Understanding the Difference Between P2P and On-Time Delivery Control for Indirect Spend
P2P (Purchase-to-Pay) and On-Time Delivery Control systems are often mistaken as being identical, but in fact, they are fundamentally different. P2P is the financial processes connecting purchasing to invoice settlement whereas On-Time Delivery Control ensures the on-time delivery of purchases. Neither system competes with the other, but instead are entirely complementary. When implemented together, the systems enhance cost management automation, increases compliance and drive efficiencies.
What Is P2P?
P2P refers to fully integrated business processes that covers the end-to-end activities of requesting (or requisitioning), receiving, and paying for goods and services. Procure to pay solutions use a supplier and/or a multi-enterprise network allowing suppliers to submit invoices electronically. In addition to e-procurement functionality, P2P systems provide invoice matching and processes for returned goods. When you hear people use the term in the industry, they are usually referring to the technology or system set in place to manage these activities.
P2P is a very powerful tool for both indirect and direct purchases to reduce the unit cost to process an invoice for payment. An enterprise accounts payable department manually processing payment can cost a company as much as $14 per invoice, but implementing an automated P2P program can significantly reduce this cost. There are a few specific ways it does this:
- End-to-end automated processes increase accuracy and reduce labor cost.
- Dynamic discounting becomes possible, facilitating new ways to manage cash.
What Is On-Time Delivery Control?
On-Time Delivery Control refers to the risk mitigation processes required to manage the timely receipt of goods purchased that fall under indirect spend. This includes adding delivery visibility into all indirect spend categories, buyers, suppliers, and project types that keep the business operating but doesn’t necessarily contribute directly to revenue. Receiving Indirect Purchase Orders On-Time is crucial to completing projects on time, and keeping the enterprise operating at peak performance.
The majority of enterprises have not implemented digitized systems to control on-time deliveries in their indirect supply chain. All to often, enterprises depend upon email, spreadsheets and the telephone to manage deliveries. As companies continue to evolve into leaner organizations, digitizing On-Time Delivery Control becomes an imperative in order to manage costs and control the on-time delivery of the GNFR purchases.
How Do P2P and On-Time Delivery Control Differ?
At this point, it should be very clear that P2P and On-Time Delivery Control are distinctly different, complementary and extremely important. P2P’s purpose is to significantly drive down the cost of requisitioning through to payment settlement. On-Time Delivery Control’s sole purpose is to ensure goods purchased are delivered on time, in the right quantities to the right location.
The difference and complementary nature of P2P and On-Time Delivery Control is best illustrated by viewing the end-to-end process from requisition through to payment settlement.
Step 1: Purchase requisition – P2P’s initiates the ordering process by creating the requisition and sending the order to the supplier.
Step 2: Supplier / 3PL delivery to final destination: After the requisition is created, On-Time Delivery Control’s assumes responsibility to ensure on-time end-to-end delivery. On-Time Delivery Control ensures the supplier receives the requisition, enters the requisition correctly into its system and follows up to ensure the requisition is shipped on-time. If the goods are shipped through a 3PL, On-Time Delivery Control ensures the 3PL receives and ships the goods on-time.
Step 3: Payment Settlement: Once the goods are received, P2P resumes control to ensure the payment process is optimized and accurate. The P2P portal offloads invoice processing costs and mistakes by enforcing compliance.
Whereas P2P is focused entirely upon the purchase of goods from the supplier and then payment settlement, On-Time Delivery Control is entirely focused upon the middle ground consisting of the end-to-end delivery of the goods to the final location (direct, through 3PL and Inventory to final location).
The two systems are complementary and offer distinctly different benefits by working together to provide transparency and efficiency as key tools to enhance cost management and reduce risks.
Once the differences and complementary features of P2P and On-Time Delivery Control are understood, it becomes much easier to pick the right enterprise systems to mitigate major risks to the business. Not all systems are the same, it is important to research the various P2P and On-Time Delivery Control automation tools to select the right tools for the enterprise. Since Indirect Spend is the area with multiple spend categories and the highest number of transactions, it offers a major opportunity to protect capital and reduce risks to the business.
Lumatrak provides a full range of real-time On-Time Delivery Control tools to help better manage supplier and delivery performance from order to the final mile of your indirect goods delivery. Provided in the cloud through its Software-as-a-Service (SaaS) offering and already connected to vast numbers of manufacturers and contractors, Lumatrak’s solution can be quickly implemented to complement and enhance any ERP, Strategic Sourcing and Procure-to-Pay systems.
To learn more about how a better GNFR-delivery management solution could save your company both time and money, contact the team at Lumatrak today.