A presentation on P2P (Procurement to Pay) process usually being followed by industry. It's part of supply chain and PPT also shows - - how the material inflow thru P2P is being balance by material outflow thru O2C - how the cash outflow thru P2P is being balanced by cash inflow thru O2C

1. TOPIC -
PROCUREMENT TO
PAY (P2P)

2. SUPPLY CHAIN & TYPES OF FLOW
P
2
P
Cycle
O
2
C
Cycle
SUPPLIERS MANUFACTURER CUSTOMER
MATERIAL FLOW (PRODUCT / MRO)
CASH FLOW
REVERSE PRODUCT FLOW
INFORMATION FLOW

3. TYPES OF CYCLE
INDUSTRY
1. P2P
CYCLE IN ANY COMMERCIAL TYPES OF 2. O2C
2  P2P - Procurement to Pay
 All Direct/ Indirect material inflow in P2P
 money outflow in P2P
 O2C - Order to cash
 Finished Goods outflow in O2C
 Money inflow in O2C

4. TYPES OF MATERIAL
 Directly proportional to unit of production
 MRP based
In cement – 1 MT of PPC required
 more than 80 % of total spending
1. DIRECT MATERIAL
TYPES OF MATERIAL
2. INDIRECT MATERIAL
 All MRO items
 MRO – Maintenance , Repair
& Operational expenses.
 less than 20 % of total
spending

5. Procurement
1. DETERMINATION
OF REQUIREMENTS
2. SOURCE DETERMINATION
4. PO
PROCESSING
6. GOODS
RECEIPT
7. INVOICE
VERIFICATION
8. PAYMENT
5. ORDER
MONITORING
3. VENDOR SELECTION
PROCUREMENT TO PAY CYCLE

6. PROCUREMENT TO PAY CYCLE
Creation of Purchase Requisition
(Manual or MRP)
 History of changes in Purchase Requisition
(Change Log) item
 Purchase Requisition status
 Release (Approval) Strategy

7.  Request for Quotation (RFQ)
 Reference technique in RFQ
creation
 Price comparison of the quotations
3. VENDOR SELECTION
PROCUREMENT TO PAY CYCLE

8. PROCUREMENT TO PAY CYCLE
 Reference technique in PO creation
 Pricing Condition
 History of changes in Purchase Order
(Change Log) header/item
 Purchase Order status
 Release (Approval) Strategy
 Tolerance limit set-up

9.  Goods Receipt with reference to
PO (PO Value = GR Value)
 Material document and Accounting
document creation after posting
 Resulting to:
 Inventory update
 Update of G/L accounts
 Updates in the Purchase Order
 Update in Material cost (Moving
Average Price)
Goods Receipt

10. Logistics Invoice Verification
 Creates Accounting Document for
referencing
 Provides 3-way matching (Purchase
Order against Goods Receipt and
the Vendor Invoice)
 It allows credit memos to be
processed, either as invoice
reversals or return deliveries.

11. Payments (A/P)
 Dual control of master record
 Simultaneous updating of subsidiary ledger and
general ledger (minimize reconciliation activities)
 Instant access to details of account balances per
Vendor
 Drill down facility down to the original document
 Full audit trail
 Manual or automatic processing of payment
transactions
 Check information on payment transactions

12. Indirect Material Vs Direct Material P2P
INDIRECT MATERIAL P2P –
-Similar Across Industries
-Demand usually originate with
requisition
DIRECT MATERIAL P2P –
-Varies from industry to industry
-Demand driven by MRP / Project
planning systems
-
• Indirect procurement processes are fairly similar across industries. Whether you are in
aerospace, or hospitality, semiconductors, pharmaceuticals, insurance, retail, healthcare,
shipping, or any other industry, there tends to be many similarities in how you buy office
supplies, computer systems, office furniture, or lawn mowing services.
• In contrast, there are fundamental differences between industries in how direct materials
procurement, change management, quality, reconciliation and payments are done.