At Zycus Horizon last month, Richard Waugh led a presentation and discussion (which I’ll cover in a separate series) looking at the provider’s approach to “guided buying” and eProcurement. Sharing the stage was an early customer, The Mentor Network, who spoke about their experience selecting and rolling out the Zycus tool. Richard framed this talk, however, with some of the latest metrics from Hackett Group regarding P2P performance efficiency.
Anyone building a business case for new or expanded investment in P2P will find these updated metrics and benchmarks useful to say the least. We list these metrics below.
- Purchase order (PO) automation: World-class organizations, by Hackett’s definition, achieve levels of PO automation of approximately 85% (i.e., touch-less POs). Peer group companies (average) achieve just over 50%.
- Percent of POs with “no rework”: World-class organizations hit 90% of on the metric. Peer group organizations come close at around 85%.
- Percent of invoices with a “first pass match”: World-class organizations exceed 90% compared with peer group performance which comes in at 90%.
- PO-based Invoice approval: World-class organizations have an average 3-day cycle day for PO-based invoice approvals. Peer group companies come in at 15 days.
- Ad-Hoc Requisition to Purchase Order: World class = 2 days compared with 3 days for peer group.
- Catalog requisition to PO: World-class organizations achieve a cycle time of 3.5 hours compared with 1 day for peer group performance.
The sum of these metrics suggests that world-class procurement organizations not only drive greater efficiency when it comes to avoiding unnecessary work and rework in for PO and invoice approval/cycle time processes, but also that the time to complete a transaction is accelerated from a business user perspective. One should also consider the effectiveness gains that this speed can enable, such as being able to finance an early payment discount over a longer period to capture the maximum discount possible.