Developing an Ariba Network Growth/Supplier Enablement Strategy to Achieve Your Business Case


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Without a defined network growth strategy and relevant tracking metrics, your efforts to move off paper and automate the management of orders and processing of invoices will not gain much momentum.

In this session, you will hear experts discuss how you can develop and implement a strategy that will effectively engage suppliers for e-commerce over the Ariba Network and ensure broad internal and external support for your e-invoicing or procure-to-pay initiative.

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Developing an Ariba Network Growth/Supplier Enablement Strategy to Achieve Your Business Case

  1. 1. Growing Electronic: Developing an Ariba Network Strategy that Promotes Business Case Achievement Etosha Thurman, Managing Partner – Network Programs, Ariba Zach Turner, Procurement Analyst, Flint Hills Resources March 19, 2014 #AribaLIVE @ariba © 2014 Ariba – an SAP company. All rights reserved.
  2. 2. Why Is Strategy Important? • • 2 Enables an individual or entity to tell where they are, where they are going and the way to get there Responsible for the coordination of all activities to achieve a shared vision © 2014 Ariba – an SAP company. All rights reserved.
  3. 3. Business Case Framework - Example • • • 3 45% of Spend not under Compliance 75% of supplier transactions submitted via paper Average number of days to pay is 62 (vs. Net 60 terms) © 2014 Ariba – an SAP company. All rights reserved.
  4. 4. A Defined Network Strategy ensures that we are “rowing in the right direction”.
  5. 5. A Strong Network Strategy Includes: Dynamic Elements: Review and Update Regularly Supporting Infrastructure • Executive support and oversight • Established program charter • Regular Steering Committee meetings and quarterly reviews Focus on Program Goals/ROI Foundational Pillars Strong Leadership Commitment • Documented goals and success metrics • Program scorecard regularly reviewed through Steering Committee • Ongoing benchmarking and continuous improvement focus Supplier Flight Plan Communication Plan • Flight Plan for supplier onboarding: Pilot, Waves, and Timing • Comprehensive analysis based on ROI and probability of successfully transacting across the Ariba Network • Internal communication plan educating organization and driving adoption • External communication plan for suppliers focused on compliance (see below) and Ariba Network benefits Compliance Management • Agreed upon approach for making sure sellers participate in initiative • EDICT with: Expectations, Deadlines, Incentives, Consequences, and Enablement Lead/Team • Dedicated team that manages enablement process • Team members understand sellers and internal stakeholders and are change Togetherness Messages agents within the organization
  6. 6. Key Metrics – Guidance along the way Inv / FTE 6 © 2014 Ariba – an SAP company. All rights reserved. % e-PO SE Yield • • • • • • • Supplier Enablement Efficiency % e-PO/e-Invoices % Spend Under Compliance % Discounts Captured % Touch-less POs/Invoices # Invoices/FTE # Days Payables Outstanding
  7. 7. Flint Hills Resources 7 © 2014 Ariba – an SAP company. All rights reserved.
  8. 8. Flint Hills Resources (FHR) Direct, wholly owned subsidiary of Koch Resources LLC, (wholly owned by Koch Industries, Inc.), a privately held company involved in most aspects of the oil and gas industry. The operations of FHR and its subsidiaries include the following: Three crude oil refineries (approximately 816,525 bpd of crude oil refining capacity) Six chemical production facilities Five ethanol production facilities and two biodiesel facilities A 50% interest in Excel Paralubes, a general partnership engaged primarily in the manufacture of lubricant base oils Proprietary pipelines and pipeline investments (located principally throughout the Mid-continent and Gulf Coast regions of the United States) FHR’s is the United States’ 9th, and the World’s 24th, largest refiner. In addition, FHR is the United States’ 5th largest producer of ethanol. FHR is also a leading producer and marketer of petrochemicals, producing about nine billion pounds of building-block chemicals. 8 © 2014 Ariba – an SAP company. All rights reserved.
  9. 9. Zach Turner • Procurement Analyst for the Center of Excellence Ariba Administrator Drive initiatives to drive to improve P2P process Develop knowledge processes Maximo/Ariba training and support Develop metrics to monitor performance and drive action 9 © 2014 Ariba – an SAP company. All rights reserved.
  10. 10. Why did FHR Implement Ariba? • Improve e-commerce capabilities for business advantage Conduct business with over 2,500 suppliers on the materials side and several thousand on the services side Legacy, EDI-based tool offered only basic PO transmission functionality and basic electronic invoice processing Enabling one took significant IT efforts for FHR and its suppliers – 10 Established connections with only five suppliers © 2014 Ariba – an SAP company. All rights reserved.
  11. 11. Why did FHR Implement Ariba? • • Enable business commerce collaboration to improve supplier interactions, optimize P2P processes and improve visibility into transactions Supported by Ariba PO and Invoice Automation, FHR aimed to create a sustainable competitive edge in its P2P process by: Reducing accounts payable costs through a zero-touch P2P process Improving spend control through better transaction data visibility Eliminating hidden P2P transaction costs between FHR and its suppliers through better business process 11 © 2014 Ariba – an SAP company. All rights reserved.
  12. 12. Management Approval Value Proposition • • Based solely on accounts payable headcount reduction through the receipt of electronic invoices Other expected benefits that were not quantified include: Optimization of confirmation process, so buyers can focus on higher-value tasks Data visibility leading to better analysis Better visibility to supplier issues on a real-time basis – (Un-invoiced, bad pricing, delivery issues, etc.) Forced business process consistency 12 © 2014 Ariba – an SAP company. All rights reserved.
  13. 13. Company Buy-In • Change management as a significant consideration Buyers don’t interact directly with Ariba, but Ariba implementation introduced changes in the way they processed POs Used metrics to help buyers and category managers understand that there was a “problem” – 13 Ariba helps the business resolve the problem and achieve its vision © 2014 Ariba – an SAP company. All rights reserved.
  14. 14. Strategy • • Phase 1 (Pilot): Enable five current OCS-enabled suppliers Phase 2 (Full): Enablement to achieve Base Case Work to solicit and integrate suppliers is done by Ariba as part of the subscription price 79 out of top 100 vendors already Ariba-enabled • Phase 3 (Quality): Slow down on enablements and focus on quality of transactions vs. quantity Use metrics to find problem areas and focus on higher efficiency rates from top suppliers Drive down support cost 14 © 2014 Ariba – an SAP company. All rights reserved.
  15. 15. Achieved Value Proposition • Payable invoice automation/optimization through electronic processing Accounts payable personnel cost savings due to elimination of keyed invoices 44%+ of our invoices come in via Ariba and are touchless Time saved researching invoices that come in without complete/valid information (PO number, Work order or Location) Reduced calls to AP to find invoice status (received, payment date) • Buyer optimization Through automation of the confirmation process we have freed up, on average, two hours per day for each buyer (We expect to capture more value in this area as we enable additional suppliers.) 60%+ of our PO lines run through this automation logic with a majority being touchless • Data visibility Suppliers return their catalog code and contract/catalog price on the confirmation, so we can better analyze the data. Prior to Ariba: limited visibility to detail spend data unless we asked the supplier for it (high number of “material” orders) Identify issues between our expected price and the supplier’s ask price. Using this data to better manage our suppliers • Forced business process consistency Internal – forces all our sites to conform to defined processes External – forces our suppliers to transact in a compliant manner (accurate and complete data) 15 © 2014 Ariba – an SAP company. All rights reserved.
  16. 16. Metrics • • • 16 Currently transacting with 400 suppliers Processing 68,000 Purchase Orders annually through the network Processing approximately 150,000 invoices annually “touch-less” through the network © 2014 Ariba – an SAP company. All rights reserved.
  17. 17. 2,000 - 17 1,2701,667 1,667 1,692 1,667 1,667 May-11 Jun-11 Jul-11 Aug-11 Sep-11 © 2014 Ariba – an SAP company. All rights reserved. 5,000 5,000 5,000 Jul-13 Aug-13 Sep-13 6,667 5,000 Jun-13 Nov-13 5,000 May-13 6,667 5,000 4,498 2,907 5,137 5,094 3,659 3,870 3,880 4,030 3,680 2,469 2,851 1,427 1,750 2,577 4,554 4,487 3,032 3,319 3,240 2,347 3,515 3,659 2,038 2,089 2,009 8,000 Oct-13 5,000 Apr-13 3,333 Sep-12 Mar-13 3,333 Aug-12 5,000 3,333 Jul-12 Feb-13 3,333 Jun-12 5,000 3,333 May-12 Jan-13 3,333 Apr-12 5,000 3,333 Mar-12 Dec-12 3,333 Feb-12 5,000 3,333 Jan-12 Nov-12 3,333 Dec-11 5,000 3,333 Nov-11 2,164 4,082 6,000 Oct-12 3,333 Oct-11 4,000 3,032 2,108 1,667 744 Apr-11 Touchless Invoices 12,000 10,000 Above Plan Plan
  18. 18. 18 © 2014 Ariba – an SAP company. All rights reserved. Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Cancel/Rejection Rate 8.0% 7.0% 6.0% 5.0% Cancel Rate 4.0% Reject Rate 3.0% Target Line 2.0% 1.0% 0.0%
  19. 19. Key Lessons Learned • • • • Clear strategy and performance metrics are essential Need buy-in across the entire organization Include support cost with Ariba in value proposition Your implementation pain/joy is directly related to how well the supplier handles their enablement. Notify-train key participants within the supplier’s firm (to reduce the surprises) – – 19 Corporate offices vs. local branch processing Billing, Order Fulfillment, Account Management © 2014 Ariba – an SAP company. All rights reserved.