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The Power of Process Mining in Purchase-to-Pay

The Power of Process Mining in Purchase-to-Pay

DivyaHeadshot
by Divya Krishnan
October 07, 2021
9 min read

Process Mining can help businesses better understand their processes and identify hidden issues within them. Hereโ€™s how itโ€™s being applied across the Purchase-to-Pay (P2P) process.

Letโ€™s talk about Process Mining for Purchase-to-Pay, (or Procure-to-Pay, or P2P, as it is often referred to). As business processes expand and grows more complex, inefficiencies naturally start to creep in. And as the number of teams, touchpoints and stakeholders involved in those processes increase, the root causes of inefficiencies can become virtually impossible to surface without specialist capabilities.

For years now, organizations have turned to business intelligence and insight tools to help tackle that challenge. By granting a snapshot of process issues, BI tools have helped teams see the impact of these inefficiencies on their KPIs. But knowing youโ€™ve got a problem and being able to tackle that problem effectively are two very different things.

To fix a process issue or inefficiency, you need to know exactly where itโ€™s coming from, what its root causes are, the impact itโ€™s having, the parties involved, and the other processes it is affecting. Thatโ€™s where Process Mining comes in.

What is Process Mining?

Process Mining is a new way of visualizing and monitoring business processes as they really run today, rather than how teams believe they run. It analyzes current data, events logs and knowledge from ERP platforms and other live information systems to help organizations build up a complete view of process performance in real time. You can then drill down to uncover the root causes of process inefficiency.

Where BI capabilities show that a problem may exist at a given point in time, Process Mining grants objective, real-time insights that can easily be translated into actions โ€” and ultimately, business process improvements. Thereโ€™s no need to hypothesize over the outputs of the analysis, or the data itโ€™s coming from โ€“ Process Mining simply shows you the problems youโ€™re facing, where they originate from, and what you need to do to solve them. If you work across Purchase-to-Pay, itโ€™s likely that you can already imagine the kinds of inefficiencies process mining might bring to light based purely on that description. But letโ€™s dive into some greater detail.

What are the benefits of Process Mining for Purchase-to-Pay?

Process Mining can deliver a lot of value for P2P processes specifically. The technology is already transforming thousands of Procurement and A/P departments today โ€” helping them optimize spend and free up working capital while reducing errors and improving productivity, primarily through automation. In other words, itโ€™s helping Purchase-to-Pay teams accelerate their journey towards full-capacity finance.

By granting teams granular visibility of both tasks and processes across Procurement and Accounts Payable, Process Mining is helping them tackle some of their biggest challenges, and achieve many of their top strategic priorities, including (but not limited to):

  • Maximizing productivity โ€“ by automating in all the right places and cutting down cycles times, for instance by automatically converting free-text requisitions into POs

  • Improving supplier performance and relationships โ€“ by ensuring master data is always correct, whether itโ€™s lead times, pricing or quantity, and of course by paying on time

  • Cutting down on maverick buying โ€“ by identifying where and why itโ€™s happening, so you can have the right conversations with the business

  • Optimizing working capital โ€“ by reducing early payments and making sure invoices are automatically prioritized by impact rather than first in, first out

  • Cutting costs: by getting both POs and invoices right the first time โ€“ every time

Use cases for Process Mining in Purchase-to-Pay

Process Mining (especially when combined with Task Mining) delivers total transparency over the tasks and activities happening right across the Purchase-to-Pay process. So, whatever challenges an organization is facing, and wherever inefficiencies manifest between Procurement and Accounts Payable, Process Mining can help find โ€“ and fix โ€“ the process gaps getting in their way.

Here are three of the most common Process Mining use cases in P2P:

Use case #1: Maximizing cash discounts

Cash discounts are a huge source of value for the organization. But, with numerous contracts to navigate and agreed payment terms to keep track of, often teams donโ€™t take full advantage of them.

Process Mining can help P2P teams see where discounts are being missed, and prioritize invoices to maximize cash discount realization. It can also help evaluate when taking advantage of a cash discount is worthwhile, or when it might be more profitable to pay later from a working capital perspective. That view enables teams to make the most of Procurementโ€™s hard-won negotiations, and ultimately reduce overall spend.

For example, by working with Celonis, global healthcare provider Fresenius Kabi increased their cash discount realization rate from 61% to 90%. (They also increased Days Payable Outstanding by improving payment terms, which has already saved them $550K in capital costs.)

Use case #2: Reducing free-text requisitions

Free-text requisitions are a constant cause of Purchase-to-Pay process gaps, impacting and creating work for teams across both Procurement and Accounts Payable. If you want to reduce them, and reduce the cost and compliance risks they create, you need to be able to identify the source quickly and act fast to resolve their underlying causes.

Process Mining helps P2P teams clearly see how free-text requisitions impact process performance, both in terms of added effort and costs. But more importantly, they enable teams to dive into the sources of free-text requisitions and pinpoint the teams, individuals and vendors involved in their creation.

With that insight, P2P teams can take direct actions with repeat sources of free-text requisitions. Plus, they can also start working towards resolving the issues that have led to the creation of those requisitions by ensuring that catalogues, processes, and currently approved suppliers can deliver everything the business needs.

Use case #3: Identifying opportunities for P2P automation

Process Mining helps organizations build up a complete view of Purchase-to-Pay processes, showing them where their biggest performance and execution gaps are. Often, those gaps are areas where P2P automation could yield significant benefits.

By surfacing the tasks and areas where things like manual rework are leading to delays and reduced performance against KPIs, Process Mining helps teams understand where automation could be applied to improve results. Plus, it helps teams see the potential impacts of proposed P2P automation cases in dollar terms, so they can prioritize them intelligently. Process Mining also enables you to monitor the impact of these automations on KPIs after the fact, so you can make sure youโ€™re on the right track.

Crucially, itโ€™s not just about identifying where P2P automation could best be applied. Process Mining also helps you understand the tasks and process areas that shouldnโ€™t be automated. By surfacing problem processes that need fixing, it can help prevent cases where teams unknowingly automate inefficiency.

You can find more Process Mining use cases across the Purchase-to-Pay process in our little book of P2P use cases.

Is Process Mining just about surfacing and fixing Purchase-to-Pay problems?

While Process Miningโ€™s biggest and clearest strength is in its ability to help teams visualize process inefficiencies and take the right action in the right places to fix them, itโ€™s also a hugely valuable tool for understanding performance and benchmarking.

Process Mining enables you to see P2P process performance clearly at a global, regional, supplier and even individual level. So, it helps you spot trends like high performing regions, and drill down into that regionโ€™s processes to discover what theyโ€™re doing well. Then, those practices can be applied across the wider business, to help you take that high regional performance global.

Itโ€™s also extremely helpful for teams that want to understand how far they are from their โ€˜idealโ€™ process state. If you have a target process model that you want to move towards, Process Mining helps you clearly see how close your live processes are to that model, and spot any major deviations from it, as well as why theyโ€™re happening.

Process Mining vs Consulting

Process Mining delivers a lot of the same outcomes as a direct engagement with a consultant. It explores your processes in-depth, works to analyze and contextualize relevant data relating to them, and ultimately helps you see where your bottlenecks and performance blockers are, and what needs to be done to remedy them.

However, Process Mining delivers these outputs a lot faster than a traditional consulting engagement. Instead of waves of workshops and exploratory exercises, it simply pulls live data for analysis, and uses information from your live systems to build up an objective and complete view of Purchase-to-Pay process performance. Thatโ€™s why a lot of consultants are โ€“ you guessed it โ€“ using Process Mining.

Process Mining enables consultants to continuously track process performance, and identify new issues as they arise, rather than generating a one-off fixed view that quickly loses value and relevance over time.

What are the challenges associated with applying Process Mining across the Purchase-to-Pay process?

Process Mining technology is designed to be easy for stakeholders to engage with right across the Purchase-to-Pay process. However, like any other technology, its adoption can carry cultural challenges that can impact its overall effectiveness and value.

Firstly, to get the most from Process Mining, Purchase-to-Pay teams need to be ready to change how they work with process data and insights. If theyโ€™ve relied solely on BI capabilities for process insights for a while, chances are theyโ€™ll be very used to questioning and scrutinizing the insights handed to them. With P2P Process Mining, that simply isnโ€™t necessary, because the data is automatically extracted directly from your systems.

The other significant challenge experienced with P2P Process Mining adoption is that Process Mining only helps detect process issues and their root causes โ€” it doesnโ€™t actually solve them on its own. To do that, youโ€™ll need complimentary capabilities like the ones included in an Execution Management System โ€“ things like machine learning, simulation, and automation, for example.

Discover the power of Purchase-to-Pay Process Mining today

Process Mining is quickly becoming the new standard for operational intelligence, providing organizations with a reliable, actionable view of their active processes as they truly run. Whether you are already familiar with the technology, or taking your first steps, Celonis can help.

Join a live process mining demo, or check out our interactive click-throughs of how Process Mining can drive outcomes in Procurement and Accounts Payable.

Or you can get straight to it and try the Celonis free plan.

DivyaHeadshot
Divya Krishnan
Senior Product Marketing Manager

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