How Smart Invoicing Enables Straight-Through Processing for All of Your Suppliers

Confusing E-Invoicing Options E-Invoicing Networks Collection Services Invoice Printing Consultants Post Audit Recovery Supplier Portals F&A BPO EDI/VANs Archiving Services Software Houses Scanning Services Banks Digital Signature Providers Workflow Services ERP Integration Evaluated Receipt Settlement2 © 2012 Ariba, Inc. All rights reserved.

Where Do You Stand? Best-in-Class (Top 20%) 5.3 days to process an invoice 60% of invoices paid early enough to secure early payment discount $7.78 average cost to process an invoice Industry Average (Middle 50%) 10.2 days to process an invoice 9% of invoices paid early enough to secure early payment discount $12.05 average cost to process an invoice Laggard (Bottom 30%) 24.5 days to process an invoice 2% of invoices paid early enough to secure early payment discount $37.45 average cost to process an invoice Source: Aberdeen Group, E-Payables 2011 Report3 © 2012 Ariba, Inc. All rights reserved.

Best Practice: Ariba Smart Invoicing  The best invoice solution is the one that is TOUCHLESS!  Lower AP Cost  Ariba Smart Invoicing drives auto post rates of 98% compared to  Faster Cycles less than 60% with other solutions  Lower Risk 1M+ TRADING PARTNERS Invoice Number GST/VAT Compliance Customer Sub Total Amount Bill To Supplier Business Address PO Account rules ERP Coding by country Total Ship to Amount Supplier Country- Address 98%... Contract specific Match Invoice Network Touchless templates Supplier Adapter Shipping Requester Thresholds AP Price - Tax Supplier Supplier Pay match Compliance Tax Invoice Thresholds Date Supplier Withholding tax support VAT / GST IDs Faster billing and receivables processing at lower cost4 © 2012 Ariba, Inc. All rights reserved

About Liberty • Fortune 100 company providing competitively priced insurance products • Founded in 1912 - we’re 100 years old! • 2011 - $34.7B in revenue • Third-largest property and casualty insurer in the U.S. (based on 2010 net written premium) • 45,000+ employees across the globe • 900+ offices • 26 countries • Mission: “Helping people live safer, more secure lives.”6 © 2012 Ariba, Inc. All rights reserved.

Our eCommerce Journey Claims Spend Database Supplier Contract Workbench Performance High module Management (repository) module Analysis reporting 9r1 module Procurement Upgrade Policies ContractEngagement Buyer and Invoice Compliance Med modules module (eInvoicing) Q4 Purchase of Ariba Spend Sourcing Mgmt. Suite module Low Change Management, Influence, Process Improvements 2004 2005 2006 2007 2008 2009 2010 2011 7 © 2012 Ariba, Inc. All rights reserved.

Business Challenges – Products • Prior to our Smart Invoicing implementation Some EDI-to-AP invoice passing for large relationships (fleet, shipping, office supplies) Very limited structure for manager approval of purchases High degree of manual invoice processing in AP (80% paper) Invoices were getting “lost” Cumbersome, manual processes for approvals and payment • Answer = Implementation of the Ariba Buyer and Ariba Invoice modules Provided a consistent approach to purchasing frequently ordered products (IT, office supplies, furniture, etc.) Electronic requisitions with manager approval Catalogs Electronic invoicing Commoditization of spend = enhanced reporting8 © 2012 Ariba, Inc. All rights reserved.

Business Challenges – Services • Needed a way to address spend that didn’t lend itself to the traditional requisition/purchase order process ♦ Examples: security, building maintenance, cleaning, advertising • Answer = Implementation of Ariba Contract Compliance (ACC) module ♦ Flexible solution for internal stakeholders ♦ No need for upfront approvals ♦ Invoice approval by manager with approval authority ♦ Supplier submits invoice electronically via the Ariba Network ♦ Users can override default cost centers ♦ Rates can be validated • To date, we’ve enabled 354 suppliers via this model (on 529 ACC contracts)9 © 2012 Ariba, Inc. All rights reserved.

Approach to Automating Invoicing Identification Enablement • “Anything paper is game”… sort of • Obtain internal default GL and CC, and • How it starts: list of approvers ♦ Analysis reporting based on • Creation of commodity codes annual targets • Jointly reach out to supplier ♦ Contractually obligated • System demo ♦ User -generated interest • Provide materials (QRCs, IDs, etc.) • Identify/approach spend owner • Create test ACC contract and perform • Learn more about product service, how obtained, etc. Identification test with supplier • Create live ACC contract • Demo system capabilities to • Go Live internal stakeholder • Determine appropriate module (Ariba Buyer or ACC) Reporting Enablement Reporting Invoicing Invoicing • Look for “leakage” • Monitor invoice activity for the first • ID new areas of spend with few invoices enabled suppliers • Follow up with stakeholders on how processing is going, ask for feedback10 © 2012 Ariba, Inc. All rights reserved.

Results Over Time 2008 - $1,509M 2009 - $1,867M Paper $809M 54% Paper $772M 42% Admin Proc BuySMART Admin Proc $224M BuySMART 12% $46M 3% IT Proc IT Proc BuySMART Non- BuySMART $304M $288M Non- 16% BuySMART BuySMART Electronic 19% Electronic $367M $566M 24% 30% 2011 - $2,151M Paper Not 2010 - $1,978M Admin Proc Being Admin Proc Paper BuySMART Pursued For BuySMART $568M $399M BuySMART $542M 29% 20% $252M 25% 12% Admin Proc BuySMART Non- Potential / In-BuySMART processElectronic $166M IT Proc $639M 8% BuySMART Paper IT $414M 30% $43M IT Proc Non- 21% 2% BuySMART $509M BuySMART 23% Electronic $597M 30%11 © 2012 Ariba, Inc. All rights reserved.

Benefits • No paper! • Vastly improved payment to supplier ♦ Discount opportunities • Enhanced process for stakeholders • Superior reporting available • Commoditization of more spend • Accounts Payables likes us - sometimes? 12 © 2012 Ariba, Inc. All rights reserved.

Next Steps • Address infrequent suppliers with few invoices Future initiative to implement systematic way to process in Ariba • Running reports on a regular basis Identifying new suppliers for electronic processing via Ariba Identify leakage and change behaviors • Enhance the supplier experience to help drive more suppliers to move off paper Example: Suppliers will be able to see payment status via the Ariba Network starting in April13 © 2012 Ariba, Inc. All rights reserved.

Lessons Learned • Test, test, test! • Sell processes with no mandate: promoting value • Find advocates in lines of business • Track successes (via reporting) and market • Report/follow up to prevent leakage • Utilize invoice tolerances • Question the value of 3-way matching • Seek continuous process improvement14 © 2012 Ariba, Inc. All rights reserved.

About UPS • Founded in Seattle, WA in 1907 • Corporate Headquarters: Atlanta, GA • Primary Business Units: Small Package Supply Chain Solutions (Logistics/Warehouse/Forwarding) UPS Freight • 2011 Delivery Volume: 4 billion packages/documents • 2011 Total Revenue: $53.1 billion ($44 billion small package)16 © 2012 Ariba, Inc. All rights reserved.

Invoicing Challenges • Too much paper, manual matching of invoices for contract suppliers (services spend) and catalog suppliers • No validation checks with Oracle workflow • Processing of PO invoices took up to 26 days • Forced to contact suppliers to resolve invoice exceptions • Inefficient process: meant many suppliers on immediate payment terms • Unable to capture many early payment discounts • Difficult time managing multiple transaction types, including EDI invoices17 © 2012 Ariba, Inc. All rights reserved.

Smart Invoicing: Process Efficiency • Ariba InvoicePro: Automating 57k invoices/month, with total of 500k in scope Supports e-invoicing in multiple file formats Automates invoice validation (date, rates, etc.) Rejects invalid invoices back to suppliers Reduces supplier and user inquiries Establishes accurate payment term date Delivers supplier performance reporting Take advantage of discounting, including dynamic discounts • Improved Metrics Reduces processing costs for services spend by about 40% Reduces cycle time from an average of ~26 days to ~7 days Fewer exceptions/calls about invoice status 224 corporate catalog vendors enabled on Ariba - $450M in spend going to 271 vendors representing about $700 million in spend18 © 2012 Ariba, Inc. All rights reserved.

Smart Invoicing: Improved Controls and Compliance • Catalog suppliers required to submit PO Confirmations and ASNs prior to invoice submission for effective services procurement ♦ PO created from contractual rates ♦ Invoices not matched to a PO are validated against the contract ♦ Prohibits non-compliant invoicing ♦ Reduces supplier inquiries and AP transaction cost • Zero tolerance on price discrepancies, invoice systemically rejected back to supplier Forces catalog suppliers to get all unit price changes, substitutions, packaging quantity changes, etc. pre-approved by procurement Forces non-catalog suppliers to invoice per contracted rates Reduces UPS invoice exception processing • Supplier “group” controls to reject invoices Currently using 11 groups for different invoicing controls19 © 2012 Ariba, Inc. All rights reserved.

Smart Invoicing: Manage Cash Better • Majority of Ariba Network spend with catalog suppliers UPS has negotiated contractual discount terms 4% of catalog suppliers accept standing offer (2% 15 net 45) Catalog suppliers occasionally accept buyer-initiated discounts on an invoice-by-invoice basis – We monitor for consistent offer acceptance and contact the supplier for possible standing offer acceptance. • Contract invoicing for services spend Majority of contracts do not have negotiated rate or payment terms 8% of transacting suppliers have accepted standing discount offers An additional 9% of suppliers have participated in one-time, sliding scale discounting on an invoice-by-invoice basis20 © 2012 Ariba, Inc. All rights reserved.

Lessons Learned • Ramp all catalog suppliers at once • EDI is still complex • Cannot over-communicate with stakeholders • Compliance and Reporting: Transaction follow-up is critical • Once trading relationship accepted, “push” them off the cliff21 © 2012 Ariba, Inc. All rights reserved.

Next Steps • Expand catalog suppliers • Expand local service contract invoicing • Early payment discount strategy • Reduce maverick spend to drive user compliance22 © 2012 Ariba, Inc. All rights reserved.

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How Smart Invoicing Enables Straight-Through Processing for All of Your Suppliers

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How Smart Invoicing Enables Straight-Through Processing for All of Your Suppliers Webinar Transcript