Supply Chain

Procure-to-Pay (P2P): Is Your Company a Top 10 Percenter?

Grant Sernick

November 30, 2017

Do you care about your Procure-to-Pay (P2P) process? Does your organization? Do you even know what P2R is?(If you don't know, Procure-to-Pay is the process by which an organization controls and optimizes the purchase, transportation, receipt of goods, and invoicing, along with all the subprocesses that it encompasses, like Trade/Regulatory Compliance.)Do you believe that your company's management of your Procure-to-Pay process falls into the top ten percent of organizations?Having spoken to hundreds of people that manage the Procure-to-Pay process across hundreds of organizations across industries, I can categorically say that organizations fall into one of two buckets. The top 10 percent, and everyone else.The Top 10 Percent are companies that understand at an organizational level that the Procure-to-Pay process is important to their organization. They understand that it is complex, and requires management. And because they understand the importance of the process to their bottom line, they invest in the management of it. They are continually looking to improve and optimize. Since this importance has been culturally instilled, their employees are always looking for ways to improve their process. Notwithstanding the fact that they are Top 10 Percenters, they believe that their processes can be improved (perhaps significantly).The Everyone Else category also has some consistent themes. First, and most importantly, there is little organizational understanding of the importance of Procure-to-Pay to the success of the business. This might be because it actually isn't a primary driver to the organization. (For services business, for instance, Procure-to-Pay isn't a factor. Similarly, if you have reasonably short lead times on your product (let's say you source domestically), it might be less important. But companies that source internationally would almost invariably have a Procure-to-Pay process that is non-trivial to manage, and material to the bottom line.)Second, and as a result of the lack of organizational understanding, the management drivers are not in place to effect change. Most companies are structured such that the Purchasing Department issues POs, which is done from the ERP (or Purchasing) system. The Supply Chain team is responsible for getting the product from its origination to its destination might use a Transportation Management System (TMS), or offline spreadsheets. The Trade Compliance team is responsible for ensuring it gets through a border smoothly, and almost invariably uses spreadsheets. And the Warehouse team is responsible for receiving the goods and uses a warehouse management system, or WMS. In these organizations, departments are operating independently and the information is maintained independently.As indicated, a common theme in the Top 10 Percenters is the drive to continually improve their P2R process. This cannot be said of everyone else. That isn't to say that there aren't people within the Everyone Else category that aren't interested in improving - far from it. There are lots of people looking to improve, but it just is not a common theme seen throughout the group.

How to know if you are a Procure-to-Pay Top 10 Percenter?

So, how would you know if you belong to that elite group? Here are some questions to ask yourself:

  1. Does my executive team have an understanding of the procurement, fulfillment, and invoicing processes within the organization?
  2. Are they concerned with the control of that process?
  3. Do they show an interest in improving it?
  4. Do you have one platform that ties the entire process together?
  5. Are there key performance indicators associated with the P2P process?

If you answer yes to these five questions, then you are likely in the top 10 percent.Answering "no" to any of them likely means that you are in the Everyone Else category. If that is you, don't feel bad. What it means is that there is a lot of low hanging fruit that you can start addressing. By doing so, you become a rockstar within your organization. But it starts with understanding that the critical piece for anyone looking to make big inroads in improvement will need to focus on getting their system on a single platform. In order to do that, you need to start convincing people this is a worthwhile endeavor. One that provides value to your organization, either reducing cost, increasing capacity, or providing increased process control.

3rdwave Can Help!

Luckily, 3rdwave is here and can help you work through the value case for your organization. It isn't the easiest thing to do, but the benefits are well worth the costs. Drop me a line if you want to learn how to be a Top 10 Percenter.