Pether Jonsson, ABB Accounting Centers. sharedserviceslink.com conference 8-10th June 2010, London    How to Significantly...
Agenda                         About ABB & P2P related facts                         The P2P process improvement initiativ...
A global leader in power and automation technologiesLeading market positions in main businesses                           ...
P2P related facts 2009                         34 Accounting Centers spread over all continents                         4‘...
P2P Process improvement                         In 2009, the “SCM/SAS cooperation” was launched to drive                  ...
Management of the initiative                         Focus areas jointly agreed between SCM and Accounts                  ...
Focus areas 2009                         • Purchase Order ratio                              Increase PO-ratio to ensure a...
Invoice volumes & Purchase Order ratio early 2009                         Direct material has high PO-ratio and can not be...
Actions taken to increase PO-ratio for indirect material                         Standard SAP functionality used, for some...
Example: ABB United Kingdom              •    Increase from 60% Purchase Orders to 99% Purchase Orders in 14 months       ...
Invoice requirements                           5 „maturity levels“ defined                              1. Not jointly (be...
Invoice RequirementsProgress made in 2009                          Each country report their status, both actual and forec...
Invoice RequirementsActions taken by countries                          Automatic printing of invoice requirements on Purc...
Results of enforcing invoice requirements                                              Rejection by outsourced scanning & ...
Consolidated results Purchase Order ratio early 2010                          By increasing the PO-ratio for indirect mate...
Summary and next stepsHow to Significantly Increase PO Rates Across 34 Countries to reach 75%                          •  ...
How to increase PO rates across 34 countries to reach 75%
Upcoming SlideShare
Loading in …5
×

How to increase PO rates across 34 countries to reach 75%

1,322 views
1,218 views

Published on

Want to be confident you are doing everything you can to improve your core KPIs around cost, quality and control? Pether Jonsson, ABB Accounting Centers shares directly transferable ideas from his experiences improving the purchase-to-pay process at ABB.

Published in: Business
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,322
On SlideShare
0
From Embeds
0
Number of Embeds
8
Actions
Shares
0
Downloads
28
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

How to increase PO rates across 34 countries to reach 75%

  1. 1. Pether Jonsson, ABB Accounting Centers. sharedserviceslink.com conference 8-10th June 2010, London How to Significantly Increase PO Rates Across 34 Countries to reach 75%© ABB GroupJune 4, 2010 | Slide 1
  2. 2. Agenda About ABB & P2P related facts The P2P process improvement initiative Scoping Management Focus areas 2009 Purchase order ratio. Invoice requirements. Summary and Next steps© ABB GroupJune 4, 2010 | Slide 2
  3. 3. A global leader in power and automation technologiesLeading market positions in main businesses 117,000 employees in about 100 countries $32 billion in revenue (2009) Formed in 1988 merger of Swiss and Swedish engineering companies Predecessors founded in 1883 and 1891 Publicly owned company with head office in Switzerland© ABB GroupJune 4, 2010 | Slide 3
  4. 4. P2P related facts 2009 34 Accounting Centers spread over all continents 4‘800‘000 supplier invoices processed 550 Accounts Payable employees Largest center processes 650‘000 invoices / year Smallest center processes < 50‘000 invoices / year Some centers are operational since 10 years, others are 1 year old Efficiency varies between 5 and 25 invoices per hour© ABB GroupJune 4, 2010 | Slide 4
  5. 5. P2P Process improvement In 2009, the “SCM/SAS cooperation” was launched to drive Process improvement in the Purchase-to-Pay process Joint effort by SCM and Accounts Payable Scope: 34 countries DK, FI, IE, NO, RU, SE, UK, CA, MX, US, FR, IT, ES, TR, BR, CN, JP, KR, AT, CZ, DE, BNL, PL, CH, IN, EG, ZA, AE, SA, AU, MY, NZ, SG, TH© ABB GroupJune 4, 2010 | Slide 5
  6. 6. Management of the initiative Focus areas jointly agreed between SCM and Accounts Payable on Group level and communicated to countries Target setting by the Group, actions defined locally in each country jointly by country SCM and country AP Quarterly calls arranged by Group, per region, for which countries submit action sheets and dial in All actions and progress is made transparent to share experiences and good ideas Tracking of progress using “bubble charts” and KPIs© ABB GroupJune 4, 2010 | Slide 6
  7. 7. Focus areas 2009 • Purchase Order ratio Increase PO-ratio to ensure a controlled purchasing behavior and to enable higher efficiency in invoice processing Status early 2009: PO-ratio of app 65%, much lower for Indirect material (especially Services) compared to Direct material Invoice requirements Improving the quality of supplier invoices to enable more efficient invoice processing and reduce risk for non- compliance with laws & regulations Status early 2009: Several countries had no agreed, communicated or enforced requirements on supplier invoices, resulting in significant rework in the AP department© ABB GroupJune 4, 2010 | Slide 7
  8. 8. Invoice volumes & Purchase Order ratio early 2009 Direct material has high PO-ratio and can not be easily improved Focus on Indirect material since the PO-ratio is often low and provides an opportunity for improving overall PO-ratio Invoice volumes PO-invoices Indirect Material Potential for improvement 40% PO-ratio 18% 7% Direct Material Consolidated PO-ratio PO-ratio 64% 60% 95% 57%© ABB GroupJune 4, 2010 | Slide 8
  9. 9. Actions taken to increase PO-ratio for indirect material Standard SAP functionality used, for some countries SAP SRM Looked at all possible purchasing scenarios & found different solutions by commodity type Training of organization Identified SAP Super Users in each region who understood Service Orders Organised and delivered events to train personnel Units defined who locally would accept services Assigned appropriate roles within SAP Thorough system-testing prior to go-live Implementation of no PO, no-Pay Implemented by a few “pilot countries” Small amount of exceptions (utilities, banks, government) will have a system PO but need not quote on invoice Warning ABB people and Vendors of forthcoming change 12 months in advance Incoming invoices can only be paid against a valid PO Invoices that do not quote a PO will be rejected back to the vendor© ABB GroupJune 4, 2010 | Slide 9
  10. 10. Example: ABB United Kingdom • Increase from 60% Purchase Orders to 99% Purchase Orders in 14 months • No-PO, no-Pay policy implemented in Jan 2010 • Primarily increase in PO-ratio for indirect material, especially services • Rejection of non-PO invoices is key component and started in Jan 2010 • To make reject possible strict Invoice Requirements had to be implemented % PO Cover - UK 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Feb-10 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Expect Invoices with PO 62.3% 62.3% 71.3% 71.0% 80.1% 72.2% 69.9% 71.9% 76.3% 74.18% 76.51% 77.9% 80.2% 98.8% 100.0%© ABB GroupJune 4, 2010 | Slide 10
  11. 11. Invoice requirements 5 „maturity levels“ defined 1. Not jointly (between SAS & AP) agreed requirements 2. Jointly agreed 3. Communicated (to suppliers) 4. Included in POs & Contracts 5. Enforced (rejection of invoices) Low Maturity level High© ABB GroupJune 4, 2010 | Slide 11
  12. 12. Invoice RequirementsProgress made in 2009 Each country report their status, both actual and forecast, every quarter using „bubbles“ Makes progress and ambition visible and creates competitionActual Q1 2009 Actual Q4 2009© ABB GroupJune 4, 2010 | Slide 12
  13. 13. Invoice RequirementsActions taken by countries Automatic printing of invoice requirements on Purchase Orders going out Letters to suppliers regarding invoice requirements Communication to ABB purchasers about requirements Establishment of web-sites with information for vendors about requirements on invoices Reject of invoices that do not meet requirements back to suppliers© ABB GroupJune 4, 2010 | Slide 13
  14. 14. Results of enforcing invoice requirements Rejection by outsourced scanning & OCR provider Number of rejected invoices dropped from 25% in January (first month) to 7% in March End-target : 3 % rejected invoices Reject status  for non‐compliant  supplier  invoices Example from ABB United Kingdom 30% 25% 20% Axis Title 15% Estimation Outcome 10% 5% 0% NOVEM… NOVEM… DECEMB… SEPTEM… OCTOBER MARCH JULY APRIL APRIL JUNE MAY JUNE/JULY FEB AUGUST AUG/SEPT© ABB GroupJune 4, 2010 | Slide 14
  15. 15. Consolidated results Purchase Order ratio early 2010 By increasing the PO-ratio for indirect material the consolidated PO ratio could be increased significantly • From 60% to 99% in United Kingdom • From 65% to 75% in the ABB Group as a whole Invoice volumes PO-invoices Indirect Material 40% PO-ratio 45% 18% Consolidated PO-ratio Increased from 64% to 75% Direct Material in one year PO-ratio 60% 95% 57%© ABB GroupJune 4, 2010 | Slide 15
  16. 16. Summary and next stepsHow to Significantly Increase PO Rates Across 34 Countries to reach 75% • Main actions were • Analysis for which commodities POs were normally not placed • Review of tool support and purchasing process for these commodities • Review of “exception lists” for POs • Training of staff on how to place POs in SAP for especially Services • Establishment of no-PO, no-Pay policy and enforcement through rejection of invoices (which required clear invoice requirements) • Next steps • Continue focus on PO-ratio , increase expected as more countries adapt “best practice” actions. • Start up work on 1st time match and Paid within terms, use same management model but use structured process improvement model (“4Q”)© ABB GroupJune 4, 2010 | Slide 16

×