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How P2P Fits Within an Enterprise Supply Chain
 

How P2P Fits Within an Enterprise Supply Chain

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Accounts Payable (AP) has proven to be extremely effective in a shared services model but efficiencies are largely dependent on upstream supply chain processes. When leading shared services operations ...

Accounts Payable (AP) has proven to be extremely effective in a shared services model but efficiencies are largely dependent on upstream supply chain processes. When leading shared services operations look for performance improvements or cost reductions in AP, they are forced to evaluate the entire P2P process to identify savings opportunities. “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). In this session, we focus on the key attributes of a successful P2P transformation and the role technology plays in enabling the capture of the synergies and savings associated with P2P in a shared services delivery model.

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    How P2P Fits Within an Enterprise Supply Chain How P2P Fits Within an Enterprise Supply Chain Presentation Transcript

    • Copyright © 2011 by ScottMadden. All rights reserved. How Purchase-to-Pay Fits Within an Enterprise Supply Chain SSON Supply Chain Learning Series Contact: aeflores@scottmadden.com
    • 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 Topics 1
    • About ScottMadden
    • Copyright © 2011 by ScottMadden. All rights reserved. What We Do – Corporate & Shared Services ScottMadden has been helping clients create greater value for their corporate services organizations for nearly 30 years. Our highly efficient, collaborative teams employ measurable, award-winning methods and deep cross-functional expertise to improve operational performance. 3 Finance & Accounting Human Resources Information Technology Supply Chain ScottMadden can improve process efficiency and automation to ensure accurate & timely financial information and compliance. ScottMadden designs, builds, and implements HR Service Delivery models to ensure efficient and effective HR operations that meet business needs. ScottMadden helps organizations create measurable IT value by focusing on business engagement to improve IT decision making. ScottMadden can craft new supply chain strategies and deliver improvements in operations, increasing the value delivered to customers.
    • Copyright © 2011 by ScottMadden. All rights reserved. What We Do – Shared Services 4 • Strategy development and integration • Benchmarking • High-level business case • Change management • Process improvement/ cost reduction • Operations/ technology assessment • M&A integration • Benchmarking • Customer and employee surveys • Change management • Service delivery model • Detailed current state, future state, and business case • Sourcing model • Organization design and staffing • Change management • Project planning and management • Service/ transaction center • Process redesign • Technology design, selection, and support • Change management Our Functional Expertise Finance & Accounting Human Resources Supply Chain Management Information Technology Real Estate & Facilities Multi-Function Engineering Services Administrative Services
    • Key Components of Purchase-to-Pay (P2P)
    • Copyright © 2011 by ScottMadden. All rights reserved. Key Components of Supply Chain The six major supply chain functions are described below. Although there are many transactional components within the supply chain, shared services has historically focused on the accounts payable (AP) function. 6 Performance Management Information Management Returns to Suppliers Suppliers Customers Returns from Customers Planning and Forecasting •Planned demand •Forecasting unplanned demand •Business support tools Strategic Sourcing •Market and spend analysis •Demand aggregation and supplier consolidation •Supplier negotiations •Contract/supplier management Procurement •Supplier setup •PO generation •Quotations – price/delivery •Order management •Supplier/customer inquiries Logistics •Inbound logistics •Cross-docking (intra-company) •Outbound logistics •Investment recovery Materials Management •Inventory planning and management •Warehouse number and location •Internal warehouse operations Accounts Payable •Invoice processing •Problem/dispute resolution •Disbursement Traditional Shared Services Opportunities
    • Copyright © 2011 by ScottMadden. All rights reserved. P2P Shared Services Transaction and non-transactional components can be considered for shared services. The value of the work performed will determine how it is aligned within a shared services model. 7 Performance Management Information Management Returns to Suppliers Suppliers Customers Returns from Customers Planning and Forecasting •Planned demand •Forecasting unplanned demand •Business support tools Strategic Sourcing •Market and spend analysis •Demand aggregation and supplier consolidation •Supplier negotiations •Contract/supplier management Procurement •Supplier setup •PO generation •Quotations – price/delivery •Order management •Supplier/customer inquiries Logistics •Inbound logistics •Cross-docking (intra-company) •Outbound logistics •Investment recovery Materials Management •Inventory planning and management •Warehouse number and location •Internal warehouse operations Accounts Payable •Invoice processing •Problem/dispute resolution •Disbursement Purchase–to–Pay Shared Services Opportunities
    • Copyright © 2011 by ScottMadden. All rights reserved. Performance Management Supplier Relationship Management CUSTOMERS Suppliers Purchasing Departments Line Managers & Purchasers P2P Shared Services Delivery Model (Example)  Issue resolution  Vendor performance Tier 2 Tier 1 Tier 0 Tier 2 SharedServices CorporateSSCOE Procurement Strategy Purchasing Policy Supplier Diversity Program Tier 3 Customers Service Delivery Policy & Programs Strategic Sourcing Accounting & Reporting Issue Resolution Tier 3  Enable portal self-service - Invoice monitor, reporting, policies, etc. - Vendor portal Assisted Support Invoice Tracker Automated Forms Self-Service Transactions Call Handling Issue Resolution 8 Tier 1  Build central call routing for clients and vendors - Interactive voice response call routing - Case manager issue capture, tracking, and closure  Central transactions (purchase orders, vendor maintenance, AP, T&E, etc.) - Automated and measured Tier 0 Customer Account Management
    • Copyright © 2011 by ScottMadden. All rights reserved. Benefits of a P2P Service Delivery Model The P2P service delivery model provides significant benefits to organizations. The focus on integrating the 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 process 9 Reduced administrative costs to replenish inventory and procure materials and services by 10-25%!
    • P2P Technology
    • Copyright © 2011 by ScottMadden. All rights reserved. 11 One of the main issues experienced by companies that are implementing a P2P service model is a misalignment of procurement and accounts payable activities.  Resolving invoice discrepancies, regarding PO number or price and quantity errors, can take up as much as 25% of the average AP department’s time. There are two main technology issues that aid in reducing discrepancies1: — Minimizing manual processes through the use of e-invoicing and vendor portals allows for a reduction in invoice discrepancies — Master Data Management (MDM) programs in relation to e-procurement can further reduce price discrepancies in invoicing  Most software vendors have developed e-invoicing suites that allow suppliers to submit and track invoices electronically. This reduces the manual data entry that can cause invoice discrepancies A Forrester Research Inc. study found that companies who combine eProcurement with e-invoicing are twice as likely to achieve excellence in AP processing1 1Source: “Tipping Point for Procurement BPO 2011?” by Bob Booth, CapGemini, August 28, 2011 Industry Leaders Procurement and AP Alignment
    • 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 on to existing ERP software platforms  Current P2P Industry Trends — As in most software markets, Software as a Service (SaaS) represents the most recent move in P2P solutions — Business Process Outsourcing (BPO) is another market trend, which is already widely used in HR and finance work streams, that is beginning to gain momentum in the P2P market P2P Technology and Industry Trends 12 1Source: “Tipping Point for Procurement BPO 2011?” by Bob Booth, CapGemini, August 28, 2011 Source: ”Magic Quadrant for Strategic Sourcing Application Suites,” Gartner Feb 2010
    • Selective Outsourcing and BPO
    • Copyright © 2011 by ScottMadden. All rights reserved. There are often several determining factors for an organization to consider outsourcing. The ability to have access to best practice processes, new technologies, and specialized skills while reducing process costs can create a very attractive business case. Buying Power Focus on Core Business Inability to Retain Talent Improve Service Levels Catalyst for Change State-of-the-Art Technologies Incorporate Best Practices Cost Savings Consolidate Centers Considerations for Outsourcing 14 Transform P2P Category Coverage and Expertise
    • Copyright © 2011 by ScottMadden. All rights reserved. Industry Leaders Purchase to Pay BPO and Strategic Sourcing 15 An emerging trend in the P2P service industry is the outsourcing of P2P process functions, particularly with 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 the early phases, cost efficiencies were sought by outsourcing the transactional P2P processes such 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 outsourcing aimed at taking advantage of learned best practices. This includes the outsourcing of strategic activities such as spend analysis and market research as these services may be cheaper to purchase than to build — Commodity Category Outsourcing  Another BPO model is complete category outsourcing. Many times companies will outsource individual categories such as travel or MRO parts to suppliers with expertise in those industries  BPO strategic sourcing projects tend to focus on indirect procurement because it involves common categories for most industries, providing a higher opportunity for aggregation and savings 1Source: “Tipping Point for Procurement BPO 2011?” by Bob Booth, CapGemini, August 28, 2011
    • Copyright © 2011 by ScottMadden. All rights reserved. Electronic Invoice Files Invoice (Paper) Financial System Client System of Record Reporting Invoice Status Inquiry Exception Notification/Resolution PO Matching Coding/Approval Payment Info AP Info User Info PO/Receipts Vendor Info InvoiceEntry DataExchange Secure Web / Intranet Access 3rd Party Software Selective Outsourcing – A/P Example Organizations looking to further reduce their P2P costs will selectively outsource portions of the process to 3rd Party Providers. Maturity of the model and level of risk tolerance often determine how much of the process will get outsourced.
    • 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 more time to focus on value-added activities. Process Component 3rd Party Provider Client Controls Enforce policies and procedure Set policies and procedures Invoice Processing Receive Invoices (mail, file upload, portal, etc.) Invoice coding (when required) Scan invoices Multi-level approvals Data capture – initial coding Vendor maintenance P.O. match Workflow for approval/verification Exception management Simple exception processing Support Central help desk (internal, vendors, etc.) Payment process Invoice analytics 1099’s
    • Future Supply Chain Topics
    • Copyright © 2011 by ScottMadden. All rights reserved.  Topic 3: Supply Chain Governance This topic will explore the key building blocks of effective supply chain governance models including decision rights, performance metrics, service level agreements, and issue escalation/resolution. We will also present methods to create alignment across an enterprise for a consistent supply chain strategy that clearly differentiates transactional efficiency from higher-value, strategic activities Future Supply Chain Topics The ScottMadden and SSON Supply Chain Series includes the topics listed below. Topic 3 is next in the series.  Topic 1: The Enterprise Supply Chain  Topic 2: How P2P Fits Within an Enterprise Supply Chain 19
    • For more information, please contact us Contact Us Andy Flores Partner ScottMadden, Inc. 3495 Piedmont Rd, Bldg 10 Suite 805 Atlanta, GA 30305 Phone: 404-814-0020 aeflores@scottmadden.com 20