We discussed various aspects of P2P process efficiency in the earlier blogs.
Let us now proceed further with;
Strategies Top Performers are Adopting to Find Enhanced P2P Efficiencies
Early adopters of e-Procurement that have realized world-class efficiencies in requisition-to-order processes have essentially moved on to the second “P” of P2P, or are at least focusing more on the downstream transactional process, after initial order placement. For instance, a greater focus on process quality has begun to produce at least marginally better results, where 10% of POs require post-issuance correction for the best performers as compared to 14% that require re-work for all others.
Six Sigma – indicates overall process quality and order accuracy represents significant improvement opportunity across the board. Another measure of process quality – the first pass invoice match rate, or the rate at which invoice terms automatically agree with the PO and goods receipt in the case of a 3-way match, reflects a much wider performance disparity – a 94% hit rate for world-class and only 80% for others, where 1 in 5 invoices are initially mismatched.
Transactional process efficiency
Another strategy adopted by world-class organizations to improve overall transaction process efficiency is not just to make the 3-way match process more efficient, but adapt the transactional strategy most appropriate to the category, which may mean not requiring a 3 way invoice match or even an invoice at all.
Aside from the obvious control issues – since a non-PO order that doesn’t go through the standard procurement process is also almost certainly a “maverick” purchase with a non-preferred vendor or at other than contracted prices – the re-work required to retroactively raise a purchase order after the supplier has already delivered goods, is perhaps the ultimate definition of a process defect.
And nearly all organizations are underwhelming a clear opportunity for transactional process efficiency to remove the invoice altogetherby implementing the P-Card as the settlement method, while capturing higher rebates to boot.
In the next blog, last in the series we will discuss what innovations have the potential to drive the next wave of P2P efficiencies.
For further reading, click the download button to access the whitepaper Touchless Long Tail Spend – The New Benchmark for World Class P2P Process Efficiency