Procure2Pay is the process of integrating purchasing and accounts payable systems to create greater efficiencies.

Some facts about Procure2Pay:

Procure2Pay covers processes that are very similar across most companies. In essence, the processes are very similar to what Amazon Business offers today, at least when considering the technology and products procured through Procure2Pay processes.

The differences to Source2Contract are therefore on the one hand the similar design of the processes, regardless of the industry in which the procuring company works. If a company buys office supplies or IT, for example, then the processes at a bank are very similar to those at a manufacturing company. On the other hand, the procurement processes in Procure2Pay are usually not as business-critical as in Source2Contract, which is why supplier management and risk management usually play no (or at least a smaller) role here.

Real complexity in the Procure2Pay process is mostly found in larger organizations that have several locations in different countries but at the same time central purchasing organizations that also take over procurement processes for the local entities. This is so complex because, for example, the account assignment has to receive all the data from the different ERP systems in the individual countries, the orders have to be distributed to several ERP systems and the invoicing and auditing are also subject to different legal regulations in the individual countries.

Components of a Procure2Pay Suite

Please click on a box for more details.

Key targets in Procure2Pay

Reduce material cost: the cost reduction is primarily achieved through bundling effects. Because purchasing specifies the supplier for a single product group, purchasing can ensure that the volume for a product group is not divided among a large number of suppliers. In addition, by promoting certain items or reducing the variety of items, it can be ensured that the consumers order a comparatively cheap product (and not a high-end product).

Optimized framework agreements: In most cases, special framework agreements are also made with the selected suppliers, which not only contain pure price advantages but also other regulations such as minimum order quantities, transport costs, payment conditions and much more. Of course, this also has an indirect effect on reducing the overall procurement costs.

Reduce process cost: the reduction in process costs is achieved through several factors:

• Because the majority of the goods and services are purchased from predefined suppliers, all processes relating to supplier identification, supplier creation and supplier maintenance are gone
• By automating the approval process, time-consuming, manual and often paper-based processes are replaced by fast, digital processes
• The automated transmission of the order to the supplier and the automated processing of incoming goods also make a massive contribution to reducing costs
• Last but not least, automated invoice processing with corresponding electronic workflows in the event of deviations is an essential part of the continuous procure2pay process

Supply chain resilience has become an absolute priority for many companies. Supply chains must be able to handle unforeseen events without disruption. To accomplish this feat, they must improve their collaboration. To solve problems most efficiently, supply chain teams should be able to share information with stakeholders and collaborate with the right people at the right time. To do this, they need the right tools and workflows to make this collaboration seamless across all parts of the supply chain. Supply chain execution and collaboration is not part of every vendor's product portfolio. Often only simple order transmission is covered here as an add-on to e-procurement. Only a few providers can cover the entire supply chain for direct and indirect material and services.

What are the main differences to Source2Contract from a software perspective?

In the Source2Contract process, almost only strategic buyers and their suppliers work with the software, and this almost every day. In the Procure2Pay process, every requisitioner works with the software, which could theoretically be every single employee, from the assistant to the maintenance technician to the marketing specialist. However, since these people only use the software occasionally, the software needs to be much easier and more intuitive to use. The requirement for the software here is that someone without any training or education can easily operate the software, just like you are used to from Amazon.

Another difference is throughput. The number of requirements and orders is extremely high in some companies, which must also be reflected in a corresponding performance of the software.

What is often not considered is also the following difference: while Source2Contract processes have often grown and been perfected over many years and therefore sometimes represent a competitive advantage, most companies have very old-fashioned Procure2Pay processes. This means that companies like to fall back on best practice and the redesign of existing processes based on the latest findings is often implemented together with a software implementation.