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The Holistic Benefit of a Networked Ecosystem – The Real-World Proof

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When multiple businesses in the same ecosystem come together to create greater efficiencies, everyone wins. In this enlightening session we will look at how billions of dollars of business can be …

When multiple businesses in the same ecosystem come together to create greater efficiencies, everyone wins. In this enlightening session we will look at how billions of dollars of business can be optimized in the most unexpected of fashions. We will hear of real-world results such as:
• The effects of impacting $4 Billion in annual spend
• Keys to reducing invoice processing costs 40%
• Secrets to managing over 6 Million invoices per year
For those looking to understand the keys of a scalable ecosystem, this session will proved guidance and insights from several real-world success stories.

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  • Ariba’s On Demand applications and the Network generate measurable value to organizationsBuyer’s experience significant savings that fall right to the bottom lineSome savings are obvious (see above) but others less so. For example, a large Oil company was able to significantly cut inventory of replacement parts in its refineries due to the visibility into order status the network provided. This visibility not only enabled the managers to focus on the operations instead of whether a critical shipment was going to come, but also enabled them to reduce the excess inventory they needed as safety stock to ensure the refinery didn’t go downSuppliers experience savings through the automation of non-value added activities (like AR clerks having to call their customers each month to see when payments will be made)Suppliers also see top line growth from participation on the network – including net new business and increased wallet share with existing customers
  • What do we want our “ecology” to look like at UPS?
  • Transcript

    • 1. The Holistic Benefit of a Networked Ecosystem –the Real-World ProofWhen multiple businesses in the same ecosystem come together to creategreater efficiencies, everyone wins. In this enlightening session we will look athow billions of dollars of business can be optimized in the most unexpected offashions. We will hear of real-world results such as:• The effects of impacting $4 Billion in annual spend• Keys to reducing invoice processing costs 40%• Secrets to managing over 6 Million invoices per yearFor those looking to understand the keys of a scalable ecosystem, this sessionwill proved guidance and insights from several real-world success stories.
    • 2. Holistic Benefitsof a Networked EcosystemAriba LIVE 2013
    • 3. Ariba Collaborative Value Chain – Direct, Indirect, ServicesBuyer’s Processes: Analyze to PaySupplier’s Processes: Market to CashThe Ariba Network is the world’s largest Business Network, allowing Buyers and Sellers tobecome more efficient across their Buying, Selling, and Cash Management Processes
    • 4. Ariba Collaborative Value Chain – Direct, Indirect, Services•Spend DataEnrichment•SpendAnalysis•ContractCollaboration•Authoring•Repository•RequisitionOwnership•CatalogCompliance•ContractCompliance•ApprovalWorkflow•POCollaboration•POTransmission•Goods &ServicesReceipt•InvoiceReceipt•InvoiceCompliance•InvoiceApproval•ExceptionWorkflow• AwarenessMarketing•LeadCollaboration•ProposalCollaboration•BiddingOpportunity•ContractCollaboration• ContractRepository•CatalogCollaboration•CatalogSyndication•RequisitionCollaboration•SpecificationNegotiation•OrderCollaboration•OrderStatus•InvoiceDelivery•InvoiceCollaboration•Supplier Info;Performance Mgmt;Supplier Research•Company Profile Mgmt•Customer Account ManagementBuyer’s Processes: Analyze to PaySupplier’s Processes: Market to Cash•PaymentCollaboration•DiscountCollaboration•PaymentCollaboration•PaymentVisibility•WorkingCapitalCollaboration•Category /ProjectMgmt•RFI / RFP /AuctionCollaboration•SavingsTracking &Pipeline
    • 5. Delivering Measurable BenefitsValue to Companies of All Sizes, Industries, RegionsSupplier ValueBuyer ValueSourcingProcurementProcessAP ProcessComplianceWCM &Discount3-9%ProcessSavings$3-20Savings/Document1-8%SpendSavingsTotalSavingsFasterPaymentAR ProcessProcessingOrdersSales &MarketingIncreasedRevenue15-75%TimeSavings15-75%ProcessSavings5-32%RevenueIncreaseTotalSavingsSource: Ariba customer surveys and interviews
    • 6. What is a “Networked Ecosystem?”EcosystemFrom Webster’s Dictionary:“The complex of a community of organisms andits environment functioning as an ecological unitin nature.”
    • 7. Today’s Discussion• About UPS• Strategy and Vision• Procure-to-Pay Processes• Lessons Learned• Q & A
    • 8. About the UPS “Organism”• Founded in Seattle, WA in 1907• Corporate Headquarters: Atlanta, GA• Primary Business Units: Small Package, Supply Chain Solutions and UPSFreight• 2012 Delivery Volume: 4.1 Billion packages/documents (16.3M per day)• 2012 Total Revenue: $54.1 Billion ($45 Billion Small Package)• Employees: 397,100 (322,100 U.S.)• Small Package Customers: 8.8 Million Daily (1.1 million pickup customers)• Total Facilities Worldwide: 2,915• Total Ground Fleet: More Than 102,800 Units─ All Business Units – Tractors, Package Cars, Motorcycles• Aircraft: 230 UPS Aircraft and 332 Chartered
    • 9. Procure-to-Pay Process…A Vision of Our “Ecology”
    • 10. Desired State: “Procure-to-Pay”• Global Process Improvement & Standardization– Paper invoices and lengthy manual processes drive up cost, delaypayments, reduce discount opportunities, and may result in late fees.• Increase Spend Visibility and Purchasing Compliance• A Consolidated Contract “Warehouse” for Verification ofPricing, Pay Terms, and Legal Compliance• Reduce Processing Fees (paper to electronic)• Increase Early Payment Discounts (Contracted Discounts andNetwork-generated Discounts)– Local service suppliers– Corporately-negotiated suppliers
    • 11. “Procure-to-Pay”• Four Key Work Streams (“Ecological Elements”)─Contract Management─Catalog/Content Management─Contract Invoicing (Services Procurement)─Ariba Network
    • 12. Contract Management• Transition From Paper to Scanned Image/DatabaseRepository• Identify Contracts─Who? What? Where?• Challenges─Identify “Owner.” Is There Just One Owner?─Master Agreement vs. Individual Contracts─Capturing All Pricing Terms for Invoicing (No previoussystemic connection to invoice process)
    • 13. Initial Scope for Supplier EnablementLate 2010/Early 2011 Kickoff• General Supply Catalog Suppliers─Approximately 250 Suppliers• I.T. Catalog Suppliers─Approximately 150 Suppliers• Local Services─3,000-5,000 Suppliers
    • 14. Supplier Enablement• Two Primary Supplier “Types” (Supplier “Organisms”)─Catalog Suppliers (Generally, large corporate suppliers)─Contract Invoice Suppliers (Generally, small local service suppliers)• Catalogs Managed Primarily “In House”─UPS prefers up-front control over items and pricing─Some “Punchout” catalogs when situation warrants• Supplier Enablement Strategy─Identification─Notification─Invitation─Strong Compliance Message
    • 15. Contract Management – Positive Impact• Single, Online Repository of Contract Data• Easy Access to Data and Basic Reports• Alerts and Notifications Help Mitigate Risk─Contract expirations─Insurance expirations• Creates Opportunity for More Effective Rate Analysisand Sourcing• Overall, Most Significant Value is in Areas ofCompliance and Risk Management
    • 16. Content/Catalog Management – Positive Impact• Content Management Tool streamlined catalogapprovals by Corporate Procurement• Ariba Punchout for Item Search/Select─Search filters are very useful─Flexibility with “Favorites” lists─Challenge: Punching out to Ariba environment adds “clicks”to the ordering process• Enhanced “Shopping” Experience FacilitatesCompliance─Best value for “total cost of ownership”
    • 17. Order Management – Positive Impact• Transacting with Suppliers Over the NetworkFacilitated Requirement of Key BusinessDocuments─PO Acknowledgements, Advanced Shipment Notices,etc.─P.O. Acknowledgements helped reduce price holds─Advanced Shipment Notices helped reduce internalinquiries regarding order status
    • 18. Contract Invoicing – Positive Impact• Invoice Strategy for Services• Systemic Validation of Rates• Streamlined Approval Process for Invoices─Invoice is validated against the contract• Elimination of Paper Invoicing for Large Segment ofSuppliers• Reduction in 3rd Party Invoice Processing Fees• Significant Reduction in “Days to Approval”─Streamlined approvals─Positive impact on meeting contracted payment terms and EPO’s
    • 19. Other Value/Benefits• Payment Term Audits─Reduced Discrepancies Between Terms on Contract, and Terms inVendor Master File─Positive Impact on Invoice Discounts Realized• Reduce “Leakage” on Corporate Agreements(Rogue Spend)─Positive Impact on Rebates for Meeting Spend Commitments─More effective compliance to ensure designated productspecifications
    • 20. UPS U.S. Domestic Annual VolumesElement of the Ecosystem Ariba NetworkAriba NetworkFuture TargetsActive Suppliers 1,265 3,000 – 5,000Catalogs 246 95+%Purchase Orders628,000 (2013Annualized)1.2M POs & transition45+% to Contract InvoicingInvoices800,000 (2013Annualized)2.3 MillionPercent of e-Invoices N/A 81%Spend$250 Million (2013Annualized)$3.2 BillionDiscounts Earned$130K (2013Annualized)$3.2 Million
    • 21. Reduction in Transactional Cost Per Invoice• Transferring invoice activity to theNetwork has resulted in reducinginvoice transactional costs by aweighted average of $0.20 perinvoice.─ Moving paper invoices to theNetwork = $0.80 savings perinvoice• Annual savings are ~$125K, withcurrent invoice volume.─ Reduced paper─ Reduced manual handling─ Reduced 3rdParty key entry costs
    • 22. Contract Compliance – Payment Term Audits• Contract visibility enabled UPS to effectivelyensure contracted payment terms matched ERPassignment. Audit in 2011 revealed that:─ 60 high-spend suppliers had contracted discountterms that weren’t assigned in Oracle.─ Approximately 400 suppliers had their contractedpayment terms extended in ERP system.• Result: Positive cash flow impact
    • 23. Intangible Benefits & Benefits Not Yet Fully Realized• Reduced Invoice Exceptions─ Unmatched invoices─ Price discrepancies• Reduced Help Desk Calls for “Invoice and Payment Status.”Suppliers on Network Now “Self-serve”• “Days to Approve” Reduced From Average of 18 Days to 7 Days• Reduction of Local P.O. (LPO) Process─ LPO is Software Customization─ Cost Reduction in LPO/Paper Invoice Transactions
    • 24. Discount Benefits – EPO Acceptance Rate• Network generated discounts are expected to be 0.15% of total spendtransacted over the Ariba Network.Wave (Supplier Type) EPO Acceptance RateCorporate Agreements 0.01%Automotive 0.30%Plant Engineering 0.14%Medical 0.96%Overall 0.07%
    • 25. Supplier Value• Clear Value for Suppliers with Significant Transactions─Visibility seems to be most useful benefit for suppliers• Working Cash Management Flexibility─Cash flow is typically not an issue with larger suppliers─Small margins on pricing for corporate suppliers leaves littleroom for invoice discounting. Many already have contracteddiscount thresholds─Much higher acceptance by small, local suppliers than ourCorporate suppliers─Small, local suppliers tend to need more cash managementflexibility
    • 26. Lessons Learned &Recommendations….
    • 27. Lessons Learned• Higher Levels of Procurement Engagement– Create up-front partnership between Campaign and Procurementleadership• Implementation– An all encompassing approach works for some, but not all organizations– Phasing smaller groups of spend provides the opportunity to showcasesuccess• Change Management– Everything is connected. Need to manage the entire “ecosystem”– Large, complex organizations require frequent and multi-level coordination– Senior management cross-functional support– Training: New processes, policies, etc. (Internal audiences and suppliers)
    • 28. Questions?
    • 29. Thank you
    • 30. Please Complete Session SurveyGo to Surveys Select SessionClickChoose oneRate SessionThank you for joining us

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