P2P Maturity

Principles and Frameworks

Dr. Kevin McCormack
July, 2007

Business Process Maturity:

A business process is a set of logically related tasks performed to achieve a
defined business outcome that have customers and that cross organizational
(and often company) boundaries. The concept of business process maturity
proposes that a process has a lifecycle that is assessed by the extent to
which the process is explicitly defined, managed, measured, and controlled.
This is the highway for the practices.

Practice Maturity:
A practice is generally defined as a procedure or a set of specific steps for
accomplishing a desired outcome. Practice maturity reflects the extent to
which the practice is explicitly defined, managed, measured, and controlled.
It also reflects the level of sophistication (depth and breadth) in the
deployment of the practice. Practices are the vehicles you use and how
you drive the highway.

Enablers:
An enabler is defined as an infrastructure element, either technology or
organization, that enables process or practice performance. Enabler
maturity reflects the increasing capability offered by the enabler and the
breadth of its offering (inter functional, cross functional, cross company).

The Supply Chain Maturity Model:

Best Processes, Practices, & Enablers
Optimized

Competition is based upon multi-firm networks. Collaboration between legal entities is routine to
the point where advanced process practices that allow transfer of responsibility without legal
ownership are in place. Trust and mutual dependency are the glue holding the extended
network together. A horizontal, customer-focused, collaborative culture is firmly in place.

Leveraged

The company, its vendors and suppliers, take cooperation to the process level. Organizational
structures and jobs are based on process, and traditional functions, as they relate to the supply chain,
begin to disappear altogether. Process measures and management systems are deeply imbedded in
the organization. Advanced process management practices take shape.
The breakthrough level. Managers employ process management with strategic intent. Broad
process jobs and structures are put in place outside of traditional functions. Cooperation between
intra-company functions, vendors and customers takes the form of teams that share common
process measures and goals.

Defined

Ad Hoc

Process Maturity

Managed

Basic processes are defined and documented. Changes to these processes must now go through a formal
procedure. Jobs and organizational structures include a process aspect, but remain basically traditional.
Representatives from functions meet regularly to coordinate with each other concerning process activities,
but only as representatives of their traditional functions.

Processes are unstructured and ill-defined. Process measures are not in place and the jobs and
organizational structures are based upon the traditional functions, not horizontal processes.
Individual heroics and working around the system are what makes things happen.

SCM Maturity
Relationships

Inter- company

High

y
rit trol
u
at n
M / Coy

y
int
a
M acy ilit ert
C
S ccur Stab ty / C cy
s
i
A
e
bil cien nes
a
t
nc
e
y
c
f
t
i
a
v
i
i
E ct bil rm
ed
s
e a o
Pr
Ef Cap Perf orp
C
ss it d
e
n
si spr
Bu E

SCM Focus

SCM Maturity

High

Inter-functional

Internal - within
functions

Low
Low

SCM Maturity

Maturity

Capability

Richness

Consistency

Relationships
Level 5

Optimized Capability and Performance

continuously improves in Level 5
Organizations (90/10).

Level 4

Reliable / Capable - Based on quantitative

understanding of process and product,
performance is tight and targets shift in
Level 4 organizations. (80/20)

Level 3

Repeatable - with well-defined and

measured processes, performance
improves in Level 3 organizations (60/40)

Level 2

Level 1

Basic Reliability - plans based on past

performance are more realistic in Level 2
Organizations. (50/50)

Unreliable - schedule and cost targets

are typically missed by Level 1 organizations.
(10/90)

Procure to Pay
Generic High Level Process Map
Projects

Maint

Operations

Start

Forecast
Plan &
Coordinate

End

Need
Clarification/
Specification

Sourcing
Decision

Contract / PO
Generation

Supplier
Need
Fulfillment

Enablers: Finance, Legal, HR, IT

Receive
Material
& Documents

Settle and
Pay

Procure to Pay (P2P) Process Description: Maturity Level 1 (General)

Level 1: Ad Hoc. The supply chain its practices are unstructured and ill
defined. Process measures are not in place. Jobs and organizational
structures are not based upon horizontal supply chain processes.
Process performance is unpredictable. Targets, if defined, are often
missed. SCM costs are high. Customer satisfaction is low. Functional
cooperation is also low.

Processes are undefined, undocumented and not understood.

Process owners are not identified.

Basic process measures are unidentified.

Process teams do not exist. Individuals reside totally within functions.

All investments are allocated by functions or business units.

Procure to Pay (P2P) Process Description: Maturity Level 1 (Detail)

P2P is a very manual, unpredictable, time consuming process that is largely

undefined.
No forecasting or planning takes place.
Specifications are done each time in response to a request. Suppliers are not
involved in development of specifications.
Sourcing decisions are done in response to requests with each requestor or
procurement manager selecting their own preferred supplier.
Suppliers are not selected through any formal process.
Ordering and Receiving are not connected resulting in extensive manual
matching and resolution before payment.
Information systems are manual and decentralized. Information resides on
spreadsheets in individual computers.

Procure to Pay (P2P) Process: Maturity Level 1 Ad Hoc

Corporate
Committee

Internal
Request
Customers

0010.1
Need
Clarification/
Specification

0010.2
Sourcing
Decision

0010.3 a
Contract /
PO
Generation

Procurement

0010.1
Need
Clarification/
Specification

0010.2
Sourcing
Decision

0010.3 a
Contract /
PO
Generation

IT
Systems

0010.4
Exception?

Yes

No

0010.7 a
Check
&
Documents

End
Yes
0010.8
Exception?

0010.9 a
Settle and
No Pay

0010.5
Contract /
PO
Exceptions

Shared
Services

Suppliers

0010.7 b
Receive Material &
Services &
(Documents)

0010.3 b
Contract /
PO
Generation

Document
Repository

0010.6
Execution

PO
System

0010.9 b
Settle and
Pay

Settle and
Pay (AP)

Procure to Pay (P2P) Process Description: Maturity Level 2 (General)

Level 2: Defined. Basic SCM processes are defined and documented. Jobs
and organizational basically remain traditional. Process performance is more
predictable. Targets are defined but still missed more often than not. Overcoming
the functional silos takes considerable effort due to boundary concerns
and competing goals. SCM costs remain high. Customer satisfaction has improved,
but is still low. To move to the next level the following must be in place:
Processes are defined, documented and understood.
Process owners are clearly identified.
Basic process measures are identified and in use.
Process teams are defined but still secondary to functions.
Some investments are allocated by process not functions or business units.

Procure to Pay (P2P) Process Description: Maturity Level 2 (Detail)

P2P is defined with some automation but still unpredictable with >50% of the
purchases in a time consuming process that is largely uncontrolled.
Basic forecasting and planning takes place but by the P2P people without customer
or supplier input. 40% accuracy is typical.
Specifications are mostly done each time in response to a request but some key
suppliers have annual agreements with releases being generated by procurement.
Only these key suppliers are involved in development of specifications. Others
are asked for input on occasion.
Sourcing decisions are mostly done in response to requests with some approved
supplier lists and annual agreements guiding each requestor or procurement
manager. Buying outside of these agreements (maverick spend) is frequent.
Ordering and Receiving are connected with some key materials and suppliers but
most (>50%) orders result in extensive manual matching and resolution before
payment.
Information systems are implemented in some areas and for some purchases but
>50% are still manual in some stage (selection, order, receipt, matching payment).

Procure to Pay (P2P) Process: Maturity Level 2 - Defined

Corporate
Committee

0010.1 c
Forecast
Plan &
Coordinate
0010.2 b
Need
Clarification/
Specification

Internal
Customers

Procurement

0010.3 b
Sourcing
Decision

0010.1 a
Forecast
Plan &
Coordinate

0010.2 a
Need
Clarification/
Specification

Shared
Services

0010.2 c
Need
Clarification/
Specification

Suppliers

0010.2 d
Need
Clarification/
Specification

IT
Systems

Forecast
Plan &
Coordinate

Storage

0010.6 b
Receive
Material &
Services
0010.3 a
Sourcing
Decision

0010.4 a
Contract / PO
Generation

0010.4 b
Contract /PO
Generation

Contract
Repository

0010.6 a
Check
&
Documents

End
Yes
0010.7
Exception?

0010.5
Execution

PO
System

0010.8 a
Settle and
No Pay

0010.8 b
Settle and
Pay

Settle and
Pay (AP)

Procure to Pay (P2P) Process Description: Maturity Level 3 (General)

Level 3: Linked (Managed) This represents the breakthrough level. Managers employ
SCM with strategic intent and results. Broad SCM jobs and structures are put in place outside
and on top of traditional functions. Cooperation between intra-company functions, vendors and
customers takes the form of teams that share common SCM measures and goals that reach
horizontally across the supply chain. Process performance becomes more predictable and
targets are often achieved. Continuous improvement efforts take shape focused on root
cause elimination and performance improvements. SCM costs begin decreasing and feelings
of esprit de corps take the place of frustration. Customers are included in process improvement
efforts and customer satisfaction begins to show marked improvement. To move to the next level
the following must be in place:
Process measure are clearly related to job responsibilities.
Process performance goals are defined and progress is tracked.
Process performance is predictable (variability reduced).
Process measures are clearly linked to strategy
The performance management process is documented (written description, flow chart) and
understood by the organization.
A formal process performance review process takes place on a regular basis.
The owner of the performance management process is clearly identified.
Process teams are clearly identified and are equal to functional groups.
Suppliers performance is measured (with feedback and improvement actions).
Suppliers are informal members of process teams and asked for input.
IT systems support the gathering and reporting of process performance.

Procure to Pay (P2P) Process Description: Maturity Level 3 (Detail)

P2P is defined, measured and mostly under control. Most (>80%) process steps are
automated and predictable but the system is mechanistic and sometimes unable to
respond to changes and unique requirements.
Effective forecasting and planning takes place for 80% of the materials and services
with customer or supplier participation. 90% accuracy at the family level is typical.
Standard Specifications (contracts, SLAs too) are in place for 80% of the materials
and services. Strategic (consolidated) suppliers handle most (80%) of the purchases.
Most suppliers are involved in the development of specifications.

Sourcing decisions are strategic and done in advance of requests. Approved supplier lists
and annual agreements guide requestors or procurement managers. Buying outside
of these agreements (maverick spend) is infrequent. Supplier performance is
measured and used to revise agreements.
Ordering and Receiving are connected (and automated) with most materials and
suppliers but some (>20%) orders result in extensive manual matching and resolution
before payment. The system has difficulty responding to unique requests or changes
in the middle of the cycle.
Information systems are implemented in all areas and intended for all purchases
(automated, mechanistic) but <20% are still a problem in some stage
(selection, order, receipt, matching payment) due to changes and unique requirements.

Procure to Pay (P2P) Process: Maturity Level 3 - Managed

Measure & Manage Process

Corporate
Committee

0010.1 c
Forecast
Plan &
Coordinate

Internal
Customers

0010.1 b
Forecast
Plan &
Coordinate

Procurement

0010.1 a
Forecast
Plan &
Coordinate

IT
Systems

Reactive Exception Management

0010.2 b
Need
Clarification/
Specification
0010.2 a
Need
Clarification/
Specification

0010.6 b
Receive
Material &
Services
0010.3 a
Sourcing
Decision

0010.6 a
Check
& Documents

0010.4 a
Contract / PO
Generation

Yes
0010.7
Exception?

No

0010.8 a
Settle and
Pay

0010.2 d
Need
Clarification/
Specification

Shared
Services

Suppliers

0010.3 b
Sourcing
Decision

0010.1 d
Forecast
Plan &
Coordinate

Forecast
Plan &
Coordinate

0010.2 c
Need
Clarification/
Specification

Spec
mgmt

0010.4 b
Contract / PO
Generation

Contract
Repository

0010.5
Execution

PO
System

Supplier Performance Management

0010.8 b
Settle and
Pay (End)

Supplier
Performance

Settle and
Pay (AP)

Procure to Pay (P2P) Process Description: Maturity Level 4 (General)

Level 4: Integrated (Leveraged). The company, its vendors and suppliers, take cooperation to
the process level. Organizational structures and jobs are based on SCM procedures, and traditional
functions, as they relate to the supply chain, begin to disappear altogether. SCM measures and
management systems are deeply imbedded in the organization. Advanced SCM practices, such
as collaborative forecasting and planning with customers and suppliers, take shape. Process
performance becomes very predictable and targets are reliably achieved. Process improvement
goals are set by the teams and achieved with confidence. SCM costs are dramatically reduced
and customer satisfaction and esprit de corps become a competitive advantage. To move to the
next level the following must be in place:
Supplier performance measures and goals are clearly identified and integrated into the
performance measurement system.
A cross functional and cross company performance management team is identified and operating.
Responsibility for process measures and goals are team based (including suppliers)
People in different functions and companies cooperate to improve process performance.
Customer driven performance measures are identified and dominate the performance
management system.
Suppliers routinely collaborate with the process teams to improve performance.
Customers are asked to be involved with improving process performance.
Suppliers regularly self report performance.
Process goals are routinely met or exceeded.
IT systems connect with suppliers and customers systems for data gathering and reporting.

Procure to Pay (P2P) Process Description: Maturity Level 4 (Detail)

P2P responsibility and authoring is shifted from procurement to customers and suppliers. Most
purchase are totally automated and monitored through spot checks and measurement systems.
Multiple channels can respond to unique request and changes.
Automated forecasting and planning takes place for all materials and services with customer or
suppliers owning the process. 99% accuracy at the family level is typical.
Standard Specifications (contracts, SLAs too) are in place for all materials and services. Strategic
(consolidated) suppliers handle >90% of the purchases. Suppliers lead the development of
specifications and continuous improvements.
Sourcing decisions strategic and done in advance of requests. Approved supplier lists and annual
agreements guide requestors or procurement managers. Buying outside of these agreements
(maverick spend) is infrequent. Supplier performance is measured by suppliers themselves and
used to continuously improve agreements. Suppliers often make the detailed decisions on unique
items and changes and inform procurement.
Ordering and Receiving are integrated and automated with all materials and suppliers. Multiple
paths are available depending upon dynamics and risk. Responsibility and authority is shifted to
customers and suppliers. Unique items and changes move through as quickly as standard
purchases.
Information systems are implemented in all areas and used for all purchases (automated,
mechanistic) as well as for changes and unique requirements. IT systems have multiple paths
matched to the dynamics of the request.

Procure to Pay (P2P) Process: Maturity Level 4 - Leveraged

Measure & Manage Process

Corporate
Committee

0010.1 d
Forecast
Plan &
Coordinate

Internal
Customers

0010.1 a
Forecast
Plan &
Coordinate

Procurement

0010.1 b
Forecast
Plan &
Coordinate

Shared
Services

0010.1 c
Forecast
Plan &
Coordinate

Suppliers

0010.1 a
Forecast
Plan &
Coordinate

IT
Systems

Forecast
Plan &
Coordinate

Yes

0010.2 a
Exception?

No

Proactive Exception Management: Exceptions <5%

0010.3 b
Contract /
PO
Generation

0010.4 a
Contract
Execution

0010.2 b
Exception
Management

Early CI

0010.3 a
Contract /
PO
Generation

Contract
Mgmnt

Supplier
Performance

0010.4 b
Contract
Execution

PO /Recpt
System

Settle and
Pay (AP)

0010.5
Audits and
Review

Procure to Pay (P2P) Process Description: Maturity Level 5 (General)

Level 5: Extended (optimized). Competition is based upon multi-firm supply chains.
Collaboration between legal entities is routine to the point where advanced SCM
practices that allow transfer of responsibility without legal ownership are in place.
Multi-firm SCM teams with common processes, goals and broad authority take shape.
Trust, mutual dependency and esprit de corps are the glue holding the extended supply
chain together. A horizontal, customer-focused, collaborative culture is firmly in place.
Process performance and reliability of the extended system are measured and joint
investments in improving the system are shared, as are the returns.
Suppliers are active and formal members of the process teams.
Suppliers share responsibility for performance improvement.
Suppliers share in the rewards of performance improvements.
Customers share responsibility for performance improvement.
Customers share in the rewards of performance improvements.
Suppliers and customer IT systems are deeply connected (two way interaction) with
your IT systems.
Suppliers, customers and the process team members feel like they are all in this
together in regards to process performance and improvement.
Process management and optimization across the network is a major focus.

Procure to Pay (P2P) Process Description: Maturity Level 5 (Detail)

A multi-company procurement management team is formed to manage the process.
99% of purchases are totally automated and monitored through spot checks and
measurement systems. Multiple channels automatically respond to unique request and changes.
Automated forecasting and planning takes place for all materials and services with the team
owning the process. 99% accuracy at the family level is typical.
Standard Specifications (contracts, SLAs too) are in place for all materials and services. Strategic
(consolidated) suppliers, represented by the team, handle >99% of the purchases.
The team leads the development of specifications and continuous improvements.
Sourcing strategy is a continuous process. Approved supplier lists and on-going, multiyear
agreements guide the process. Buying outside of agreements (maverick spend) is non-existent.
Supplier performance is measured by suppliers themselves, monitored by the team and used to
continuously improve the process and agreements. Suppliers make the detailed decisions on
unique items and changes and inform the team.

Ordering and Receiving are integrated and automated with all materials and suppliers. Multiple
paths are available depending upon dynamics and risk. Responsibility and authority is shifted mainly
to suppliers. Unique items and changes move through as quickly as standard purchases.
Information systems are connected between companies and used for all purchases (automated,
mechanistic) as well as for changes and unique requirements. IT systems have multiple paths
matched to the dynamics of the request.

Procure to Pay (P2P) Process: Maturity Level 5 - Optimized

Procurement Team:
Procurement Team Manager,
Internal Customers,
Suppliers,
Shared Services

Corporate
Committee

IT
Systems

0010.1 b
Forecast
Plan &
Coordinate

Proactive Exception Management: Exceptions <1%

Yes
0010.1 a
Forecast
Plan &
Coordinate

0010.2 a
Exception?

No

0010.4
Execute
Plan

0010.2 b
Exception
Management

0010.5
Audits and
Review

Continuous Improvement
Management

Forecast
Plan &
Coordinate

Contract
Mgmnt

Supplier
Performance

P2P Process Management System

Settle and
Pay (AP)