Process mining finds & captures value in Purchase-to-Pay – here’s how

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Whether you call it Procure-to-Pay, Purchase-to-Pay, or the simple, snappy P2P, one thing is certain — get these processes right and you’ll massively protect your company spend and margins.

With inflation raging, Purchase-to-Pay is top of mind for business leaders around the world. From spend to suppliers and operations to overheads, nailing Procurement and Accounts Payable (the two main departments across P2P) puts a business on strong footing to tackle tricky external trading conditions.

Any attempts to get P2P into shape and draw out additional, much-needed value will be hamstrung by poor processes. That’s why we’ve outlined below how Celonis Process Mining for Purchase-to-Pay helps businesses find and capture value across P2P.

Introducing process mining

Process mining provides a business with total, objective visibility of how they really run. It helps leaders identify areas for improvement, take action automatically, and capture value.

Read why process mining matters here.

Process mining is the technology at the heart of the Celonis Execution Management System (EMS). The EMS sits on top of existing systems, integrating data to create a real-time MRI of a company’s processes. It automatically reveals improvement opportunities and recommends actions. By intelligently orchestrating teams and technologies, businesses use the EMS to find and capture business value in their processes, enabling them to optimize business performance like never before.

Here’s what your Purchase-to-Pay process mining journey with the Celonis EMS could look like in five steps:

  1. Extract data in real-time from multiple data sources ranging from your ERPs to your Excel spreadsheets to get a living, breathing MRI of your P2P process.
  2. Benchmark regions, business units, buyers, and requisitioners against each other to identify value opportunities.
  3. Monitor your process conformance against best-practice models to identify value in and between processes, and determine how to capture the opportunities
  4. Based on machine learning and best-practices, the EMS suggests the best steps to maximize process performance.
  5. Celonis takes action by automatingreal-time actions across systems and deploying the right people to capture value when manual intervention is required.

Why use process mining for P2P?

In times of inflation every dollar counts. And even when inflation isn’t stalking a company’s every move, teams should still be obsessively tracking every dollar spent.

Here’s a broad picture of what you can protect by optimizing P2P with process mining:

  • Spend, by ensuring correct payment terms are used by everyone, so no one spends more than they need to
  • Margins, by going touchless on purchase orders, goods receipts, and other documents, so people work more efficiently
  • Relationships, by monitoring supplier lead times in real-time, so you avoid last-minute sourcing, production delays and missed customer orders
  • Working capital, by reducing early payments and making sure invoices are automatically prioritized by impact – not simply first in, first out

P2P success stories: process mining leads to big P2P wins for big brands

P2P outcomes matter and process mining delivers. Take a look at how top companies used Celonis to get to top performer status across the P2P cycle.

Digging deeper: process mining for Procurement

So we know that process mining is a critical tool for P2P teams looking to capture value opportunities. But how can businesses use it to deliver strategic value in the Procurement department, specifically?

Read on to learn about three of the most common process mining use cases in Procurement and how companies have successfully extracted value.

Use case #1: reduce process time of purchase requisitions (PR)

When it comes to improving employee productivity, PR processing time is the KPI for businesses to prioritize. But requisitioners — due to negligence, need for speed, or a lack of knowledge — might manually create free-text requisitions rather than selecting a standard vendor with pre-negotiated terms from a contract.

A high volume of free-text requisitions slows down purchasing time — even when the requisitions refer to a contracted item.

The good news: process mining uses machine learning to either automatically convert a free-text PR to a PO, or recommend an item from an existing catalog to the requisitioner.

Use case #2: increase on-time delivery rate

On-time delivery is a key metric when assessing supplier performance and reliability. Deliveries that arrive later than the internally planned delivery date drive the need for inventory buffers, increasing inventory costs. This usually occurs because of incorrect master data concerning internal planning parameters.

With process mining businesses can identify patterns in delivery date confirmations that are significantly later than the requested or planned delivery date and then either automatically update these planning parameters or notify the planning team of a potential systemic issue. In other words, process mining drives supplier performance in an objective, data-driven manner.

Use case #3: optimize spend under management

Optimizing spend under management drives better compliance outcomes. Unfortunately, maverick purchases reduce the ability to negotiate with vendors — and they also cost businesses money by circumventing lower price contracts already negotiated with strategic suppliers.

Where process mining comes in: it allows organizations to notify category managers of repeat offenders. It can also jumpstart the blocking of requisitioner system access, reject maverick purchases, or contact vendors that repeatedly fulfill maverick purchases. With process mining, your compliance outcomes will be soaring in no time.

Process mining in Procurement: success stories

Now that we know three of the most common use cases for process mining in Procurement departments, here are three brief customer stories showing how these use cases play out in real-life situations:

  • An American manufacturer of cryogenic equipment used Celonis as a single source of truth for their spend analysis as well as suppliers’ activity and performance to drive more effective negotiations. As a result, they secured $10M in negotiated savings, while also freeing up 25% of their category managers’ time per month.
  • One of the top five US aerospace and defense companies used Celonis to consolidate their supplier base by 20% and optimize their spend when the government told them to cut costs or lose their contract. Spoiler alert: they kept the contract.
  • A global medical device company saved more than $1M in three months by identifying likely maverick buying and proactively clamping down on it, as well as by completely eliminating duplicate invoices.

Digging deeper: process mining for Accounts Payable

Accounts Payable is one of the best levers to pull on in the hunt for savings and value. Here are three top use cases for process mining in Accounts Payable and three short success stories.

Use case #1: optimize days payable outstanding (DPO)

Paying invoices unnecessarily early sacrifices working capital optimization. When invoices are posted for payment before the due date, payment runs include these invoices and drive up working capital.

The fix? Process mining insights allow for the automatic check and application of the contracted payment terms, and can also assist with issuing a notice to the supplier to inform them of any discrepancies. These steps work in tandem to tackle DPO and optimize working capital.

Use case #2: improve paid on time rate

Paid on time rate is the key to ensuring good supplier relationships. But if suppliers use outdated prices when invoicing, price changes require additional processing — and this can prevent an invoice from being paid on time.

The good news is that process mining technology can identify discrepancies in pricing and inform suppliers of issues before they start costing you. Use process mining and your paid on time rate will thank you.

Use case #3: boost touchless invoice rate

One goal of limiting manual intervention is cutting costs — and this requires focusing on touchless invoice rate. Unfortunately, master data discrepancies and manual errors on the vendor’s side can lead to issues like incorrect invoice fields.

With process mining, though, businesses can zoom in on invoice fields by comparing the PO, historical data, and the invoice for standard fields like currency and VAT. Process mining technology can also automatically update the fields based on POs and historical data.

Process mining for Accounts Payable: success stories

  • A top 5 global pharma company reduced late payments by 37% in a year by adjusting payment run frequencies, modifying payment run selection criteria to align with cutoffs, and addressing vendor specific issues.
  • A French automotive company was paying 20,000 invoices early, and this impacted working capital by €33M. They are adjusting how they process and enforce payment terms accordingly.
  • A top 10 industrial manufacturer identified and recovered $620K in duplicate payments in a single quarter. Ongoing blocking has prevented an additional $300K in outflow.

Process mining takes P2P performance to the next level

What Covid-19 set in motion, inflation has turned into an all-out sprint: the need to get P2P into tip-top shape.

Leaders cannot afford to be wasting time dealing with PO changes, manual blocks, or even maverick buying — especially when these issues can be automatically resolved by process mining.

Improving your processes is crucial to finding and capturing massive value opportunities for your organization. So what are you waiting for? Find out what Celonis can do for you.

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