Accounts Payable (AP) has proven to be extremely effective in a shared services model but efficiencies are largely dependent on upstream supply chain processes. When leading shared services operations look for performance improvements or cost reductions in AP, they are forced to evaluate the entire P2P process to identify savings opportunities. “How P2P Fits Within an Enterprise Supply Chain” is the second topic of a supply chain learning series presented by ScottMadden and Shared Services & Outsourcing Network (SSON). In this session, we focus on the key attributes of a successful P2P transformation and the role technology plays in enabling the capture of the synergies and savings associated with P2P in a shared services delivery model.
How Purchase-to-Pay Fits within an Enterprise Supply Chain
What We Do Shared Services
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- Decide
- Strategy development and integration Benchmarking High-level business case Change management
- Design
- Service delivery model Detailed current state, future state, and business case Sourcing model Organization design and staffing Change management
Build
- Project planning and management Service/transaction center Process redesign Technology design, selection, and support Change management
- Improve
- Process improvement/cost reduction Operations/technology assessment M&A integration Benchmarking Customer and employee surveys Change management
- Finance & Accounting
- Human Resources
- Supply Chain Management
- Information Technology
- Real Estate & Facilities
- Multifunction
- Engineering Services
- Administrative Services
- Our Functional Expertise
Key Components of Supply Chain
- The six major supply chain functions are described below. Although there are many transactional components within the supply chain, shared services has historically focused on the accounts payable (AP) function.
- Performance Management
- Information Management
- Returns to Suppliers
- Suppliers
- Customers
- Returns from Customers
- Traditional Shared Services Opportunities
P2P Shared Services
- When viewing the six major supply chain functions through the lens of the end-to-end P2P process, it is clear that there are other key transactional components within the supply chain that present worthwhile shared services opportunities.
- Performance Management
- Information Management
- Returns to Suppliers
- Suppliers
- Customers
- Returns from Customers
- P2P Shared Services Opportunities
P2P Shared Services Delivery Model (Example)
- Performance Management
- Supplier Relationship Management
- CUSTOMERS Suppliers Purchasing Departments Line Managers & Purchasers
- Issue resolution Vendor performance
- Tier 2
- Tier 1
- Tier 0
- Tier 2
- Shared Services
- Corporate
- SS COE
- Procurement Strategy
- Purchasing Policy
- Supplier Diversity Program
- Tier 3
- Customers
- Service Delivery
- Policy & Programs
- Strategic Sourcing
- Accounting & Reporting
- Issue Resolution
- Tier 3
- Enable portal self-service Invoice monitor, reporting, policies, etc. Vendor portal
- Assisted Support
- Invoice Tracker Automated Forms
- Self-Service
- Transactions Call Handling Issue Resolution
- Tier 1
- Build central call routing for clients and vendors Interactive voice response call routing Case manager issue capture, tracking, and closure Central transactions (purchase orders, vendor maintenance, AP, T&E, etc.) Automated and measured
- Customer Account Management
Benefits of a P2P Service Delivery Model
- The P2P service delivery model provides significant benefits to organizations. The focus on integrating the entire supply chain can dramatically reduce errors and manual efforts Single point of contact for procurement/payment questions or issues Ability to optimize supplier relationships and automate payment process Improved compliance, control, and service levels with vendors Higher visibility of procurement transactions for customers and suppliers Improved control over early payment discounts Single investment decision making for the purchase to pay process
- Reduced administrative costs to replenish inventory and procure materials and services by 10-25%!
P2P Technology
Procurement and AP Alignment
- One of the main issues experienced by companies that are implementing a P2P service model is a misalignment of procurement and accounts payable activities Resolving invoice discrepancies, regarding PO number or price and quantity errors, can take up as much as 25% of the average AP departments time. There are two main technology issues that aid in reducing discrepancies1: Minimizing manual processes through the use of e-invoicing and vendor portals allows for a reduction in invoice discrepancies Master Data Management (MDM) programs in relation to e-procurement can further reduce price discrepancies in invoicing Most software vendors have developed e-invoicing suites that allow suppliers to submit and track invoices electronically. This reduces the manual data entry that can cause invoice discrepancies A Forrester Research Inc. study found that companies who combine eProcurement with e-invoicing are twice as likely to achieve excellence in AP processing1
- Industry Leaders
- Source: Tipping Point for Procurement BPO 2011. Bob Booth. CapGemini. August 28, 2011.
Vendor segmentation ERP vendors Leaders: SAP (Ariba) and Oracle Best-of-breed vendors Leaders: Zycus, SAP (Ariba), BravoSolution, Ivalua Most best-of-breed solutions will bolt on to existing ERP software platforms Current P2P industry trends As in most software markets, Software as a Service (SaaS) has become the predominant form of delivery Mobile applications are on the rise, including touchscreen tablets Procurement is typically the lead decision-maker within an organization with respect to P2P technology selection
- Current P2P software vendors fall into two separate categories: Enterprise Resource Program (ERP) vendors and best-of-breed vendors
- P2P Technology and Industry Trends
- Source: Magic Quadrant for Strategic Sourcing Application Suites, Gartner Feb 2015
Selective Outsourcing and BPO
Considerations for Outsourcing
- There are often several determining factors for an organization to consider outsourcing. The ability to have access to best practice processes, new technologies, and specialized skills while reducing process costs can create a very attractive business case.
- Buying Power
- Focus on Core Business
- Inability to Retain Talent
- Improve Service Levels
- Catalyst for Change
- State-of-the-Art Technologies
- Incorporate Best Practices
- Cost Savings
- Consolidate Centers
- Transform P2P
- Category Coverage and Expertise
Industry Leaders1
- Purchase-to-Pay BPO and Strategic Sourcing
- An continuing trend in the P2P service industry is the outsourcing of P2P process functions, particularly with regard to transactional workflow, spend analysis, and indirect strategic sourcing BPO tends to follow one of two specific models: Process outsourcing This model involves the outsourcing of actual P2P processes to a third-party provider. In the early phases, cost efficiencies were sought by outsourcing the transactional P2P processes such as PO creation and management, along with other financial functions such as AP Increased focus on strategic sourcing as a business model has led to further outsourcing aimed at taking advantage of learned best practices. This includes the outsourcing of strategic activities such as spend analysis and market research as these services may be cheaper to purchase than to build Commodity category outsourcing Another BPO model is complete category outsourcing. Many times companies will outsource individual categories such as travel or MRO parts to suppliers with expertise in those industries BPO strategic sourcing projects tend to focus on indirect procurement because it involves common categories for most industries, providing a higher opportunity for aggregation and savings
- 1Source: HfS Blueprint Report: Procurement As-a-Service 2015. Charles Sutherland and Hema Santosh. June 2015.
Organizations looking to further reduce their P2P costs will selectively outsource portions of the process to third-party providers. Maturity of the model and level of risk tolerance often determine how much of the process will get outsourced.
- Electronic Invoice Files
- Invoice (Paper)
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