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LAKRAN Procurement Professionals | Simplifying P2P
P2P Process Management inthe Procurement Control Room
A new approach for effective management of purchase to pay processes
LAKRAN Procurement Professionals | Simplifying P2P
Sourcingcycle
“Savings in the air” “Savings on the table” “Savings in the pocket”
• P2P is a hygiene factor and an enabler of world-class procurement
• Effective P2P is quintessential for:o Savings capturingo Spend visibilityo Contract complianceo Supply Chain Finance/ cash managemento Compliance with rules & regulationso Corporate Social Responsibility
• P2P is the key determinant of the procurement department reputation with the business
P2P is a core element of an effective procurement organization and constitutes the main interface with the business.
Contractmanagement
Contractimplementation
Plan need
Request goods & services
Approve requisition
Issue purchase
order
Receive goods & services
Check and process invoice
Develop procurement
strategy
ExecuteTender
Analyse supply market
Analyse and plan
needs
Manage supplier relations
Select supplier & negotiate contract
Orderingcycle
2
LAKRAN Procurement Professionals | Simplifying P2P
ThroughputInput Output
Objective of P2P ProcessMeet effectively and efficiently with the demands of an organization for products and services supplied by external suppliers.
Objective of P2P Process ManagementMinimize the effort needed to provide the required output with the desired quality.
A mature P2P process could be managed as an industrialized manufacturing process using lean principles.
Past Present Future
LAKRAN Procurement Professionals | Simplifying P2P 4
Shopping carts Sourcing events Approved SC’s PO’s Send PO’s Changed PO’s Approved changed PO’s POR’s Processed POR’s Goods receipts Approved time sheets Reminder emails
Returned invoices Matched invoices Solved mismatches Processed CR’s Returns Inquiries …
Delivered products or services Paid invoices Financial postings (Reports)
Required/ possible input Intermediate products End products Defined need Systems Content (cat., pricelist, suppliers, G/L
account, cost center, etc.) Labor Purchase order confirmations Deliveries Invoices Credit-notes Supplier inquiries Business inquiries Requests for support …
ThroughputInput Output
P2P process management monitors and maintains quality of inputs, throughputs and outputs
LAKRAN Procurement Professionals | Simplifying P2P
P2P process management closely monitors past, present and future developments and delivers reports and alerts.
Past Present Future
BI Reporting
Process performance measurement
DashboardsAlerts
Predictive Analytics
Ad hoc
Structural
Push Pull
PastPresent
Future
Reports
LAKRAN Procurement Professionals | Simplifying P2P 6
P2P Process Management: a concrete example.
P2P
LAKRAN Procurement Professionals | Simplifying P2P 7
Examples of process performance indicators.
PPI 1Name Rejected purchase requisitions
Definition Ratio of purchase requisitions that are rejected by approver.
Relevance Insight in relevance of approval process
PPI 2Name Number of PO changes
Definition Ratio of PO’s that are changed (price, quantity, delivery date, tax code)
Relevance - Efficiency of the process- Gives indication of quality of process
PPI 3Name Lead-time
Definition Lead-time PR to creation PO, PR to confirmation and PO to confirmation
Relevance - Insight in waste in process- Insight in end user experience
PPI 4Name Number of processors
DefinitionTotal average unique users (user id’s) involved in a process (instance) covering PR to confirmation
Relevance Insight in motion (hand-overs)
LAKRAN Procurement Professionals | Simplifying P2P 8
9
The Proces Performance Indicators are linked to a clear model for analysis.
Solutions Value drivers Results
Processes Systems Organization
Financial (Increased revenue) Decreased costs Decreased working
capital
Non-financial results CSR impact
10
The analysis model provides you with clues to start with effective monitoring, measuring and analyzing.
ExampleMeasuring
Knowing
Managing
Mastering
11
PPI
The analysis model forms the basis for effective monitoring, measuring and analysis.
Solutions Value drivers Results
Processes Systems Organization
Financial (Increased revenue) Decreased costs Decreased working
capital
Non-financial results CSR impact
LAKRAN Procurement Professionals | Simplifying P2P 12
PPI 1Rejected shopping carts
PPI 3Lead-time
PPI 4Number of processors
Waste because: Many rejected shopping carts
imply interruptions, hence extra effort and costs. This can be caused by a lack of knowledge of the requester, lack of information, insufficient alignment between requester and approver, non-optimized ordering channel, etc.
A small number of rejected shopping carts raises questions about the added value of the approval step. Complete abolishment might be impossible or not desirable, but perhaps there are other ways to stay in control.
Waste because: We aim for a hands-free ordering
process. PO changes are a symptom of a non-optimal ordering process. Potential causes:o Master data not well-
maintainedo Insufficient content in catalogo Wrong or incomplete contract
agreements with suppliero Wrong process design (or
wrong choice for purchasing channel)
o Planning data inaccurate or wrong
o Insufficient discipline (late approval leads to crossing the requested delivery time)
o …
Waste because: Delays are causing interruptions
in the process that need intervention. Potential causes:o Approval process is too
complex or cumbersomeo Lack of disciplineo Shopping carts cannot be
finalized because of missing information
o Too many special request shopping carts that need manual processing
o Goods receipt postings too lateo …
Waste because: Too many people are dedicating
time to an ordering process. This is an indication of interruptions, hence a violation of the hands-free concept. Potential causes:o Lack of knowledge of
processorso Many PO changes (see PPI 2)o Lack of disciplineo …
PPI 2Number of PO changes
X
Number of problem purchase orders per month 9000
Percentage of problem purchase orders that are routine 80%
Percentage of problem purchase orders that are problematic 20%
Number of minutes required to resolve majority of problem purchase orders 15
Number of FTE hours per month spent on the majority of problem purchase orders 1800Number of minutes required to resolve very problematic purchase orders 60Number of FTE hours per month required to resolve very problematic purchase orders 1.800Number of FTEs dedicated to status call issues 2Status calls/day/processor 30Average daily number of status calls from vendors or employees 60Average minutes per status call 5Number of FTE hours/month required to resolve status calls 100Number of FTE hours per month currently spent on problem purchase orders 3.700
Efficiency gain in resolving problem purchase orders -27%
The analysis model enables the calculation of waste for each type of process disruption.
… more than 5.000 changes were made to purchase orders…
Average processing time0,25 hour
Average hourly rate€70
5.000PO changes
€1,0 mln(per year)X X =
EXAMPLE
LAKRAN Procurement Professionals | Simplifying P2P 13
Standardize the P2P process and supporting activities
Inform & train stakeholders
Measure the operation
Gauge measurements
against requirements
Conduct root cause analysis on
deviations
Innovate to meet
requirements and increase productivity
P2P process management, using the Procurement Control Room, offers a strong mechanism for continuous improvement.
14
LAKRAN Procurement Professionals | Simplifying P2P
Our dream: simplifying purchasing.
LAKRAN Procurement Professionals | Simplifying P2P
Each individual organization can build and run its own Procurement Control Room.
Past Present Future Past Present Future Past Present Future Past Present Future Past Present Future Past Present Future
Organization A Organization B Organization C Organization D Organization E Organization F
LAKRAN Procurement Professionals | Simplifying P2P
Past Present Future Past Present Future Past Present Future Past Present Future Past Present Future Past Present Future
X XXX X X
Past Present Future
Alternatively, they can connect to the one Procurement Control Room to obtain superior service and save money.
State-of-the-art cloud solutions
External data sources (e.g. D&B)
Unstructured data (big data)
Organization A Organization B Organization C Organization D Organization E Organization F
LAKRAN Procurement Professionals | Simplifying P2P
Lakran’s Procurement Control Room.
Ready-to-use platform
Best practice and client-specific
performance indicators
Actionable reports
Analysis as a serviceProven technology
All-in monthly fee Flexible, scalable, affordable