Contracts - the Missing Link: Utilizing Contract Management to Close the Gap on Savings and Compliance

Contracts - the Missing Link: Utilizing Contract Management
to Close the Gap on Savings and Compliance
Moderator: Florain Seebauer, Senior Solution Manager - SAP Ariba
Theresa Smart, ITT Transformation Business Process Manager - Schlumberger
Amy Forbes, Director of Procurement Operations - UnitedHealth Group
March 16, 2016
Public

© 2016 SAP SE or an SAP affiliate company. All rights reserved. 10Public
Panelists
Theresa Smart
ITT Transformation
Business Process Manager
Schlumberger
Amy Forbes
Director of Procurement
Operations
UnitedHealth Group

Theresa Smart, ITT Transformation Business Process Manager/ March 15, 2016
How Schlumberger Achieved Sourcing Process
Excellence through Ariba Contract Management Solution

© 2015 Schlumberger. All rights reserved
An asterisk is used throughout this presentation to denote a mark of Schlumberger.
Measurable Impact is a mark of Schlumberger. Be Certain is a mark of Schlumberger.
Other company, product, and service names are the properties of their respective
owners.
About Schlumberger:
Schlumberger is the world’s leading supplier of technology, integrated project
management and information solutions to customers working in the oil and gas
industry worldwide. Employing approximately 115,000 people representing over 140
nationalities and working in more than 85 countries, Schlumberger provides the
industry’s widest range of products and services from exploration through production.

An assessment of existing Procurement & Sourcing practices
surfaced significant challenges requiring a change in direction…
• Standardized workflows that enable
better enforcement of gate reviews
• Better record of contracting activities
for auditing and internal controls
• Increased responsiveness
• Reduced administrative work
• Accuracy on measuring and
recovering control
• Better knowledge sharing
• Better service delivery to stakeholders
• Improved negotiation positions
with suppliers
…To desired future state
• Inconsistent, inefficient processes
• Unable to ensure compliance of
contracts management processes
• No single contracting tool
• Duplicate work across contracting
teams
• Lack of complete visibility into
contracts being generated
worldwide
• Unable to assess productivity
performance
• Unable to achieve a strategic
competitive advantage
• Little collaboration & engagement
across business units and stakeholders
From current state…
WhatchallengesdoIfaceonadaily
basis?
What’sinitformeforachange?

…and revealed the need for a common robust system that can help structure
and enforce a global common procurement & sourcing process
…with a comprehensive focus covering all aspects of the P&S
process
SAP Ariba has been recognized in a
2015 Gartner survey as the best
strategic sourcing suite…
6) Invoice
Invoice Pro
Process
Invoice
5) Procure
Procure to Order
Request Approve Receive
7) Pay
Discount
Payment Mgt
Manage
Cash
Spend
visibility
Analyze
1) Sourcing
Ariba
Discovery
Ariba Sourcing Pro
Discover Plan
Tender/
Negotiate
2) Supplier
contracting
Ariba
Contract Pro
Contract
4) Procurement
content
Catalog
Content
Broadcast
Catalog
Category
management
Source to Contract
Procure to Pay
SIPM
3) Supplier
management
Supplier Info
and KPI
tracking
The end-to-end Source to Pay
will be enabled by SAP Ariba
through a phased approach
between 2014-2017

Key value drivers and value at stake
Contracting
initiatives
Use of best
practices
Productivity2
Contract
Process
Efficiency1
Full set of KPIs to track value capture
Non-
financial
Reduced risk
exposure
3
• Contracts set to expire in 90, 60 and 30 days
• Number of contracts amendments
• Increased regulatory compliance (e.g., fewer penalties) from document
and message tracking
• Increased compliance with internal policies (e.g., contracts template
selection, mandatory information to request contracts)
• Greater visibility into residual risk exposure after T&C from built-in risk
analysis tool
Actionable levers
• Number of contracts per Area by Contract Type
• Contracts personnel managing contracts through standardized
templates templates and workflow management, including approvals
• Average contracts processed per person per month
• Contracting personnel processing contracts requests as a result of
sourcing events that properly awards business to approved suppliers
• Integration of sourcing and contracts process resulting in synergistic
corporate benefits allowing continuous improvement and adoption of
lessons learned
• Template usage by Area
• Improved contract adherence through notification of key events
• Number of contract requests as a result of sourcing events• Increased visibility through workflow management and standardized
contracts templates
• Enable structured contracting process, including negotiation and
administering long-term contracts – contracts management process
• Contract Cycle Time by Contract Type (in days)• Increased collaboration between sourcing specialist and contracts
personnel and adherence to an organized process workflow
• SAP Ariba enhances global visibility of sourcing plans and contracts
initiative with suppliers
• Number of contract requests per Area per Contract Type
Value drivers

Additional enhancements after Go-Live
Contracts migration
~64,000 agreements were migrated to SAP Ariba with the assistance of a third party supplier
Project Plan was achieved by leveraging existing meta data (contract attributes) from our legacy
system, and analyzing agreements by contract type and term (expiration)
Contracts were migrated in Test environment before loading them to Production
Detailed communication was required to the contracts community before, during and after
project completion
Migration of contracts with third party supplier provided access to contracts data that was unknown,
e.g. considerable amount of agreement are in several languages

Additional enhancements after Go-Live
Electronic signature
6
0.5
0
1
2
3
4
5
6
7
Paper Signature in Ariba Electronically Signature Ariba
91%
Improvement!
Paper vs. Electronic Contracts
Days
• Signature process on average takes
~6 days. DocuSign has reduced the
turnaround time to half a day
• The electronic signature implementation
has reduced time and expense of
shipping and handling, improving the
overall efficiency of the process
• Electronic signature has been
implemented in 3 countries and plan is
to roll it out in other several countries
“With a couple clicks, a contract is sent to the signatories and it gets
signed in matter of minutes or seconds. This process is extremely
convenient, fast, easy and seamless. DocuSign will improve the
efficiency of the turnaround time of the contracts signature process,
reducing printing, courier handling, and archival costs.” Global IT Security
34
77
136
192
Contract Type 4 Contract Type 2 Contract Type 1 Contract Type 3
Number of Contracts Executed
Electronically (2015)

Change and support
Support tools
Champions
Calls
Change
Materials
QRG+FAQs
Change
Sessions
Helpdesk
Support
ilearn
Modules
Ariba S2C
Pre/Post
Deployment
calls
Summary Documents
Quick Reference Guides
Practice and Refresher
Online learning videos
(max. 10 minutes each)
SAP Ariba support email
distribution list
Weekly, bi-monthly or
monthly calls
Documents
Calls
Online Support
Bi-weekly/monthly follow up

Change and support
Change management
Summary document as supplement to
Quick Reference Guides
• Easy to use
• Trigger reminders rather than full training
• High level view of contract process in SAP Ariba
Practice sessions with areas
• Focusing on the Change
• Engage users by leading the training
Process documenting
• Contracts process to align Procurement and
Contracts functions

© 2016 SAP SE or an SAP affiliate company. All rights reserved. 20Internal
Change management
Survey – continuous improvement
• The implementation team developed
a survey in order to identify
opportunities of improving and to
‘hear’ what the users might be
struggling with
• The goal is to determine and target
focus to the sections of Ariba
Contracts where the most challenges
are being faced
• The survey’s results were shared and
improvement action items were put
in place to make sure the efforts were
focused where most needed, e.g.
remedy support ticketing system was
put in place
2%
8%
90%
Have you created contract workspaces in Ariba?
N/A
No
Yes
52%
27%
21%
If you are a part of the pilot do you utilize the
electronic signature?
N/A
No
Yes

Training assessment and feedback
Self-assessment feedback
Students are asked to rate themselves on a scale of 1 to 5, based on the key lessons they learned in
training (i.e. I can create a Contract Workspace, I can create and download a pre-configured report, etc.)
3.8
4.5
4.8 4.6
4.3
4.6 4.5
4.2
4.4
0
1
2
3
4
5
6
AVERAGE
Nov-14 Jan-15 Feb-15 Apr-15 May-15 Jun-15
“Training provided is a
huge asset in helping
me navigate Ariba ”
“Each step for creating
a Contract Workspace
was very clear”
“Excited about having an
electronic process to
measure time delays and
improve overall process ”
“The contract request will
force business folks to
engage P&S prior to
requesting agreements”

Results
Ariba Contract Management reports – efficiency as of February 26, 2016
AVERAGE CYCLE TIME IN DAYS
COUNT OF ELECTRONIC SIGNATURE BY CONTRACT TYPE

Results
Reporting accomplishments
Clarity: Clearer and more accurate reports, providing details by various
parameters (Month, Region, Group, Category)
Contribution: Building reports that allowing other groups to
track KPOs
Contracts data: Ability to view all contracts with suppliers in a single
system/repository, company wide
Contract Details: Full picture of contract details including contract
type, term, parties’ legal entity, etc.
2
Contract Workspace (CW) is
created once the Contract Request
(CR) is received and approved
240
601
1856
3064
1668
0
500
1000
1500
2000
2500
3000
3500
Q1-15 Q2-15 Q3-15 Q4-15 Q1-16
Contract Request
146
476
1803
3189
1695
0
500
1000
1500
2000
2500
3000
3500
4000
Q1-15 Q2-15 Q3-15 Q4-15 Q1-16
Contract Workspace

Overall project challenges
Adoption: Users are reluctant to accept the change.
Significant 1-1 user assistance and support is required.
Areas with low management support have low utilization.
Intermediate solution: Review utilization and process gaps then provide additional support or
solutions as needed (from core team)
Long-term solution: Transfer accountability to support users to regional champions/experts.
Requires management support
Management Support: Users are adapting to the sourcing
procedure compliance and have many process related
questions as well as terminology.
Intermediate solution: Provide support and direct questions to the Contracts Function on the
case-by-case basis
Long-term solution: Single point of contact or a committee to advise and
provide support
Champions/Experts: Are not fully committed to the change
and/or supporting their teams
Need to make the champions/experts accountable of this responsibility by adding this role as a
specific objective. Management to send a clear message to managers to commit the chosen
champions to their regions and to be part of their objectives
Suppliers: Use by local suppliers (language), acceptance of
using Ariba Contracts to respond
Significant component of business is done with localized suppliers. Suppliers who do not
transact in English have trouble since some communications from SAP Ariba are sent in
English. Suppliers reluctant to access a system to input their information (as opposed to
providing it via email)
Economic Downturn The deployment plan had to be modified multiple times to adjust timings and account for travel
capabilities of the affected region. Several additional training venues were added beyond the
original plan. Still in some cases personnel could not attend and have struggled significantly
since then.

Lessons learned
1. Use SAP Ariba to ensure process compliance
2. Focus on delivering 80% immediately and emphasize continuous
improvement (suggestions and requests coming from the function directly
and incorporated into design)
3. Ensure that milestones are linked to performance goals (KPIs from
SAP Ariba to be incorporated to employee performance KPOs)
4. SAP Ariba module go-live happened immediately after training (so
personnel retain knowledge and stay fresh)
5. Change management, communication and support are critical elements
for success

Thank you
Contact information:
Theresa Smart
ITT Transformation Business
Process Manager
Schlumberger
smartt1@slb.com

Realizing Contract Value
Amy Forbes, UnitedHealth Group, March 16, 2016

UnitedHealth Group Procurement Overview

UnitedHealth Group procurement overview
Enterprise Sourcing & Procurement (ES&P)
Delight our customers by offering
simple, efficient, value-added
procurement solutions and
improve business engagement by
executing and marketing our ES&P
value proposition
Outstanding Customer
Service
Mission
“We deliver collaborative, constituent-based,
innovative sourcing and procurement solutions that
manage risk and leverage our size and scale to
advance the integrity, quality, competitiveness and
agility of UnitedHealth Group”
Maximize Value
Continuously improve and optimize
the tools and processes associated
with the procurement lifecycle through
innovation and collaboration. Ensure
our teams are engaged and have the
tools and training needed
to succeed.
Common, Innovative
solutions
Continue to create competitive
markets for ES&P managed spend
that maximizes the value realized
throughout the procurement life
cycle for the categories we support.
Maximize Value
Optimize the structure and
framework required to identify
and manage risks introduced
by third party suppliers and
govern risk throughout the
Supply Chain
Mitigate Risk

UnitedHealth Group Procurement overview
ES&P by the numbers
~ $5.9 Billion Spend in ES&P Scope
~ $700 Million in Run-rate Savings
~ 4,500 Risk Vendor Engagements
~ 9,100 Suppliers in ES&P Scope
~ 4,800 Ariba Contracts per Year
~ 16,000 Ariba Purchase Orders per Month
~ 207 Onshore Employees
~ 40 Offshore Employees
BUSINSS JUSTIFICATION FOR A
CENTRALIZED PROCUREMENT
(ROI)

UnitedHealth Group Procurement overview
Roles and responsibilities
Maximize
Value
• Competitively bid goods/services
• Obtain competitive pricing
• Leverage UHG size and scale
• Draft and author contracts
Mitigate
Risk
• Review risk for each supplier engagement
• Include contract terms on managing
handling of protected data
• Prevent data breeches
ES&P - Authors Contracts
Business Partners–
Orders/Pays• Order via Purchase Orders for goods (~20%)
• Order via email/phone SOW-based work (~80%)
• Process and approve invoices
• Different teams and tools managing invoices/contracts
• No visibility to compliance
• Limited view to company-wide spend/activities
• Invoices can technically be paid without a
contract/risk review

Technology bridges the gap
Supplemental Benefits of ACC:
At UHG, alternative invoicing channels are shut off
for most of our SAP Ariba-enabled suppliers, which
then ensures:
• ES&P is engaged for all supplier contracts
• Risk is assessed for every engagement
Key Benefits of ACC:
• Price Compliance against contract
• Spend Visibility by SOW
• Controls on total contract spend
Ariba Contract Compliance (ACC)
Validates ES&P savings

How it works
Contract:
Loaded in Ariba
Contract
Management
Setup:
Contract Terms
setup for invoicing
Invoice:
Supplier submits
invoice against
contracts
Reconcile:
System reconciles
invoice against
contract terms
Approve:
Invoice routed for
approval
Payment:
Invoice routed to
ERP for payment
Ariba Contract Compliance

Ariba Terms for Invoicing:
Contract:
Loaded in Ariba
Contract Management
Setup:
Contract Terms
setup for invoicing
Contract:
How it works

Reconcile:
Invoice:
Supplier submits
invoice against
contracts
Reconcile:
System reconciles
invoice against
contract terms
Invoice
How it works

Payment:
Approve:
Invoice routed for
approval
Payment:
Invoice routed to
ERP for payment
Approve:
How it works

Spend visibility – reporting benefits
Supplier 1
UNSPSC
Code 1
Invoice 1
Invoice 2
UNSPSC
Code 2
Invoice 3
Invoice 4
Supplier 2
Supplier 1
SOW 1
Invoice 1
Invoice 2
SOW 2
Invoice 3
Invoice 4
Reporting by good/services
Spend Breakdown
Supplier Optimization
Price/Volume Comparisons
Reporting by SOW
Visibility to spend by contract
Future negotiations
Manage Contract Spend

In Conclusion
Ariba Contract Compliance at UHG
739 contracts setup for invoicing in SAP Ariba
89% of SAP Ariba contracts have contract compliance (others are lump sum invoices against a SOW)
$1.9 Billion in Annual Spend throughput in SAP Ariba (80% is ACC, 20% PO)
UHG realizes the value of our contracts
Tool automates match of invoice pricing against the contract pricing
Drives compliance of Corporate Policies
• Ensures Risk is managed for all supplier engagements
• Ensures ES&P is engaged for all supplier contracts

Thank you
Contact information:
Amy Forbes
Director of Procurement
Operations
UnitedHealth Group
amy_forbes@uhg.com

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