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Procure-to-Pay: The Great Supply Chain Time Machine

Peter Nilsson, director, solutions strategy, GT Nexus

In a recent Bloomberg article, columnist Matt Levine positioned a simple but powerful idea: “The essence of finance is time travel. Saving is about moving resources from the present into the future; financing is about moving resources from the future back into the present.”

The ability to move resources in time, through saving and financing, can have a profound effect on supply chain resilience and effectiveness. After all, when it comes to trade, time is money—and adjusting resources in time can also adjust costs.

Stuck in the Past – Manual Processes, The Time Killer

It is well-established that disconnected, manual supply chain processes inevitably add unnecessary lead-times and expense into the supply chain. With many different parties involved, along with complex processes and a high exposure to human errors, the time traveling opportunities are very limited.

The procure-to-pay process has often been considered a “back office” function, but the reality is that poor information flow between organisations is creating unnecessary inefficiencies and slowing down the rate of business. It’s widely known that organisations struggle with intracompany automation, but they struggle with intercompany automation even more.

Procure-to-pay automation therefore remains one of the most critical “underachieved” supply chain improvements to date. And yet, it is central to many of today’s data-driven supply chain financing programs, which are getting a lot of interest and attention. As data grows in both volume and velocity, it further complicates the efforts to maintain data quality and the efficiency of the process, but managed correctly, it can open new opportunities.

Time Traveling with Procure-to-Pay Automation

So how does procure-to-pay automation translate to time traveling?

With an automated and modernized procure-to-pay process, organisations can make more strategic decisions about how to manage working capital; and they can do it in a more informed and transparent way. This is the fuel enabling several time traveling capabilities.

By bringing together the physical and financial side of the supply chain on a single networked-platform, you can create streamlined, more compliant procure-to-pay and order-to-cash transactions, providing both buyers and suppliers earlier cash flow visibility. Traditional short-term bank credit lines are normally assessed by banks based on the historical financial performance of the borrower, and many times require additional collateral.

Supply chain finance, on the other hand, is forward-looking, moving resources from the future back into the present. This provides suppliers access to capital throughout the entire transaction lifecycle, which helps secure production and delivery times and generate savings, moving resources from the present back into the future.

By automating procure-to-pay, organizations not only automate mundane internal processes, but also events that will have ripple effects on commerce and customer relationships downstream. The aphorism “a rising tide lifts all boats” speaks to the fact that general improvements ultimately benefit all participants in the supply chain.

In fact, as buyers seek to partner with suppliers to ensure their health and strong performance, procure-to-pay automation is a way to enable better planning and access to capital for suppliers. Organisations can then unlock resources, allowing them to move them more freely between the present and the future.

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