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Optimizing purchase to pay (P2P) processes with Process Mining

What is purchase to pay?

The purchase to pay process, abbreviated P2P process, in a company refers to the procurement process. This process includes for example requesting an order, initiating an order, receiving it, and finally paying for the ordered services or purchased goods. The P2P process refers to both goods and services.

The P2P process is one of the most complex processes in a company and therefore has enormous potential for standardization and optimization. The complexity mentioned above also poses challenges in the analysis of the process and causes conformance deviations such as maverick buying. This is where Process Mining can be used to explore, examine and finally optimize the complex process web.

What are the challenges in the P2P process?

Deviations in the purchasing process have direct effects on the company’s finances, as only few deviations in other business areas. Complications in purchasing are therefore always tricky and have enormous potential for savings.

a) Resource consumption through rework

In theory, the P2P process has clear activity sequences: An order is placed, the invoice is received, documented and paid. In practice, the process is not always that straightforward and is a complex network of process activities. For example, an order is adjusted again after it has been allocated, an invoice is changed, the order is dispatched too late or there are discrepancies in the payment.

All these points slow down the process and require additional resources such as time, money, and effort. Furthermore, there are questions like: Are invoices from a specific supplier are frequently adjusted retrospectively? Is there a specific order category where payment problems occur regularly? With conventional methods, it is difficult to get to the bottom of these process deviations and to find answers to those specific questions.

b) Maverick Buying

Maverick buying is the procurement of goods or services with little or no involvement of the purchasing department. This results in a wide range of deviations from the standard purchasing process. These are for example:

  • Procurement of goods and services completely bypassing the purchasing department with the resulting compliance violations
  • Procurement of goods and services that are not approved or do not meet internal purchasing requirements
  • Procurement of goods or services from unauthorised or untrusted suppliers
  • Loss of discounts from partner and authorized distributors

What seems like a rare exception occurs in reality in almost every organization, from small family businesses to large international corporations. This makes it even more important to identify these problems early and to optimize the P2P process.

c) Expired discount periods

Discount periods are a familiar term for every purchasing department. Due to delays in the process flow, these deadlines often expire and the possible savings potential cannot be realized. Some reasons for this are, among others, too long waiting times or rework. The reasons can be manifold, from bottlenecks in the accounting department to invoices issued with errors.

The consequence is always the same: wasted savings potential. What may still seem insignificant for individual orders, accumulates over a quarter or a whole year. Without a systematic overview of these key figures and actual processes, such problems rarely become noticeable.

Process Mining as a guide for purchasing optimization

Optimizing the purchasing process is a time-consuming task due to the high complexity of the process. Even the first step for such a project is enormously costly. All process variants and key figures must be identified and documented manually. Only based on this data the processes can be analyzed and optimized. If errors already occur in the first phase, for example if variants are not included, these errors are usually reflected in unsuitable optimization measures. As a result, process problems are shifted instead of being solved.

Process mining solutions such as LANA offer efficient and simple remedies to aggregate, visualize and consequently analyze all actual process variants and available key figures. In this way the correct and problem-solving measures can be implemented to improve the processes.

Understand and use existing data.

Process Mining is a method for process-oriented processing of data. This data on process flows and key figures that is stored in IT systems is automatically read by software such as LANA Process Mining and matched to individual analysable processes. On the basis of these so-called event logs, the tool visualizes the business and purchasing processes as they are actually performed in daily operations. Process Mining thus provides unique transparency and analyzability even for very complex and unclear processes. This provides deep insights into the flow, performance and conformance of processes, which automatically identifies bottlenecks, deviations and optimization potential.

The preparation of real process data provides the basis for companies to optimize their purchasing processes in a target-oriented and data-supported manner.

Optimize purchasing from the ground up.

The process transparency created with Process Mining makes it possible to master the challenges identified. LANA uses machine learning algorithms to highlight the causes of problems. The automated target-performance comparison also allows direct comparison between the identified real and ideal compliance-compliant process sequences – conformance checking through the power of data.

With LANA Process Mining you can achieve the following goals:

  • Process transparency by mapping processes objectively and comprehensively

P2P Prozesstransarenz

 

  • Faster throughput times and higher output through the analysis of key figures

Optimierter Einkauf

 

  • Better monitoring of process key figures

Einkaufsmonitoring

 

  • More efficient decisions and measures through data-based facts

Entscheidungen auf Faktenbasis

 

  • Realization of discount discounts through prediction

Skontorabbatierung realisieren

Proactively minimize risks.

Data-supported transparency in the purchasing process is also an effective tool for comprehensive controlling. Compliance risks and the loss of cash discounts can be prevented at an early stage through flexibly adaptable dashboards and our unique prediction functionalities.

Process Mining provides the starting point, the framework and continuous control of process optimization for companies.

Transform strategically. Implement smartly. Optimize sustainably.

With LANA Process Mining you have full control over your digitization strategy. You can find out how LANA makes your company faster, more efficient and smarter by talking to our experts.