What is Procure to Pay?
Procure-to-Pay (PtoP) refers to the processes and systems used beginning with the procurement of goods and services to include managing all the activities and transactions relating to the acquisition and payment of those goods and services as well as to the suppliers supplying them. There are any number of different systems on the market today that help companies in the PtoP process. Some of these systems are made up of discrete components of the PtoP process and reside within ERP systems. Other, more holistic, approaches are offered as either hosted or installed systems. These systems take on many different flavors with varying degrees of functionality, price, and complexity to address the many different supply chain configurations. Despite the many options, these systems breakdown into two main catagories:
1 - Closed systems that require you to use suppliers that reside within the PtoP systems network;
2 - Open systems that allow you to enable your existing supplier community with having to sign up for a proprietary network.
Before emabarking on a PtoP venture, it is important to understand the pros and cons of both of these methods and to select the one that best fits your culture, industry, and supply chain management needs.
Procure to Pay systems can be complicated to manage and leverage to their full potential. These systems require the integration of different operating units within a comany, i.e. procurement, payables, vendor management, operations and IT and must satisfy the needs and goals of each. Our experience has found that many implementations of full blown PtoP systems result in underuse and unmet expectations.
What is Order to Pay?
Order-to-Pay (OtoP), as the name would suggest, are the processes and systems related activities and transactions from the point of the ordering of goods or services through the payment for those goods and services. The primary difference between a PtoP system and an OtoP system is that an OtoP system is not focused on any activities in the procurement process but rather managing the transaction that result from the orders flowing from procurement activities. These systems have a track record of delivering cost savings and are easier to onboard existing suppliers. OtoP systems are heavily focused on managing transactions in the supply chain versus managing the vendors and the negotiations and contract management aspects of supply chain relationships. While both are very important functions, we recommend that best-of-breed solutions be used for the procurement and purchasing processes as well as the order through payment transaction processes to acheive the best results. Taking this approach can greatly improve working capital and reduces operational costs while improving supplier/vendor relationships.
For more information on some of the key components of an Order to Pay system click on the links below.
If you interested in more information or are considering automating your PtoP or OtoP processes please let us know and we will be happy to have a no obligation discussion with you to discuss your business needs and how these systems nmay benefit you. Contact ICG today for a free assesment.