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Global Spend Reporting

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  • 1. Global Spend Reporting Amsterdam, May 2012 Michael Url, Manager Procurement Process & Technologies,1 Sappi Fine Paper Europe Corporate Overview May 2011
  • 2. Agenda: Global Spend Reporting • Introducing Sappi • Why Spend Analysis • Getting the Master Data right • Applying best suited Technology • Measuring the speed and effectiveness of Operational Procurement • Summary & Take Aways ...2
  • 3. Sappi Limited - who are we today? • We are the world’s leading producer of high quality coated fine paper used in printing everything from art books to quality magazines to wine labels. (USA, Europe, South Africa, China JV) • We also produce a range of business paper, coated and uncoated speciality paper and casting release paper (USA, Europe, SA) • We are the largest and lowest cost producer of the chemical cellulose pulp used to produce viscose fiber (SA – 100% export) • We employ over 15,600 people and achieved an annual turnover of US$6,572 million (2010) • We are listed on the stock exchanges of Johannesburg and New York.3
  • 4. Geographic diversification Global presence enables Sappi to take advantage of opportunities where markets are strong  3 Paper Mills  4 Sales Offices  8 Paper Mills  16 Sales Offices  1 Fine Paper Mill (JV)  4 Sales Offices  1 Sales Office  1 Sales Office  6 Pulp and Paper Mills  1 Chemical Cellulose Mill  10 Sales Offices  541,000ha Forests  1 Sales Office  1 Sales Office 13% Europe 55% 48% 24% North America 17% Southern Africa 21% 22% Asia & other Sales By Source1 (US$) Sales By Destination1 (US$)4
  • 5. Fine paper mills in Europe Nijmegen Mill The Netherlands 240,000 tons coated Maastricht Mill fine paper The Netherlands 280,000 tons coated Kirkniemi Mill fine paper Finland 730,000 tons coated fine paper and 330,000 tons pulp Lanaken Mill Belgium Alfeld Mill 500,000 tons coated Germany mechanical paper and 330,000 tons coated 180,000 tons pulp woodfree and uncoated speciality and 125,000 tons pulp Stockstadt Mill Germany Gratkorn Mill 430,000 tons coated Ehingen Mill Austria and uncoated fine Germany 950,000 tons coated paper and 250,000 tons coated fine paper and 150,000 tons pulp fine paper and 255,000 tons pulp Biberist Mill 135,000 tons pulp Switzerland 500,000 tons coated and uncoated fine paper Total fine paper capacity in EU4,210,000 tons/year in 20105 
  • 6. Spend Analysis - what surveys say… • Almost 60% of study • Only 29% of all enterprises respondents said that spend have enterprise-level visibility analysis was crucial for into spend – despite the effective sourcing. market-proven impact that spend visibility can have. A.T. Kearney: „European Indirect Spend Management Study 2011” (survey base: 162 large and mid-sized companies) Ardent Partners: CPO Rising 2011 „The State of Spend Analysis“ (survey base: 250 companies) • 80% of procurement • Organisations have poor spend professionals agree that the visibility and accuracy to quality of masterdata is the key support effective sourcing: only factor for spend transparency. one in three organisations captures the item level Dun&Bradstreet Germany: Survey at BME-Symposium 2010 (survey base: 200 participants) details that is required for effective procurement. same A.T. Kearney study6
  • 7. Spend Analysis - why bother ? Not knowing what and where youre spending means not knowing where you can save. You cannot manage what you cannot see. Spend Analysis enables Spend Management: • Increased visibility into spend levels across the entire enterprise • Faster identification of sourcing opportunities and negotiating leverage with suppliers • Enhanced monitoring of contract “leakage” and “maverick” buying • Enhanced benchmarking and performance capabilities ROI ? • According to a US-survey: new cost savings on an annual basis of 0,25% - 1,00% of total spend • It’s hard to proof which part of a new saving is due to enhanced visibility7
  • 8. The classical 5 steps for Spend Analysis8 
  • 9. Special Guest at Procurement Strategy Meeting ?9
  • 10. Don’t ignore the Data Elephant in the room !10
  • 11. How big is the Data Elephant ? Annually for Sappi Europe (2010):  212.000 invoices (including credit / debit notes) 76.000 without purchase order reference 136.000 with purchase order reference  87.000 purchase orders with 183.000 purchase order items and 308.000 related goods receipt items (delivery items)  13.000 vendor masters used as Invoicing partner (of possible 42.000)  37.000 material masters referenced to in Invoices (of possible 310.000)11
  • 12. Why do we need to eat the Data Elephant ? Benefits • trustworthy segmentation and accuracy of spend analysis • better material / vendor search possibility ( less search time) • elimination of known duplicates • opportunity to share strategic spares between mills Steps taken at Sappi • seek senior management buy-in and get the resources • make allies: accounting/finance as well as IT department • establish central function “Master Data Management” • cleanse efficiently with own people (our choice) or with external data services • keep clean with master data workflow (material, vendor)12
  • 13. How do you eat an elephant standing in your path ? Remember that Sappi is an acronym for South African Pulp and Paper Industries. An old African proverb says: “The only way to eat an elephant is one bite at a time.”13
  • 14. Master data cleansing: one bite at a time Online Workflow for new Master Restrict Data system authorisations for create/change Master Data Mandatory bites for Spend Analysis14
  • 15. How is Spend without PO assigned to Material Groups and Parent Material Groups 142 Sappi Material Groups the determination sequence is as follows: 1. from Material Master, if there is none then 2. from Purchase Order, if there is none then 3. from a mapping table “GL-Account ( /Vendor ) to Material Group” 17 Sappi Parent Material Groups each Material Group is assigned to one Parent Material Group: 1 Wood and Chips 2 Pulp 3 Non-Fibre Rawmaterials 4 Logistics, Warehouse, Transport 5 Energy, Utilities, Water 6 Industrial Services 7 MRO Spares 8 Capital Equipment 9 Machine Clothing 10 Consumables 11 Packaging, Shipping Supplies 12 G&A, Insurance, HR 13 Marketing, Rebates, Trials 14 IT, Telcom 15 Travel 16 Non net-spend (VAT, Taxes, Intercompany, Grants, Suspense, Interest) 17 Release Paper15 
  • 16. Material Master Cleansing: the 2 phases at Sappi • “Commercial” Cleansing (this “phase 1” completed in Mar 2011)  Sappi Material Number 5051280  Short Text in language English BEARING:BALL;ANNULAR GE40KRRB YEL208  eOTD Concept Identifier 0161-1-01-006687  UNSPSC code UNSP-31171504 Ball Bearings  Commodity Code (Intrastat Nr) 84828000 Balls, needles and rollers for bearings  Sappi Product Hierarchy 010991-01 Ball Bearings  Sappi Material Group 010991 Bearings & Supplies  Sappi Parent Material Group 7 MRO Spares • Enrichment with Technical Attributes (“phase 2” not started in EU )  Deliverable (example): Bearing: Ball; Annular Property Description Value UOM Inner Diameter 85 mm From these attributes, a Outer Diameter 180 mm “Material Master Longtext” Width 41 mm is generated Number of Rows 1 Sealing Type Open Load Rating 3.5 KN Software used: Speed Rating 5000 rpm „Refresh“ by Fresh International16
  • 17. Material Master Cleansing at Sappi: 284.000 records cleansed (“phase 1”) Average speed: Cleansing 335 material masters / 6 old mills manday completed by Nov 2009 (except for product hierarchy) Cleansing 3 new mills Acquisition ( another 99.000 of 4 mills Materials) from completed by M-Real Mar 2011 (including product hierarchy)17
  • 18. Vendor Master Cleansing at Sappi • business information was bought from Dun&Bradstreet • …for 71% of records (agreed hit-rate): - ownership structure, DUNS-Nr, out-of-business, duplicates • rework / completion was done by Sappi • no annual updates bought • “Parent Vendor” grouping introduced for top 1.000 supplier • covering 97% of total spend and now containing 6.199 single vendor records • parents shared between Sappi Europe, Sappi North America, Sappi South Africa • blocking of vendor records (minus 17%) • out of business • not used for 7 years • elimination of duplicates • 42.000 records remain18 
  • 19. Technology Approaches for Spend Analysis19
  • 20. Approaches for Spend Analysis Manual - useful as proof of concept or due to lack of budget - issues: lack of scale, not easy to repeat, inconsistent … Outsourced Service: - Software Provider: typically self-service with customer categorizes (effort!) - Procurement Service Provider: buy categorization expertize and sourcing expertize In-house Software: - Packaged Solution for Spend Reporting e.g. SAP Business Objects Spend Performance Management (BO SPM) - Adjust a Visualisation Software to the needs of Spend Reporting e.g. SAP Business Objects Explorer20
  • 21. Suppliers of Business Intelligence Plattforms 2005 – 2010: large brands acquire best-of-breed products - Oracle: Siebel and Hyperion - IBM: Cognos - SAP: Business Objects 2011: trend continues to strategic purchases that expand market opportunity21
  • 22. BI Platforms include various Tools for Specific Purposes Example: SAP Business Objects22
  • 23. Sappi Global Spend Reporting: Data collection and Reporting Software • All invoices/supplier payments are covered by 2 ERP systems • Data is extracted daily from 2 ERP systems (Europe/North America, South Africa, both SAP ERP 6.0) into one BI system (SAP BW 7.0) • SAP Business Objects Explorer is used as interactive visualisation tool for analysis. – all European buyers and some finance managers have access – user-friendly, fast and very good user acceptance • SAP BEx Analyser (MS Excel integrated) remains available for use by system experts (with same data content + some more fields)23
  • 24. Sappi Global Spend Reporting: Content • allows for spend reporting and analysis at a Sappi global level, as well as for local ad-hoc analysis • based on invoiced values  includes invoices with PO and without PO, but singles-out the “non- net-spend” (VAT, taxes, intercompany, suspense, interest...)  also includes all debit and credit notes, as well as credit card spend  net value (cash discount is deducted)  at invoice date with currency conversion at that date’s rate  aggregations possible for both, Sappi fiscal periods and calendar months  in case “without PO”, the Material Group is derived from the General Ledger Account24
  • 25. Sappi Global Spend Reporting: Available Data Spend for what?  Parent Material Group  Material Group  Product hierarchy (only available if there is a Material Number)  Text Information (= invoice text, inherited from the PO short text, if PO exists )  Material Spend to which suppliers?  Vendor’s Industry (e.g. all energy suppliers)  Parent Vendor (e.g. all “Siemens” companies accumulated)  Vendor Spend where within Sappi?  Operational Division (e.g. Europe)  Company Code Group (= all companies at one location e.g. at “Maastricht”)  Company Code Performance indicators  “Spend under Control”: with PO, credit-note process w/o PO, other control, no control  “PO with contract”: Yes/No (the referenced PO is a contract call-off)  “PO with catalog”: Yes/No (the referenced PO is from an online supplier catalog) Other details  Payment terms  General Ledger Account  Invoice Number  Invoiced quantity25
  • 26. Sappi Global Spend Reporting: Default view after starting the report26
  • 27. Example „spend via online catalogs at one location“27 
  • 28. Procurement Europe manages around 2 billion € annual spend • Raw Materials and Energy (“direct spend”) encounters for • 73% of total spend • 11% of transactional efforts (# invoice items) • 10 % of the (active) supplier base28
  • 29. KPIs Procurement Operations: the average does not give the full picture • the KPIs vary a lot • per mill • per category • “No SAP purchase order” does not necessarily mean maverick spend (e.g. credit note process, VMI/consignment, electricity,...) • “No SAP contract” does not necessarily mean no written long term agreement29 
  • 30. Summary & Take Aways30
  • 31. Sappi Spend Analysis: remaining challenges • Free-text POs: Relying on user entered classifications • Efforts continue to raise % of POs with coded description (= with material/service master) • Spend without PO: Some GL-accounts are used for very different categories – assignment to material groups via vendor • Payments without accounts payable (small amount): discuss with Finance department to stop or add AP posting (e.g. bank collection for leasing) • Parent Vendors: keep up-to date with mergers/acquisitions • Ensure global agreements on standards (supplier, material) are adhered to in other Sappi regions, too (South Africa, North America)31
  • 32. Summary One bite at a time • collect data from all sources (ERP,…) • cleanse & enrich master data • choose & deploy spend analysis software The human factor • get buy-in from senior management • ally with IT and AP • dont assume that software can do the data cleansing (it can help) • make sure that software is easy-to-use for the buyers Some decisions must be taken • in-house solution vs. outsourced service • analysis software: tailor-made visualisation vs. packaged solution • masterdata cleansing: - internal vs. external resources - internal vs. external standards Focus on + correct&complete data content + a flexible, user friendly analysis tool - not on colorful dashboards with static reports32
  • 33. Thank you. www.sappi.com33 | [Presentation title] | [Client Name] | 21 May 2012 
  • 34. Back-Up Slides34
  • 35. IT Systems Landscape for procure-to-pay process at Sappi: high level of integration, same at all EU locations Function Description System Purchasing, Inventory Management, Invoice Verification. ERP Beside MM also FI, CO, PS, PM, APO... SAP ERP 6.0 SRM Supplier Relationship Management SAP SRM 7.0 Catalog Supplier Catalog SAP CCM 2.0 and Punch-Out B2B System to System (Supplier) SAP OCI, Sterling Integrator Optical Character Recognition for OCR Scanning of Invoice & Delivery Notes ReadSoft Process Director Rawmaterial Planning and Recipe Planning System RRS (Sappi System) BW Enterprise Datawarehouse SAP BW 7.0 BW Reporting Surface SAP BusinessObjects Explorer 3.1 Portal Access to SAP Systems, single-sign on SAP EP 7.3 Portal Sappi Intranet Microsoft SharePoint35
  • 36. Performance Management with KPIs in Procurement Operations ( without working capital KPIs and fixed cost KPIs)36
  • 37. Current Initiatives ... Systems • enhanced contract upload tool - go-live March • SRM roll-out Stockstadt/Kirkniemi - go-live May • support mills to improve KPIs (new catalogs, contracts, Auto-PO, EDI) MRO Stock optimisation • material master enrichment for selected groups continues • seek approval for stock-sharing concept at Maintenance Managers meeting Reporting • enhanced BOE Spend Report (quantities, vendor industry) - go-live April • new BOE Stock&Consumption Report - go-live May? Lean Projects • Pallet ordering - first wave done, implementation ongoing • Raw material price maintenance - done, follow-up with KPIs • 5S Sappinet for Procurement Europe - until May37
  • 38. The Journey Continues... • One Purchase Requisition Workflow for all type of PReqs/Shopping Carts • decision expected in Sept 2012 • Single SAP system SA - EUNA • go-live July 2013 • no business process / reporting harmonisation included • no master data alignment included • evaluate new functionalities and deploy if worth the effort • Contract Management tool • Dashboard for KPIs (crystal reports?) • Supplier Portal (SAP SUS or MS Sharepoint) • online Bidding (SRM) • online Supplier Evaluation • electronic invoicing enhancements38