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
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.
Hinweis der Redaktion
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