The value of Process Mining for Procure to pay process

The Purchase-to-Pay process - also known as PtP, procure-to-pay, - refers to business processes that cover requisitioning, purchasing, confirming, receiving, paying for, and accounting for goods and services.

As the transactional volume is extremely high ( specially in some areas like retail, manufacturing, construction, ..) and often quite complex in Purchase-to-Pay (with many different business rules, procedures requests and suppliers), each step within the processes represents a potential source of errors and lack of compliance. This makes Purchase-to-Pay an area often targeted by auditors ( either internal or externals ). This process is also a great candidate for process mining, which brings visibility to the entire end-to-end process and identifies root causes for problems (such as maverick buying) as well as automation opportunities.

Steps included in the Purchase-to-Pay process

Purchase-to-Pay process steps generally include the following steps .

• Purchase Requisition (PR) created– This is the beginning - a request to make a purchase and get the necessary approvals in your procurement system has been created.
• Purchase Order (PO) created – A purchase order with line items for the goods being procured has been created.
• Goods Receipt – The goods arrived in your physical storage and were logged in your system ( home made or ERP )
• Invoice Receipt – The vendor sent you an invoice for the goods ( hopefully matching the content of the Purchase order and the Purchase Requisition !
• Invoice Approved – Your handling team verified the quantity/quality of the goods and released the invoice to accounts payable.
• Invoice Posted / Payment – The invoice has been paid.

However, in reality, the process is not as straightforward and often goes way beyond the steps outlined above. The steps outlined are just a macro/simplistic view. If we dig down in the details we can find very challenging topics. The complete end-to-end process contains a variety of steps that are not always handled in the right order or at the right time - and all these process changes, errors, and rework increase the process times, expenses and errors.

Applying Process Mining to the Purchase-to-Pay Process

It is very likely that a number of different events, such as "purchase order created" or "invoice approved", are recorded into your procurement, ERP, or invoicing system database with the appropriate time stamps and complementary information ( who / when / what ). From the starting point of the process to "Goods Receipt" and all the way until "Invoice Payment" (and beyond), a record might exist of when such an event took place in the purchase-to-pay process.

With this data in our hands, we can feed this info into the process mining tool that will understand them and show how your process is really happening. With these visualizations you will able to easily identify areas to be worked such as bottlenecks, rework, errors, Maverick Buying, and conformance violations.

3 practical ways for optimizing your PtP process

Take these three steps to optimize your purchase-to-pay process with IBM Process Mining

1. Discover your as-is processes: check long process durations and benchmark internally
2. Use Root Cause analysis to understand where and why issues (such as long lead times) are happening
3. Monitor and improve continuously by utilizing built-in KPIs

To sum it up: What are the benefits of using Process Mining for the Purchase-to-Pay process?

Through process mining, it is possible to know precisely how your procurement system is performing and informations like the ones below.

• How long it takes for a procurement request to become an actual order ?
• How long it takes to process the orders ?
• How much your organization is complying with the designed Purchase-to-Pay process model - and how to improve ?
• Is there any vendor that presents more deviations ?
• Is there a product of department that has more errors ?
• Which are the steps that have more errors ?
• Which are the steps that takes more time ?

When you can pinpoint the inefficiencies and hot spots in your process, you can focus your improvement efforts where they will produce the most value. With this objective in sight, you will have the confidence to make changes, e.g.:

• Expediting a round of approvals in their purchase request process
• Automating specific steps, such as invoice approval
• Automating Decisions
• Increasing controls for specific areas / vendors or certain types of materials.

Know exactly how, why, and where your procurement is performing better than ever, and where you still need to improve on your way to optimize your purchasing process.