How P2P Fits Within an Enterprise Supply Chain

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“How P2P Fits Within an Enterprise Supply Chain” is the second topic of a supply chain learning series presented by ScottMadden and Shared Services & Outsourcing Network (SSON).

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How P2P Fits Within an Enterprise Supply Chain

  1. 1. Copyright © 2011 by ScottMadden. All rights reserved.How Purchase-to-Pay Fits Within anEnterprise Supply ChainSSON Supply Chain Learning SeriesContact: aeflores@scottmadden.com
  2. 2. Copyright © 2011 by ScottMadden. All rights reserved.Table of Contents About ScottMadden Key Components of Purchase-to-Pay (P2P) P2P Technology Selective Outsourcing and Business Process Outsourcing (BPO) Future Supply Chain Topics1
  3. 3. About ScottMadden
  4. 4. Copyright © 2011 by ScottMadden. All rights reserved.What We Do – Corporate & Shared ServicesScottMadden has been helping clients create greater value for their corporate services organizations fornearly 30 years. Our highly efficient, collaborative teams employ measurable, award-winning methodsand deep cross-functional expertise to improve operational performance.3Finance &AccountingHumanResourcesInformationTechnologySupply ChainScottMadden canimprove processefficiency andautomation toensure accurate &timely financialinformation andcompliance.ScottMaddendesigns, builds,and implementsHR ServiceDelivery models toensure efficientand effective HRoperations thatmeet businessneeds.ScottMaddenhelpsorganizationscreatemeasurable ITvalue by focusingon businessengagement toimprove ITdecision making.ScottMadden cancraft new supplychain strategiesand deliverimprovements inoperations,increasing thevalue delivered tocustomers.
  5. 5. Copyright © 2011 by ScottMadden. All rights reserved.What We Do – Shared Services4• Strategydevelopment andintegration• Benchmarking• High-levelbusiness case• Changemanagement• Processimprovement/cost reduction• Operations/technologyassessment• M&A integration• Benchmarking• Customer andemployeesurveys• Changemanagement• Service deliverymodel• Detailed currentstate, futurestate, andbusiness case• Sourcing model• Organizationdesign andstaffing• Changemanagement• Project planningand management• Service/transactioncenter• Process redesign• Technologydesign, selection,and support• ChangemanagementOur Functional ExpertiseFinance & AccountingHuman ResourcesSupply ChainManagementInformationTechnologyReal Estate &FacilitiesMulti-FunctionEngineering ServicesAdministrativeServices
  6. 6. Key Components of Purchase-to-Pay (P2P)
  7. 7. Copyright © 2011 by ScottMadden. All rights reserved.Key Components of Supply ChainThe six major supply chain functions are described below. Although there are many transactionalcomponents within the supply chain, shared services has historically focused on the accountspayable (AP) function.6Performance ManagementInformation ManagementReturns to SuppliersSuppliersCustomersReturns from CustomersPlanning andForecasting•Planned demand•Forecastingunplanneddemand•Business supporttoolsStrategic Sourcing•Market and spendanalysis•Demandaggregation andsupplierconsolidation•Suppliernegotiations•Contract/suppliermanagementProcurement•Supplier setup•PO generation•Quotations –price/delivery•Ordermanagement•Supplier/customerinquiriesLogistics•Inbound logistics•Cross-docking(intra-company)•Outbound logistics•InvestmentrecoveryMaterialsManagement•Inventory planningand management•Warehousenumber andlocation•InternalwarehouseoperationsAccounts Payable•Invoice processing•Problem/disputeresolution•DisbursementTraditional Shared Services Opportunities
  8. 8. Copyright © 2011 by ScottMadden. All rights reserved.P2P Shared ServicesTransaction and non-transactional components can be considered for shared services. The value ofthe work performed will determine how it is aligned within a shared services model.7Performance ManagementInformation ManagementReturns to SuppliersSuppliersCustomersReturns from CustomersPlanning andForecasting•Planned demand•Forecastingunplanneddemand•Business supporttoolsStrategic Sourcing•Market and spendanalysis•Demandaggregation andsupplierconsolidation•Suppliernegotiations•Contract/suppliermanagementProcurement•Supplier setup•PO generation•Quotations –price/delivery•Ordermanagement•Supplier/customerinquiriesLogistics•Inbound logistics•Cross-docking(intra-company)•Outbound logistics•InvestmentrecoveryMaterialsManagement•Inventory planningand management•Warehousenumber andlocation•InternalwarehouseoperationsAccounts Payable•Invoice processing•Problem/disputeresolution•DisbursementPurchase–to–Pay Shared Services Opportunities
  9. 9. Copyright © 2011 by ScottMadden. All rights reserved.PerformanceManagementSupplierRelationshipManagementCUSTOMERSSuppliersPurchasingDepartmentsLine Managers& PurchasersP2P Shared Services Delivery Model (Example) Issue resolution Vendor performanceTier 2Tier 1Tier 0Tier 2SharedServicesCorporateSSCOEProcurementStrategyPurchasing PolicySupplier DiversityProgramTier 3Customers Service Delivery Policy & ProgramsStrategic SourcingAccounting &ReportingIssue ResolutionTier 3 Enable portal self-service- Invoice monitor, reporting,policies, etc.- Vendor portalAssisted SupportInvoice TrackerAutomated FormsSelf-ServiceTransactionsCall HandlingIssue Resolution8Tier 1 Build central call routing forclients and vendors- Interactive voice responsecall routing- Case manager issuecapture, tracking, andclosure Central transactions(purchase orders, vendormaintenance, AP, T&E, etc.)- Automated and measuredTier 0Customer AccountManagement
  10. 10. Copyright © 2011 by ScottMadden. All rights reserved.Benefits of a P2P Service Delivery ModelThe P2P service delivery model provides significant benefits to organizations. The focus on integratingthe entire supply chain can dramatically reduce errors and manual efforts. Single point of contact for procurement/payment questions or issues Ability to optimize supplier relationships and automate payment process Improved compliance, control, and service levels with vendors Higher visibility of procurement transactions for customers and suppliers Improved control over early payment discounts Single investment decision making for the purchase to pay process9Reduced administrative costs to replenish inventory and procurematerials and services by 10-25%!
  11. 11. P2P Technology
  12. 12. Copyright © 2011 by ScottMadden. All rights reserved.11One of the main issues experienced by companies that are implementing a P2P service model is amisalignment of procurement and accounts payable activities. Resolving invoice discrepancies, regarding PO number or price and quantity errors, can take up asmuch as 25% of the average AP department’s time. There are two main technology issues that aid inreducing discrepancies1:— Minimizing manual processes through the use of e-invoicing and vendor portals allows for areduction in invoice discrepancies— Master Data Management (MDM) programs in relation to e-procurement can further reduce pricediscrepancies in invoicing Most software vendors have developed e-invoicing suites that allow suppliers to submit and trackinvoices electronically. This reduces the manual data entry that can cause invoice discrepanciesA Forrester Research Inc. study found that companies who combine eProcurement with e-invoicingare twice as likely to achieve excellence in AP processing11Source: “Tipping Point for Procurement BPO 2011?” by Bob Booth, CapGemini, August 28, 2011Industry LeadersProcurement and AP Alignment
  13. 13. Copyright © 2011 by ScottMadden. All rights reserved.Current P2P software vendors fall into two separate categories: Enterprise Resource Program (ERP)vendors and best-of-breed vendors. Vendor Segmentation— ERP Vendors Leaders: SAP and Oracle— Best-of-Breed Vendors Leaders: Ariba, Emptoris,BravoSolution Most best-of-breed solutions will bolt onto existing ERP software platforms Current P2P Industry Trends— As in most software markets, Software as aService (SaaS) represents the most recentmove in P2P solutions— Business Process Outsourcing (BPO) isanother market trend, which is already widelyused in HR and finance work streams, that isbeginning to gain momentum in the P2PmarketP2P Technology and Industry Trends121Source: “Tipping Point for Procurement BPO 2011?” by Bob Booth, CapGemini, August 28, 2011Source: ”Magic Quadrant for Strategic Sourcing Application Suites,” GartnerFeb 2010
  14. 14. Selective Outsourcing and BPO
  15. 15. Copyright © 2011 by ScottMadden. All rights reserved.There are often several determining factors for an organization to consider outsourcing. The ability tohave access to best practice processes, new technologies, and specialized skills while reducing processcosts can create a very attractive business case.BuyingPowerFocus onCore BusinessInability toRetain TalentImproveService LevelsCatalyst forChangeState-of-the-ArtTechnologiesIncorporate BestPracticesCostSavingsConsolidateCentersConsiderations for Outsourcing14TransformP2PCategory Coverageand Expertise
  16. 16. Copyright © 2011 by ScottMadden. All rights reserved.Industry LeadersPurchase to Pay BPO and Strategic Sourcing15An emerging trend in the P2P service industry is the outsourcing of P2P process functions, particularlywith regard to transactional workflow, spend analysis, and indirect strategic sourcing. BPO tends to follow one of two specific models:— Process Outsourcing This model involves the outsourcing of actual P2P processes to a 3rd Party Provider. In theearly phases, cost efficiencies were sought by outsourcing the transactional P2P processessuch as PO creation and management, along with other financial functions such as AP Increased focus on strategic sourcing as a business model has led to further outsourcingaimed at taking advantage of learned best practices. This includes the outsourcing ofstrategic activities such as spend analysis and market research as these services may becheaper to purchase than to build— Commodity Category Outsourcing Another BPO model is complete category outsourcing. Many times companies will outsourceindividual categories such as travel or MRO parts to suppliers with expertise in thoseindustries BPO strategic sourcing projects tend to focus on indirect procurement because it involvescommon categories for most industries, providing a higher opportunity for aggregation andsavings1Source: “Tipping Point for Procurement BPO 2011?” by Bob Booth, CapGemini, August 28, 2011
  17. 17. Copyright © 2011 by ScottMadden. All rights reserved.Electronic InvoiceFilesInvoice(Paper)FinancialSystemClientSystem of RecordReportingInvoice StatusInquiryExceptionNotification/ResolutionPO MatchingCoding/ApprovalPayment InfoAP InfoUser InfoPO/ReceiptsVendor InfoInvoiceEntryDataExchangeSecureWeb / Intranet Access3rd PartySoftwareSelective Outsourcing – A/P ExampleOrganizations looking to further reduce their P2P costs will selectively outsource portions of theprocess to 3rd Party Providers. Maturity of the model and level of risk tolerance often determine howmuch of the process will get outsourced.
  18. 18. Copyright © 2011 by ScottMadden. All rights reserved.Selective Outsourcing – A/P Example (Cont’d )The 3rd Party Providers will process the invoices and manage vendors giving their clients moretime to focus on value-added activities.Process Component 3rd Party Provider ClientControls Enforce policies and procedure Set policies and proceduresInvoice Processing Receive Invoices (mail, file upload,portal, etc.)Invoice coding (when required)Scan invoices Multi-level approvalsData capture – initial coding Vendor maintenanceP.O. matchWorkflow for approval/verificationException managementSimple exception processingSupport Central help desk (internal, vendors,etc.)Payment processInvoice analytics 1099’s
  19. 19. Future Supply Chain Topics
  20. 20. Copyright © 2011 by ScottMadden. All rights reserved. Topic 3: Supply Chain GovernanceThis topic will explore the key building blocks of effective supply chain governance models includingdecision rights, performance metrics, service level agreements, and issue escalation/resolution. Wewill also present methods to create alignment across an enterprise for a consistent supply chainstrategy that clearly differentiates transactional efficiency from higher-value, strategic activitiesFuture Supply Chain TopicsThe ScottMadden and SSON Supply Chain Series includes the topics listed below. Topic 3 is next in theseries. Topic 1: The Enterprise Supply Chain Topic 2: How P2P Fits Within an Enterprise Supply Chain19
  21. 21. For more information, please contact usContact UsAndy FloresPartnerScottMadden, Inc.3495 Piedmont Rd, Bldg 10Suite 805Atlanta, GA 30305Phone: 404-814-0020aeflores@scottmadden.com20

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