Technology plays an increasingly essential role in the supply chain, as we have shown earlier on this blog: we have already addressed the role of technology in changing global trade, supply chain 4.0, and trends that are revolutionizing supply chains around the world.
The aim of today’s article is to clarify what Purchase-to-Pay (P2P) is, in addition to showing its benefits, by taking a more self-centered approach regarding the role of technology in the daily lives of purchasing professionals.
What is Purchase-to-Pay?
It is the whole process involved in the relationship between customers and suppliers. All stages of this relationship – buying, paying and receiving goods and services – are included in this concept.
In a more practical way, electronic payments, issuing invoices and even exchanging documents electronically represent Purchase-to-Pay elements.
P2P also includes purchase-to-pay (basically, how an organization acquires goods and services necessary for its production) and sourcing-to-pay (which controls the accounts payable and perceives the entire operation more strategically from the point of view of expenses).
To understand a little better what this means, see below what are each of the stages of P2P and how they bring more effectiveness to the daily lives of supply chain professionals.
The process begins with the purchasing department being requested by other teams within the company – maintenance, for example – to find parts or services from a particular supplier. From there, you can start sending an RFQ or the activation of suppliers already known by the company.
After the end of the first stage, negotiations to sign the contract start, in which the parts agree on points such as delivery time, price, terms and payment terms, Incoterms and others.
3. Purchase Orders
After the contracted is closed, purchase orders begin to be issued, often electronically.
4. Receipt of items
The requested products are checked by the supplier and sent to the customer, preventing defective items (or in wrong quantities) from being received.
From the moment the items are received and checked, the billing (again, electronic) can begin, but it depends on the payment terms agreed in contract.
6. Spending analysis
As part of the process, companies must have strict control over spending on suppliers. Rational spending is the best way to guarantee the sustainability of the area within any company.
As this is an action that involves multiple agents at different points of contact, it is necessary to coordinate the entire relationship very well so that the final objective is achieved without presenting major losses of increased complexity within the supply chain.
Having a partner capable of understanding all the needs of your purchasing department and achieving the best prices in the global market is essential. For this reason, Soluparts is actively dedicated to building the best possible environment so that its customers can find the parts they need, with all the guarantees and the best prices.
This way, purchasing professionals can save time and have, in addition to technological support, a true partner to carry out their purchases as quickly and efficiently as possible.
The role of technology
All the steps above can count on the support of digital solutions to be conducted quickly and with the less amount of errors as possible. The so-called “electronic purchasing systems” are of great value in this context – if employed correctly, they can bring savings of up to 80% for the purchasing sector.
Experts point out that the payback for this type of solution should happen very quickly within different companies. The most delicate part of this operation is precisely the beginning: ensuring that the area’s culture adapts to these new stages and that it fully and effectively understands the functioning of the new softwares that will be part of your daily life.
According to Fernando Motta, leader of the Process Intelligence area at gA, a global technology company that uses digital platforms to empower large companies, some of the points that can be improved by using software such as this are:
- Significant reduction in rework in purchasing;
- Elimination of order approval delay, since the software directs documents straight to those responsible and does the subsequent follow up automatically;
- Reduction of divergences between orders and invoices;
- Elimination of payment delays.
Finally, as these procedures involve a significant amount of data, it is possible to carry out a complete analytics analysis to understand where it is possible to generate more efficiency and understand more about the products purchased and their demand, therefore becoming a true aid as well as collaborating in all sectors of the company.
In addition to the efficiency gains already described, other benefits can be linked to procurement-to-pay. The main one would be the visibility that the supply chain area has within the company, with easier communication among itself and the other business areas, making it possible to more effectively manage points such as prices and inventory.
Another feature that deserves attention is the more assertive decision-making based on data analysis that the process is capable of building. In this way, supply chain professionals can be agents who actively contribute to the financial health of not only their areas, but the entire company.
Finally, the optimization of operational performance is a result of this entire process. From the agility achieved with new methodologies and the insertion of softwares capable of assisting them, professionals now have more time to dedicate themselves to strategic tasks and can contribute more significantly to the advancement of the companies in which they operate.
Continue reading our blog to be updated on the latest market trends for the supply chain:
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