these functional silos in P2P and deliver critical supply chain value in an automated manner. This is referred to as P2P automation.
In reviewing the P2P automation footprint within SAPinsider community ecosystems, many organizations have a procurement transaction layer “sitting” within the SAP solution acting as the system of record for POs, and vendor and item masters. Often, the challenge faced by many is effectively managing the P2P process interlinking other associated systems.
A three-way match process of matching the invoice, PO, and receiving report to validate the details of a purchase before making a payment could involve an SAP instance, where a separate warehouse management system solution connects to an in-house contract management system, for example. The challenge of connecting these systems, combined with the volume of transactions, can be overwhelming.
Another example is the purchase requisitioning and approval process in a shared service model where inbound PR can come from multiple sources. All this pushed through the procurement approval funnel often creates a bottleneck. These are perfect examples of where procurement automation can contribute to P2P improvements — leading to reduced lead times, greater compliance, better control of vendor contracts, fewer accounts payable errors, and lower overall costs. This also forms the foundation for effective spend management. With the increasing focus on supply chain risks and revisiting sourcing strategies, accurate vendor spend data leads to effective spend analysis. When presented with this topic to some members of the SAPinsider community, many felt the next wave of improvements will be connecting procurement automation with spend management and contract management solutions, combining intelligent analytics with the use of artificial intelligence and machine learning technologies.