• Report Details: The research for this report was primarily conducted via an online survey from August 1, 2016 - January 27, 2017. Surveys were conducted among a mix of manufacturers, retailers, and wholesalers/distributors/co-operatives (n=114), including a focus on those who use B2B methods to process purchase orders AND have/plan to have a program to support digital procure-to-pay processes (n=45). • Objective: To identify the adoption levels of digital business-to-business (B2B) methods and determine the business benefits of digital procure-to-pay (P2P) processes. • Highlight: Overall for companies with more advanced digital procure-to-pay initiatives, the benefits of the program are as follows: improved visibility, process accuracy, and speed; better quality customer service; and lower cost.

1. Digital Procure-To-Pay
What Is the Value Proposition?
8/15/2017
By Lora Cecere
Founder and CEO
Supply Chain Insights LLC

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Contents
Executive Summary
Current State
Purchase Orders
Advanced Shipment Notification
Invoices
What Is the Value Proposition?
Need for Governance in Digital P2P
Maturity Model
Recommendations
Summary
Appendix
Research Methodology
Additional Related Research
About Supply Chain Insights LLC
About Lora Cecere
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Executive Summary
Paper and manual processes are the norm in today’s supply chain. The dream is for procurement to
be paperless and automated. It is not. Over the last decade, the dream was to automate procurement
by making the processes hands-free. As will be seen in the results of this report, industry progress is
slow. This does not have to be the case.
Why is the pace so slow? Corporations struggle with conflicting priorities. With growth agendas and
the heightened focus on sales and marketing, procurement initiatives often get short shrift. With the
heightened focus on outsourcing and cost control, it is increasingly difficult for the procurement leader
to get funding approval to start a Digital Procure-to-Pay project.
Why automate procurement? What are the benefits of hands-free order processing? Or faster
onboarding? As will be seen by the findings in this report, procurement automation improves supply
chain agility, reduces costs and improves cycle times. It is also an essential building block for
business-to-business commerce, taking friction out of the business process to improve supplier
development and material sourcing reliability. These improvements are not possible without control,
and visibility.
As organizations become more global, and have greater supplier volatility (more changes in Purchase
Orders and the need for multi-tier visibility for Advanced Shipping Notifications (ASN)), these benefits
grow in importance. The greatest value happens when companies focus on a holistic redesign from
the outside-in (from the supplier back to the enterprise) as a foundational element for a larger
initiative like supplier risk management, supplier certification for Corporate Social Responsibility
(CSR), or supply chain finance.

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Current State
Digital Procure-to-Pay (Digital P2P) processes are evolving. However, in the industry, there is more
talk than action. It is easier to say than execute. While traditional Business-to-Business (B2B)
techniques focus on procurement automation, they are a part of, but not equal to a Digital Procure-to-
Pay strategy.
The difference lies in the degree of automation. While traditional B2B concepts focus on transactional
automation of procure-to-pay, Digital Procure-to-Pay includes community onboarding, contract
management and workflows, and supplier relationship management. The definitions vary at each
company and there is no standard definition. In this study, 43% of companies (who already use
digital B2B methods) had a focus on Digital Procure-to-Pay for procurement. These results are
outlined in Figure 1.
Figure 1. Digital P2P Program Status for Companies Actively Using Digital B2B Methods
Across companies, the state of B2B maturity varies widely. Electronic Data Interchange (EDI) is the
most frequent digital business method used to automate procurement processes. Portals are a close
second. However, in qualitative interviews with business leaders, the industry feels that they are

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portaled to death. Portals offer passive information, lacking a system of record to track business
changes. One plastics manufacturer interviewed, stuck between large chemical resin suppliers and
food manufacturers as customers, is required to post data in over 150 portals. This requires 12
planners within procurement, and they feel that they cannot keep up with the changes. For this
company, the process is unwieldy; yet, they lack the channel power to impact substantial change in
trading partner relationships. The passive nature of portals, and the lack of a system of record for
inter-enterprise decisions, makes it hard to track and synchronize business logic changes. For
companies with many changes in purchase orders and ship dates, the pain of business portals
becomes unmanageable.
A more mature company (those focused on Digital P2P), rate their performance higher on the
tracking of purchase order acceptance, and inter-enterprise visibility of logistics shipments and
transportation carrier performance. As supply chains become more global, with a growing number of
trading partners, these results are significant. We share these findings in Figure 2.
Figure 2. Company Performance on Purchase Order Processing
Overall, companies perform better on internal transactional data than tracking inter-enterprise
performance. Digital Procure-to-Pay initiatives streamline the data sources for supplier spend and
logistics tracking. These results do not happen when a company is focused on inside-out process

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definitions stemming from internal projects, often Enterprise Resource Planning (ERP), which are
driven by the goal to streamline company efficiency.
To understand these benefits more completely, in the next section of the report we will examine the
impact of Digital Procure-to-Pay more closely by examining the impact on each data element—
purchase orders, Advanced Shipping Notices (ASNs), and invoices—more closely.
Purchase Orders
A purchase order (PO) details the legal obligation between two companies. The PO outlines what is
to be purchased, the date of delivery and the terms/conditions of the purchasing agreement. With the
evolution of global organizations, and the consolidation of procurement organizations, PO
management and approval is more difficult than the processes in more local and largely regional
supply chains of the 1990s.
Overall, in the wider respondent population of all surveyed, 59% of orders are processed through B2B
methods and 41% of orders are processed manually via phone, email, fax, or postal mail. Manual
processing is especially problematic when there are PO changes. The more global, and the more
changes, the more difficult manual processes become. These results are shown in Figure 3. (Note
that in Figure 3, we asked respondents to report all methods used. As a result, the numbers do not
add up to 100%.)
Figure 3. B2B Processing and Purchase Order Performance

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In contrast, for those with a Digital Procure-to-Pay focus, an average of 73% of the POs are tracked
and managed digitally. As a result, the order tracking is less time-consuming, with lower expense and
easier process maintenance. These results are shown in Figures 4 and 5.
Figure 4. Volume Processed Through Digital Methods
Figure 5. Digital Procure-to-Pay Impact on Purchase Orders

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Advanced Shipment Notification
The Advanced Shipping Notification (ASN) is used to notify shippers and logistics providers within
multi-tier trading networks of timing of shipments against a PO. The ASN helps to streamline
warehouse scheduling and dock management. Overall, companies are less sophisticated in the
processing of ASNs than POs with an average of only 50% of companies with a Digital P2P focus
processing ASNs digitally. This is considerably lower than the digital handling of purchase orders.
Companies not processing ASNs digitally struggle with higher costs, and more issues on PO/invoice
matching. These results are shown in Figures 6 and 7.
Figure 6. Volume of ASNs Processed Digitally

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Figure 7. Benefits of Digital ASN

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Invoices
Invoices and ASNs have a similar level of maturity in Digital P2P processes. Neither is as mature as
purchase management. In the study of companies with a focus on Digital P2P, 59% of invoices were
processed digitally on average. When done manually, there are issues with reconciliation and
matching resulting in greater expense and errors.
Figure 8. Digital P2P Impact on Invoices

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What Is the Value Proposition?
Overall, for more companies with more advanced Digital P2P initiatives, the benefits of the program
are: improved visibility, process accuracy and speed; better quality customer service; and lower cost.
In a world where direct material procurement has an increasingly fragile supply base, these benefits
are growing in importance for supplier development programs and business continuity. They are also
important for the successful execution of supplier development/diversity initiatives. (For additional
reading on these topics reference the reports in the Appendix.)
The open-ended responses from the respondents in the study are shared in Table 1.
Table 1. Benefits of Digital P2P Programs
In contrast, the barriers are: acceptance; time and integration for implementation; employee training;
electronic errors; resources; and funding. Within a company there are many projects, systems, and
initiatives. Companies moving through merger & acquisition activities and Business Process
Outsourcing (BPO) struggle to focus on Digital P2P initiatives. Unfortunately, for many, the barriers
prevent the obtainment of the value.

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Table 2. Barriers in Building a Digital P2P Program
Need for Governance in Digital P2P
Successful Digital P2P programs require leadership. Business leadership cannot be an afterthought
(an add-on activity following an ERP implementation) in the design. Instead, the systems and
processes need to be designed with the Digital P2P end in mind.
To accomplish this goal, one of the major elements to consider in the program design is governance.
What is governance? Essentially, it is designing roles and responsibilities for the program. This
includes clarity on:
• Who can drive program changes?
• Which teams define and design the programs?
• What are the goals?
• How do business units share in the benefits?
• With the movement to self-administration of purchasing by the business functions, how is the
organization best supported?

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Define the governance model before initiating the project. Knock down the barriers. The review of the
governance model and agreement on the expected benefits can drive adoption. The lack of
agreement on governance can drive a program into a continual change management spin cycle. For
most companies, as shown in Figure 9, Digital P2P programs are driven as a corporate initiative.
Figure 9. Corporate Governance: Who Drives Digital P2P Processes
Maturity Model
When contemplating the design of the program, to gain the benefits, it is important to think past
enterprise-centric strategies like enterprise portals and embrace multi-tier inter-enterprise digital
processes. This requires holistic systems thinking. It is not the automation of documents or
transactions. Instead, it is the digital automation of process procurement flows to connect the
documents in a seamless manner to improve cost, transparency, and process visibility to drive action,
seize cost opportunities, and pinpoint problem areas early.
In Figure 10 we share a maturity model to guide process evolution.

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Figure 10. Digital P2P Maturity Model
As shown in Figure 11, in the self-assessed maturity of advanced respondents, companies are the
most advanced at enterprise purchase order management, and the least advanced at inter-
enterprise, multi-tier mapping of flows and community onboarding. They are stuck between levels 1-3
in the maturity model.
Figure 11. Self-Assessed Maturity

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For holistic thinkers, the programs should be designed using this maturity model and goals in mind.
While it is easy to automate purchase orders and invoices, it is more difficult to start outside-in and
work back to enterprise processes. Higher benefits will be achieved by outside-in thinkers because
they will not get stuck trying to automate process flows between business partners.

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Recommendations
For those focused on executing and building Digital P2P processes, start with the end in mind. Build
systems to deliver the desired outcome with progress over time. For example, the best projects for
Enterprise Resource Planning are implemented with Digital P2P processes in mind. The holistic
system transformation from paper to digital should not be an afterthought. In this design, face the
change management issue of “people love paper.” Try to wean the organization off of paper-based
processing by focusing on the benefits on paperless systems with high reliability. In this process of
the design, consider these recommendations:
• Recognize the Difference Between Automation and Digitization. Automation is a precursor of
digitization, but the two terms are not the same. As companies build strategies keep this in mind.
• Start by Defining Governance Models. When it comes to Digital P2P, the old adage of “too many
cooks ruin the stew” applies. Be clear and define governance. Before the initiation of a Digital P2P
program define ownership and accountability across corporate, regional and business teams, and
clearly state desired benefits.
• Clearly Outline Expected Benefits. Document the gaps and track the improvements. Tie these
results to business benefits. Start with an audit of existing systems. Ask simple questions. What
percentage of purchase orders are processed without touches? How many invoices can be
matched with purchase orders reliably? What is the average time for matching? How easily can the
company track shipments? How many people are required to handle paperwork for procurement?
What is the value-add?
• Start Outside-in. If companies start inside-out, within the enterprise only and with a focus on ERP
data, the efforts will get stuck in trying to track inter-enterprise shipments, logistics/transportation
carrier performance, and quality of materials. As a result, start the program outside-in through digital
tracking of flows from important suppliers and carriers. Implement multi-tier process automation
using B2B technologies.
Summary
While the term Digital P2P is bandied about quite freely in the industry; few have actualized the value.
There is a different between transaction automation and digitization. There are great benefits in
flexibility, visibility and accuracy for those that can cross the chasm. This leads to improvements in
costs, customer service, reliability and transactional integrity. In this world of global expansion, these
are important considerations.

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Appendix
Research Methodology
This report is a summary of quantitative research fielded in 2016-2017 on the value proposition of
Digital Procure-to-Pay. In this report, we summarize the findings. A summary of the methodology,
outlining the goals and objectives of the study, is shown in Figure A.
Figure A. Study Goals, Objectives, and Overview of the Methodology
Throughout the study, we analyze the behaviors of three groups with differing levels of automation,
and their focus on procurement strategies. These groups are outlined in Figure B.
Of the 114 business leaders surveyed, only 45 had a focus on building a Digital P2P program. In this
report we characterize the differences and impact of Digital P2P processes on business results
between the groups. We augment the quantitative findings with insights from qualitative interviews
from roundtable discussions with business leaders.

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Figure B. Respondent Groups for Analysis
As with any research project, definitions matter. There is no common definition in the industry for
Digital P2P, so in the study we were careful to clearly define the terms. Having B2B capabilities is
different that the use of technologies to improve Digital P2Pprocesses. We share this delineation in
Figure C.
Figure C. Study Definitions
In fielding the study, we find that there are more digital B2B business users than those with plans for,
or who currently have, a Digital P2P program. These results are shared in Figure D.

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Figure D. Study Results Using the Definitions
In our research, the names, both of individual respondents and companies participating, are held in
confidence. The demographics and additional charts are found in Figures D–G. At the bottom of each
image are the specific questions asked in the survey along with the survey details.
Figure D. Overview of Respondents

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Figure E. Respondent Involvement and Familiarity with Digital B2B Methods
Figure F. Types and Characteristics of Companies Who Have or Plan to Have a Digital P2P Process

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Figure G. Respondent Industry

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Additional Related Research
Supply Chain Insights has published nearly 100 reports. Unlike other industry analyst groups—who
keep research behind a paywall—we share research openly to help all global supply chain leaders.
To gain a deeper comprehension of the research in the procurement area, and topics associated with
Digital P2P, check out related reports by clicking on these links:
In Search of Supply Chain Excellence
Improving Supplier Reliability
Supply Chain Visibility in Business Networks
Packaging Artwork: An Important Supply Chain Process
The Global Supply Chain Ups the Ante for Risk Management

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About Supply Chain Insights LLC
Founded in February 2012 by Lora Cecere, Supply Chain Insights LLC is beginning its fifth year of
operation. The Company’s mission is to deliver independent, actionable, and objective advice for
supply chain leaders. If you need to know which practices and technologies make the biggest
difference to corporate performance, we want you to turn to us. We are a company dedicated to this
research. Our goal is to help leaders understand supply chain trends, evolving technologies and
which metrics matter.
About Lora Cecere
Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights LLC and
the author of popular enterprise software blog Supply Chain Shaman currently read
by 15,000 supply chain professionals. She also writes as a Linkedin Influencer and
is a a contributor for Forbes. She has written five books. The first book, Bricks
Matter, (co-authored with Charlie Chase) published in 2012. The second book, The
Shaman’s Journal 2014, published in September 2014; the third book, Supply
Chain Metrics That Matter, published in December 2014; the fourth book, The
Shaman’s Journal 2015, published in September 2015, and the fifth book, The Shaman’s Journal
2016, published in September 2016. A sixth book will publish in September 2017.
With over 14 years as a research analyst with AMR Research, Altimeter Group, and Gartner
Group and now as the Founder of Supply Chain Insights, Lora understands supply chain. She has
worked with over 600 companies on their supply chain strategy and is a frequent speaker on the
evolution of supply chain processes and technologies. Her research is designed for the early adopter
seeking first mover advantage.