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- This is it.
The fast-moving consumer goods (FMCG) industry is highly competitive, requiring continuous improvement and innovation to stay ahead. One FMCG producer recognised the importance of improving their procure-to-pay (P2P) process to enhance financial performance. Using process mining, they analysed the process and generated automation ideas.
However, to evaluate the impact of changes and gain stakeholder buy-in, they required a solution that could connect the process to commercial outcomes and strategic objectives. In this case study, we'll examine how this FMCG producer utilised Silico’s Business Process Simulation (BPS) platform to future-proof their P2P process and maximised the impact of process changes on strategic objectives.
By harnessing the power of simulation, they generated an additional profit of $3.3m.
P2P processes significantly affect strategic business objectives
While many P2P process improvements focus on reducing costs by limiting unnecessary, duplicate, and maverick buying, the significance of P2P processes in businesses is often underestimated. P2P processes ensure that the right goods and services are procured at the correct time, quality, and price. They allow companies to respond quickly to changes in demand while minimising excess inventory. However, if inventory coverage is restrictive and P2P processes are slow, customers may turn to competitors due to unavailable stock. This problem was further exacerbated by supply chain disruptions during the pandemic.
The FMCG company in this case study highlights the significant impact of inventory shortages on revenue. The company estimated it lost $2 million in revenue due to inventory shortages in 2022, and anticipates that this number will continue to grow as product demand increases throughout 2023 and the beginning of 2024. As a result, the company recognised the importance of improving its P2P processes to enhance financial and operational resilience.
Process mining can generate ideas for P2P automation but can’t quantify its far-reaching implications
The transformation team of the FMCG company decided to improve their order management process by utilising process mining and automation. The team used process mining to obtain a valuable picture and analytics of their as-is process. By analysing the data provided by process mining, the team could identify the most impactful activities to automate: Level 1 reposition approvals and creating purchase order items.
Looking at different groups of purchase requisitions and orders, the team identified potential improvements:
- An automation that covers about 20% of level 1 requisition approvals
- An automation that covers another 15% of level 1 requisition approvals
- An automation that generates purchase items automatically for about 40% of purchase orders
However, to assess the impact of changes to the P2P process, prioritise them, and convince stakeholders, they needed a solution that could capture the impact of process changes on inventory levels, production, sales, and financials. The team needed to combine process mining - focusing on historical analysis of just the process - with advanced, holistic Business Process Simulation.
Silico can transform process mining analysis into prescriptive, actionable insights in just 4 weeks
Silico enabled the company to move from process mining to action in a proof-of-value over just four weeks through the following steps:
- Automatically importing the process mining graph and analytics to develop a quantitative Digital Twin of the process
- Adjusting and testing the Digital Twin to ensure insights can be trusted, and incorporating additional modules that include case volume forecasting, a production and inventory model, and a financial model
- Conducting forward-looking simulations to identify where issues will occur in the future and what impact the identified automation candidates have
- Iterating on process changes to act on side-effects and unintended consequences of automation identified through the previous simulations
Predict the impact of your Procure-to-Pay process on connected processes and strategic business objectives
A slow P2P process leads to $5.4m in lost revenue due to insufficient stock
Using Silico’s powerful simulation engine, the team forecasted that as more orders are received, fulfilment declines from around 98% to 95%, resulting in lost revenue of nearly $5.4 million. To make a strong business case and encourage immediate action, the transformation team implemented a simple dashboard that sits on top of the Process Twin. Using the dashboard, the team could demonstrate how growth affects the P2P process and the business as a whole, all the way down to the bottom line and the KPIs that stakeholders care about the most.
The team further discovered that almost all of the backlog of purchase orders in the process was with the procurement team, rather than the warehouse and accounts payable team. This insight helped the transformation team to focus their time and budget on making targeted improvements to the procurement process to address bottlenecks and improve efficiency.
Prescribe the optimal combination of process changes for maximal impact
Save $450k and months of transformation team time by focusing on optimal improvements
The transformation team leveraged Silico to experiment with various process variants and automation levels, enabling them to iterate through multiple DMAIC cycles in minutes. Using this approach, they identified the optimal combination of changes and avoided implementing insufficient or low-impact solutions. For instance, the team discovered that lower automation rates for level 1 requisition approvals were sufficient to fix the process.
In contrast, automating more cases did not significantly improve commercial KPIs when considering transformation costs. This insight allowed the team to focus their efforts and avoid spending time and $450k of budget on low-impact changes that would have disappointed and dissatisfied stakeholders.
Through this quick experimentation in Silico, the transformation team also identified that increasing automation in the procurement team pushes the problem to the warehouse team, which will now build up significant backlogs. This is the reason why further automation for the procurement team was not impactful. As a result, the transformation team redirected their focus, in line with the goal of streamlining the entire P2P process for maximal impact on commercial outcomes like revenue and profit.
Predict side effects and prescribe the changes that optimise your business holistically
Unlock additional profit of $3.3m through a streamlined P2P process
The transformation team then reordered and removed activities to reduce the manual handling times of receiving goods at the warehouse. This optimisation ensures that the entire P2P process is prepared for expected growth and increased processing requirements. By linking the P2P process to inventory levels, production requirements, and financial statements, the team was able to make a convincing business case to stakeholders. The team anticipated that a more efficient P2P process will allow them to respond to changes in demand more quickly, improve the firm’s ability to fulfil orders, and result in an additional profit of $3.3m.
Optimise your process for maximal impact on business outcomes
Silico offers a powerful solution for businesses that strive to optimise their processes and achieve their targets at minimal costs. In just four weeks, Silico can use process mining discovery and analytics to develop a Business Process Simulation that connects your process to KPIs and objectives that truly matter for your business, including financials, customer satisfaction, and ESG performance.
With Silico, your team can experiment with process changes in a virtual, risk-free environment and evaluate their impact. By identifying the optimal combination of changes required to achieve targets, you can streamline your processes and increase profitability. Get in touch today and learn how we can help you optimise your business.
If you'd like to read the full case study, and keep it as a PDF option, please download the P2P Case Study below.