Purchase to Pay Charter for Strategic Suppliers

Purchase to Pay Charter for Strategic Suppliers

Posted by Pete Loughlin in Purchase to Pay 20 Aug 2010

Purchase to Pay, P2P and Dynamic DiscountingA one size fits all approach just won’t work with purchase to pay. And that’s not just intuition or experience informing  that view.

The Hackett Group reported this in their May Procurement Metric of the Month :  “Many organizations define sourcing and supplier management processes by spend category as the basis for understanding how to best source and manage their suppliers. However, they often do not specify how to buy from and pay those suppliers based on the nature of the spend category and the needs of stakeholders (spend owners, requisi­tioners, suppliers, etc.). While companies usually have some type of “n-step” sourcing methodology, they may have tens if not hundreds of different ways to buy and pay for goods and services. This can reduce efficiency and customer satisfaction and lead to higher noncompliance rates and greater risk”

Take an example of a key strategic supplier of technology components to a globally dispersed manufacturing business. The potential for purchase to pay problems is enormous. There can often be invoice and reciepting queries because delivery is regularly held up with some cross border customs issues. Even where both supplier and buyer adopt best in class supply chain solutions, they are not necessarilyjoined up. These kinds of issues need a solution that is customized for individual circumstances.

It’s best to take a category approach with purchase to pay, however, with strategic suppliers, even a category approach won’t always fit the bill. Strategic spend is more often than not where the transaction volumes, and consequently the P2P benefits, are concentrated so it’s worth the effort to develop a bespoke solution like a Purchase to Pay Charter

Purchase to Pay Charter

The Purchase to Pay charter is an agreement between two supply chain partners that defines their P2P relationship, how they order, how orders are fulfilled and how invoicing and payment works. It provides a means of defining system requiremnts as well as business requirements.

A properly implemented Purchase to Pay Charter provides a collaborative platform from which optimze and further enhance purchase to pay processes for mutual benefit. It can stabalise fraught relationships and build stronger more sustainable working partnerships and best of all, it reduces the cost of doing business.

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