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Seven Habits of Highly Successful Procure-to-pay Programs
 

Seven Habits of Highly Successful Procure-to-pay Programs

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Seven Habits of Highly Successful Procure-to-pay Programs Seven Habits of Highly Successful Procure-to-pay Programs Presentation Transcript

  • Seven Habits ofB Highly Successful Procure-to-Pay Programs David Morrison P2P Program Manager Rentokil Initial Alex Saric Marketing Director - Ariba© 2012 Ariba, Inc. All rights reserved.
  • Agenda • Summary Case Studies: Dollar Tree Corinthian Colleges Synovus • The 7 Habits from Ariba LIVE US • Rentokil Initial2 © 2012 Ariba, Inc. All rights reserved.
  • Dollar Tree, Inc. (NASDAQ: DLTR) • Leading operator of discount variety stores selling everything for $1 or less • Headquartered in Chesapeake, Virginia • Sales $6.6 billion (FY11) • 4,351 stores (FY11) • No price increases to our customers in 25 years for Dollar Tree stores!3 © 2012 Ariba, Inc. All rights reserved.
  • Business Background • Problems Faced (Indirect purchasing) Lack of up-front standardized approvals Paper invoices Line item spend difficult to obtain Manual contract compliance (no catalogs) • Business Case Evaluated several companies Ariba sourcing customer since 2004 Dynamic Discounting ROI • Executive Sponsorship: COO4 © 2012 Ariba, Inc. All rights reserved.
  • The Story • Project Kickoff – Jan. 2010 Development – Spring/Summer 2010 Supplier Enablement/Catalogs – Summer 2010 Testing – Fall 2010 • First Transaction – Dec. 15, 2010 Pilot – Dec. 2010/Jan. 2011 • Go-Live Feb. 2011, phased rollout • Lessons learned: Process change Over-customizing Scope creep5 © 2012 Ariba, Inc. All rights reserved.
  • Results • Statistics Suppliers – 1st 12 months – 500 active relationships (150 new suppliers through PO quick enablement) Internal Users – 250 throughout nine divisions POs – 1st 12 months – 25,000 Invoices – 1st 12 months – 35,000 Discounting – Standing and dynamic plans/Discount Pro6 © 2012 Ariba, Inc. All rights reserved.
  • • Corinthian Colleges (CCi) is one of the largest career college, post- secondary education companies in the United States and Canada, with more than 102,000 students. • The company operates 105 schools in 25 states and 17 schools in Canada. • CCi serves the large and growing segment of the population seeking to acquire career-oriented education. • Our company was founded in 1995 and we completed an initial public offering in 1999. As of Feb 2012, we had approximately 15,000 employees in North America, including 6,600 full-time and part-time faculty members. • Our mission is to help students prepare for careers that are in demand or advance in their chosen field.7 © 2012 Ariba, Inc. All rights reserved.
  • What Is the Business Problem We Are Trying to Solve?• More Organized Buying Single point of entry for all buying activity Aggregates all of our catalogs and vendors into one process• Easy to Use (amazon.com experience)• Reduced Time Spent Negotiating with Vendors Pre-negotiated content New and non-catalog purchases are routed to Procurement for assistance• Automates CER Process (ready in May)• Budget Checks (Phase 2)• Automates Approvals (approve via email, i-phone, blackberry)• Improved visibility into purchases due to approval being required before the order is placed• Allow campus employees to focus on students and not vendors8 © 2012 Ariba, Inc. All rights reserved.
  • E-Procurement Will Help Us More Efficiently and Effectively Order Goods and Services Our project is focused on Submit improving this part of the Obtain Pay Invoice P2P process Business Supplier Needs Receive Strategic Catalog or Approved Fulfill Supplier List Monitor and Order Sourcing Control RFP & Order Negotiate Product Negotiate Select online (if Suppliers needed) Get Approvals9 © 2012 Ariba, Inc. All rights reserved.
  • Drivers of Compliance and Savings • Sourcing savings are jeopardized by “Rogue Spending”, where staff buys goods/services from unapproved suppliers • Level of rogue spending varies greatly depending on culture, tools, and policies - up to 52 percent in some companies Why Staff Engage in Rogue Spending How eProcurement Reduces Rogue Spending More comfortable with other suppliers  Tool encourages use of preferred supplier but has mechanism for using other suppliers with appropriate approvals Lack knowledge regarding preferred  Tool shows user who to use suppliers Too busy to find approved source/item  Easy-to-use product/service catalog; one-stop shopping Don‟t think it matters  Tool outlines benefits of using preferred supplier Unaware of policies  Tool clearly defines policies to user No one challenges them  Tool has built-in approval workflow and reporting No visibility  Tool has built-in reporting and approval workflow10 © 2012 Ariba, Inc. All rights reserved.
  • What Is the Financial Benefit of Solving This Problem? Soft Savings/ Better Compliance Efficiencies • User compliance with Contracts• Enforcement of other policies • User compliance with preferred suppliers• Less spending because of visibility • Demand management• Simplified product search• Simplified invoice + PO matching More Discounts• Automated PO transmission• Continuous Improvement eProcurement • Captured rebates Savings • Early Payment discounts Intangible Savings ($5M - $8M) • Dynamic Discount capture• Real-time visibility into spend Stricter Approvals commitments• Real-time management of GL • Fewer unnecessary purchases accounts • Reduced buying of “luxury” products• Enhanced detection of fraud and services Better Sourcing Reduced Errors• Strengthened negotiation position • Errors in transmission due to demonstrable compliance • Errors in pricing • Errors in invoicing/matching11 © 2012 Ariba, Inc. All rights reserved.
  • Prioritizing Spend CategoriesCategories Most Suited for E-Procurement• Many buyers• Diverse buyers• Goods/services simple to describe• Frequent transactions• Agreements in place with suppliers• Many invoices• Simple invoices• Complex discount structures• Suppliers already conducting e-procurement with other customers * Spend on individuals above and beyond spend on individuals in the Excluded Categories12 © 2012 Ariba, Inc. All rights reserved.
  • Categories by Wave % Spend with ePro Ariba Network Category Wave Suitability Savings* Suppliers Annualized Computer Equipment & Savings by Wave Accessories 1 159.8 $254,807 96% $MM Furniture 1 90.0 $253,124 43% 1 $0.91 66.4 $45,065 67% Student consumables 1 2 $2.56 Medical Equipment & Supplies 1 61.8 $205,481 61% 3 $1.68 Safety Equipment & Services 1 61.3 $17,479 13% 4 $0.36 Hardware 1 58.7 $18,155 91% Σ $5.49 49.5 $21,931 84% Hand tools 1 Machinery Services & Supplies 1 45.6 $12,210 64% AV Supplies 1 44.6 $77,896 99% * Conservatively assumes at most 95% of calculated savings can be captured13 © 2012 Ariba, Inc. All rights reserved.
  • Implementation Timing Integrate w. PeopleSoft E-Procurement Implementation Activities Months After Project Start System Testing Initial User Training Begin Wave 1 Savings (Full savings 6 mo later) Enable Wave 1 Suppliers Begin Wave 2 Savings Ramp-up Enable Wave 2 Suppliers Begin Wave 3 Savings Ramp-up Enable Wave 3 Suppliers Begin Wave 4 Enable Wave 4 Suppliers Savings Ramp-up 3 6 9 12 15 18 21 24 2614 © 2012 Ariba, Inc. All rights reserved.
  • Results Cumulative Savings $ MM Q1 $0.00 Q2 $0.00 Q3 $0.08 Q4 $0.37 Q5 $1.31 Q6 $1.91 Q7 $3.00 Q8 $4.32 Q9 $7.0715 © 2012 Ariba, Inc. All rights reserved.
  • • Synovus Financial Corp. Commercial and Retail Banking, Investment, Mortgage HQ in Columbus, GA; founded in 1888 $27 Billion in Assets; 40th largest US Bank Holding Co. Five-state footprint in Southeast w/ over 300 locations Community-oriented customer relationship model Decentralized business model with centralized support functions16 © 2012 Ariba, Inc. All rights reserved.
  • Business Background • 2009 expense/efficiency initiative identified opportunities in centralizing Procurement • Over $300 million in addressable spend • Minimal structure and oversight • Buy points scattered across 30+ operating divisions • Gaps in vendor and contract management identified as risk points17 © 2012 Ariba, Inc. All rights reserved.
  • Business Background • Goals/Objectives Integrate existing purchasing and vendor activity to obtain efficiencies and economies of scale Address local market concerns re: “balance of trade” (vendors who are also bank customers) Reduce addressable spend by 2% YTY Increase spend under management to 50%+ 60%+ compliance with use of preferred suppliers Establish vendor management program to mitigate risk and address regulatory requirements18 © 2012 Ariba, Inc. All rights reserved.
  • Results • Addressable spend down 24% vs. 2008 baseline • Spend down 3.6% most recent YTY • Spend Under Management at 54% (and rising) • Compliance at 50% (continued challenges) • Procurement function expense = 0.28% of spend • Vendor Management Program established • Over 2,000 suppliers enabled within system19 © 2012 Ariba, Inc. All rights reserved.
  • In a Networked Business, Suppliers also Win… • $10M in annual transactions • Support to 25 Customers • 10-15% of our new account revenues are directly a • 25% Annual Growth result of Ariba Network membership • 25% of total order volume is transacted via the Ariba Network eInvoicing eliminated rekeying, resulting in 83% lower error rate which reduced DSO by 75% 99% customer retention rates – (10 to 15% better than industry average, per Forrester) and 30% growth in accounts Reduced manual intervention and errors, lowering processing costs from $8 to $2 per purchase20 © 2012 Ariba, Inc. All rights reserved.
  • The 7 Habits: 1. Develop and Sell a Clear and Simple Vision Include the stakeholders early 2. Establish Executive Support 3. Define the Metrics & Report Regularly 4. Establish Waves based on Best Practices Deliver Quick Wins Create Ongoing Value 5. Visibly Manage Change – Internal and External Market to Users Training Support 6. Leverage the Supplier Network Create Win / Win 7. Think Strategically21 © 2012 Ariba, Inc. All rights reserved.
  • Seven Habits ofB Highly Successful Procure-to-Pay Programs David Morrison P2P Program Manager Rentokil Initial© 2012 Ariba, Inc. All rights reserved.
  • Who we are and what we do:• One of the largest business services companies in the world.• experts delivering essential services in areas such as: • Hygiene • Textiles • Pest Control • Plants • Food • Facilities • Parcels Delivery• Sales £2.54 billion (FY 2011)• Over 66,000 employees operating in over 58 countries.23 © 2012 Ariba, Inc. All rights reserved.
  • Business Background • Problems Faced Weak levels of control Manual Processes with High cost of processing transactions around the procure to pay processes Lack of consistent approval and limited receipting process Low visibility over financial commitments Absence of processes to confirm actual pricing is as per contract Multiple supplier master files (AP ledgers) and inconsistent use of data fields (categorisation, etc.)24 © 2012 Ariba, Inc. All rights reserved.
  • Business Background • Objectives of P2P: Drive improvements and standardisation in the purchasing through to accounts payables processes Drive compliance to preferred suppliers; thus acting as an enabler to the achievement of the strategy and savings plans of Group Purchasing Provide a single, rationalised supplier master file Drive the business towards a paperless environment Act as an incentive to introduce a harmonised approval authority matrix across the business. Reduce and control the risk of error, abuse and fraud Provide a clear understanding of commitments and liabilities Design and deliver supporting organisational structures25 © 2012 Ariba, Inc. All rights reserved.
  • The Story • 2010 Mar – Apr : Requirements Gathering Apr – May : Prepare & launch Request for Quotation May – Jun : Supplier Selection Jun – Jul : Business Case Preparation, Submission & Approval End Jul : Award Contract Sep : Mobilise Project Team Sep – Dec : Design, Build, Configure Systems • 2011 Jan – Mar : Design, Build, Configure Systems Apr – Jun : Testing & Training Jul : Prepare for Go Live (Pest Control UK) Aug - Dec : Roll Out (Pest Control UK) • 2012 Jan – Jul : Deploy across other UK Businesses Aug - : Deploy across non UK Businesses26 © 2012 Ariba, Inc. All rights reserved.
  • How We Made Our Decision: • Requirements Gathering: Stakeholder Engagement with Heads of Businesses to cover: – Scope options for P2P, High level requirements, Open Questions, Next steps & Governance – Reach agreement/Confirmation on: the scope, requirements list is complete, next steps • Request for Information/Quotation: Using information gained from Stakeholder engagement, create & issue RFQ covering: – Company, Customers, Functionality, Technology, Services & Support, Commercials • Short List & Evaluate: Short list to 3 vendors & invite to present solution to Business Stakeholders at ½ day sessions – Decide on Supplier to continue with in-depth negotiations • Produce Business Case & Get Sign Off from Business Stakeholders Walk business case round all business stakeholders to explain/clarify & solicit their inputs and approval • Award Contract27 © 2012 Ariba, Inc. All rights reserved.
  • Results • Statistics Significant reduction in invoice cycle time*: Average pre Ariba 61 days down to 16 days post Ariba All UK Pest Control division spend through Ariba 400+ users 7,000 orders in less than 6 months > 250 vendors Branch Training lasts only ½ day and users are live! * From date on Invoice to input into finance system28 © 2012 Ariba, Inc. All rights reserved.
  • Lessons Learned • What went well • Acceptance of the system by the business • Approval process (via email) has worked well • Not so well • Supplier Enablement – This takes longer than expected – Need to find right contact at Supplier, may not be your account manager. • Maintaining data to manage Ariba – manual process requiring resource to manage • Account Code Combinations – need to get this right so that requesters do not encounter issues – But simple crib sheets work! • Some evidence that this has pulled forward cost – timing issue only29 © 2012 Ariba, Inc. All rights reserved.
  • Feedback from Users “Allows management to spend “I‟ve had no more time in the field, not in problems….it‟s a office filling in paper! Reduces brilliant system” admin & overhead. Makes us more competitive. More accurate accounting” “„Easy to use, better visibility”. “The system has been great. It remembers my previous“Shortened month end processes, orders”.high quality MI that identifiesprocess compliance issues. Helpsidentify business opportunities. “Makes process nonMaximises buying power. conformance visible. PaperlessImproved forecasting” process enables detailed Operations spend analysis. Empowers managers; self responsibility Finance for cost”30 © 2012 Ariba, Inc. All rights reserved.
  • 7 Habits for a Successful P2P 1. Clarify how the system will de-risk whole P2P process. 2. Have business buy in from the start 3. Identify your metrics for success from the beginning 4. Think big picture: A strong system that is up to date and offers much. Will work equally well all finance systems. 5. Implementation team needs to be strong and support operations, to whom this will be new. 6. Be sure that Finance is on board: A big implementation for Finance team with GCOA, but long term gain is significant 7. Plan for supplier set up efforts: Need to find right contacts in supplier organisation and support them in „enabling‟ their business.31 © 2012 Ariba, Inc. All rights reserved.
  • Share This Session…NOW…from your mobile! • All presentations are posted: Guidebook mobile app – Search Apple or Android app store for Guidebook – Enter code “collabor8” Or at Slideshare.net/Ariba • Share via email or social media **Come back soon – we are syncing #AribaLIVE audio and video interviews to the presentations**32 © 2012 Ariba, Inc. All rights reserved.
  • Q&A Contact info: Alex Saric asaric@ariba.com33 © 2012 Ariba, Inc. All rights reserved.