Financial Metrics for TPM Foodservice
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This document summarizes a user conference for the AFS automation, audit, and analytics (AAA) system. It discusses how AFS measures return on investment, including hard ROI through measurable cost savings and soft ROI through improved processes. It provides details on how AFS has automated over 70% of the 19.7 million lines of claims data processed in 2014. It also describes how AFS audits generated $104 million in recovered funds from auditing over $1 billion in trade spend. The document concludes by showing analytics capabilities like compliance reporting and master data that help customers improve their ROI.
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Financial Metrics for TPM Foodservice
- 1. PERFORMANCE FUELED BY INNOVATION NAVIGATING IN THE FAST LANE MARCH 15 – 17 CHANDLER, AZ Presentations from the 2015 AFS User Conference
- 2. PERFORMANCE FUELED BY INNOVATION Financial Metrics The value of hard and soft ROI
- 3. PERFORMANCE FUELED BY INNOVATION Agenda • How do you measure ROI? • Are you maximizing your ROI? • Automation • AFS and automation • How does automation translate to ROI? • Audit • Audit process • Metrics • Translating our auditing process to your ROI • Analytics • Leveraging TPM reports • Wrap Up
- 4. PERFORMANCE FUELED BY INNOVATION How do you measure ROI? Hard ROI Can be assigned clear and measurable values, which directly impact business or financial goals Soft ROI Is more qualitative in nature and manifests itself in less tangible elements, such as improved visibility and process management
- 5. PERFORMANCE FUELED BY INNOVATION Hard ROI
- 6. PERFORMANCE FUELED BY INNOVATION Soft ROI
- 7. PERFORMANCE FUELED BY INNOVATION “AAA” Value Prop Automation, Audit, and Analytics
- 8. PERFORMANCE FUELED BY INNOVATION Automation
- 9. PERFORMANCE FUELED BY INNOVATION Automation
- 10. PERFORMANCE FUELED BY INNOVATION Automation • In 2014, AFS received over 550,000 claims, translating into 19.7 million lines of data - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2014
- 11. PERFORMANCE FUELED BY INNOVATION Automation 70% 30% Electronic Manual Of the 19.7 million lines of data we processed last year, we were able to automate the processes for 13.8 million of them
- 12. PERFORMANCE FUELED BY INNOVATION Automation
- 13. PERFORMANCE FUELED BY INNOVATION Automation
- 14. PERFORMANCE FUELED BY INNOVATION Audit
- 15. PERFORMANCE FUELED BY INNOVATION Audits • AFS audited over $1.0B in trade spend during 2014, resulting in $104M in settlement errors • Each of the 550k claims we processed last year went through 3 levels of verification Prelog Sku/Market verification Review against contract Authorization Payment
- 16. PERFORMANCE FUELED BY INNOVATION How do you achieve ROI?
- 17. PERFORMANCE FUELED BY INNOVATION Company A
- 18. PERFORMANCE FUELED BY INNOVATION Company B
- 19. PERFORMANCE FUELED BY INNOVATION How can you improve your ROI? • Over 50% of settled dollars were taken in deductions in 2014 • Review your KPI • Checks vs deductions? • Pros and cons
- 20. PERFORMANCE FUELED BY INNOVATION Analytics
- 21. PERFORMANCE FUELED BY INNOVATION Master Data • 111K Distributors • 36M Sku Cross References • 1.280M Operators • 400K CHD IDs
- 22. PERFORMANCE FUELED BY INNOVATION Operator Reporting
- 23. PERFORMANCE FUELED BY INNOVATION Compliance top 4 providers Premier Novation Compass Sodexo
- 24. PERFORMANCE FUELED BY INNOVATION Partnership with CHD
- 25. PERFORMANCE FUELED BY INNOVATION Sodexo Compliance Currently at 76% with over 7100 outlets without ____ Product • Of the 7100 units not buying, the segmentation with the biggest opportunity is with Travel Leisure segment representing 7% of the total market
- 26. PERFORMANCE FUELED BY INNOVATION Compass Units purchasing Q4 2013, but not in Q1 2014
- 27. PERFORMANCE FUELED BY INNOVATION Multi Dipping • Submitting for unit in Iowa, but under Minnesota and Wisconsin School Contracts • Submitting under Premier and Novation
- 28. PERFORMANCE FUELED BY INNOVATION Q & A Chris Jackson Account Director Foodservice Division Direct: 602-522-8282 ext. 1 Chris.Jackson@afsi.com
- 29. PERFORMANCE FUELED BY INNOVATION
Editor's Notes
- There are two types of ROI that any business or organization needs to consider when measuring their gains on financial investments. Hard and soft. Hard ROI is easy to measure, it is clear and defined and directly impacts business or financial goals. Typically, once the facts are gathered, this can be done through a simple calculation that will quickly determine if your seeing positive or negative results from the investment you’ve made. On the other hand, there are some ROIs that are soft, which can be a bit trickier to measure. Fortunately, labeling a benefit as soft doesn’t necessarily mean that hard ROI payoffs don’t exist. It only means that its tangibility is not always obvious or apparent at first glance. Let’s look at some examples of both hard and soft ROIs
- Imagine you’re a toy manufacturer. Presently all of your toys are made by employees in an assembly line environment. Now picture that you can purchase one piece of equipment that will provide you with the same output in half of the time. Not only have you improved your output with the equipment purchase, but you’ve also created labor efficiencies.. The hard ROI is the savings you’ll generate from the improved capacity or labor efficiencies measured against the investment. Armed with that data and knowledge, you can easily calculate your return on the equipment investment. Soft ROI is not always so easy to measure.
- As I mentioned before, soft ROI refers to savings that cannot be easily quantified. For example, If I want to spend $5000 to put an ad on a billboard, how do I determine the ROI this will achieve? Are we reaching our target audience? I had an increase to my top line, is that directly related to that advertisement or could it be attributed to other factors, such as seasonality or promotion? So, how do you measure the effectiveness of an advertising campaign? Well, you could identify the size of the audience you’ve reached and make assumptions regarding the effect your campaign had on that audience for one. how do you calculate the long term results you’ll receive from increased brand awareness? As you can see, soft ROI is much more difficult to quantify, but just because it’s challenging to measure, doesn’t mean it should be ignored. Now that we’ve clearly defined the types of ROI an organization should be measuring, I’d like to dive into specific metrics AFS provides you with to measure your ROI and how you can become more effective in doing so.
- So what is the AFS triple A value prop? Well, at AFS we know Foodservice and all of the complexities that come along with it. With that knowledge, we’ve identified the opportunity to bring you value in three distinct forms: automation, audit, and analytics. And in doing so, make managing your trade spending easier and more insightful than it would be to do it alone, which directly correlates with your hard and soft ROI.
- Let’s start with automation
- Most manufacturers do not have the financial or human resources to contribute to large scale processes for trade spend. Many are still tracking claims manually through the use of robust excel spreadsheets and paper storage, causing companies to get bogged down in the manual, everyday processes. For example, it’s estimated that at least 35% of claims still come in via paper form – if the majority of an employee’s time is spent logging and paying these claims, when do they have the time to actually validate or review for accuracy? The sheer volume of claims coming in alone can be overwhelming. So while the intention of manufacturers can be to gain visibility and insights into their trade spend, without a claims processing partner like AFS to assist with the associated task work,,,,,, the manual environment and nature of the industry can make that almost impossible.
- In 2014, AFS received over 550k claims, translating into 19.7 million lines of data. How were we able to successfully process this substantial volume? One word, automation.
- The TPM system is built to be smart, with automation in mind. Our auto-resolve and auto-validation features are intended to create efficiencies in the claims settlement process. Over 70% of claims are processed electronically at AFS offering visibility to the client that doesn’t exist when processes are manual. It’s our longstanding partnerships with distributors and database of over 36 million sku cross references that helped us to automate over 13.8 million lines of data last year. These partnerships, systems, and processes are just too large scale for individual organizations to replicate on their own. But for the most important question, how does this contribute to your ROI?
- Let’s look at Company A - prior to implementing AFS TPM Foodservice, company A had 4 employees managing their received claims; between receiving, storing, tracking, matching and payment, the majority of their time was spent managing processes and tasks… There wasn’t enough time or human resources to validate the data and derive useful insights from it. After implementing he new system, these 4 employees are now more efficient. The tasks that they previously managed are now being system driven; allowing them to now focus on the analytical piece of trade spend; defining gaps in their processes, and collecting on deductions that were taken in error. The savings are soft – not directly measurable by a calculation, but valuable in shifting the trade management teams’ focus to areas like profitability….. No time to look up and see big picture, pushing paper,, into actually gaining insights and value add activities ***controls and automation – different view of data –initial hurdles transitioning from manual tasks, but once over, moving toward value add activities.*** Once a distributor’s claim is matched to a contract in our system will auto resolve that process in the future, allowing your claim matching to become more efficient – Cross references among products and distributors are memorized and stored behind the scenes freeing up time for employees to focus on more important activities.
- So how do you stack up in terms of your electronic processing? As Sue showed you earlier, that information is directly available in your KPI dash in TPM. Above you’ll see an example of a company that is processing 73% of claims electronically. While some of your ability to process electronically is customer driven, there are definitely steps you can take to improve your electronic versus manual input, thereby allowing your claims to flow through TPM Foodservice more fluidly and improving your visibility. I encourage you to go back and review your current monthly KPI dashboard and review your eClaim verus paper percentages over time and discuss potential improvements with your CSMs.
- Audit – the word no one wants to hear during tax season…. But at AFS audit is a great thing! Let us give you a peek inside our organization into our audit process and how it translates into ROI for your organization
- As previously mentioned, AFS audited over $1B in trade spend during 2014, which resulted in a 10% settlement error rate, to the tune of $104M dollars. How did we do this? Each of the 550k claims we processed last year went through 3 levels of verification, where they were audited for accuracy, validity against the contract, and duplication. Claims that do not meet the necessary requirements are either recalculated for the correct payment amounts or rejected and not paid at all. So of the $104M that we at AFS found in error, how much was your organization able to capitalize on? Entered, queues for verification, verified calculated against contract, validated by reviewers, is this authorized for payment, payment
- So how does this diligent audit process help you to achieve your ROI? Let’s start by looking at how we define the $104M dollars in settlement errors we found in 2014 and what they mean to you. Our auditing process generally yields between a 7 and 15 percent error rate within claims settlement. The way this is reflected back to you is in the form of short paid and rejected payments, which Sue touched on the definitions of yesterday. But can the way your business is structured effect how you’ll receive your ROI? Absolutely. Let’s look at some examples
- Let’s take a look at Company A – Pulling directly from the new KPI UI that Sue presented earlier, on the left we can see that During December, AFS rejected roughly $55k in claim payments on their behalf. How much of translated into hard ROI? Well, as you can see on the right, Company A does the majority of their payments, (70%), via check. This means that the majority of their rejected payments were never made, which means we can estimate that this company avoided nearly 44k of erroneous payments in December. Over the course of a year, that translates to over $500k… Now, you may ask, what if your organization is structured differently or what about the other 11k that was deducted? Which brings us to my second example..
- For Company B, we can see that nearly 80% of their settled dollars are paid via deductions. Given the same $55k in rejected payments for December, the likelihood that these deductions were taken is probably much higher. With that being said, does that mean the company doesn’t receive an ROI in the form of rejected payments and recalculations? Of course not. It simply means that they must manage their ROI differently. AFS provides letters to our manufacturers to use in collecting on erroneous payments. Those letters assist you with recovering deductions that were taken in error, leading to your return on investment. So how is your organization structured? Do you currently have the processes in place to collect on erroneous claims? Or do you primarily pay claims via check, therefore taking your ROI up front? Are you leaving money on the table? All of this information is currently available in your TPM Foodservice KPI.
- Last year over 50% of settled dollars were taken in deductions. So was your organization collecting on their dollars to take advantage of the ROI available? I recommend reviewing your KPI to determine the best course of action for your business and then working with your CSM to achieve the desired results. For some companies, this may mean working to change customer behaviors and moving in the direction of payment through checks, while for others setting up a process to collect on erroneous claims may yield the best outcome. A simple analysis of your UI will help to answer many of these questions which are unique to your business… And speaking of analysis, that takes us on to our next topic. Analytics
- So how do analytics provide you with ROI? By providing you with top line growth and trade efficiencies through reporting.
- As Sue provided you with earlier, our master data set houses 111k distributors, 36M cross references, 1.2m operators and 400k CHD IDs.. This database provides you with analytical capabilities beyond what any manufacturer could collect alone. How does this translate to ROI? Let’s take a look at our first example: Unit level reporting
- We utilize our database of 1.2M operators to provide you with detailed level reporting that can show you voids within your distribution matrix, allowing your sales teams to target specific segments, and execute on that information to increase your top line.
- Our compliance reporting is capable of delivering insights into your largest distributors and allows you to drill down to determine which operators are and are not purchasing from you. The benefit of our large set of master data is that our TPM reports can tell you which operators are buying or not buying through GPO or national accounts Our partnership with CHD takes this one step further…
- With over 400k CHD Ids, Our partnership with CHD takes unit level analytics to the next degree. Through our buying/not buying reports manufacturers have the ability to target specific operators based on segment and size. This provides valuable insight into voids in your current distribution matrix, delivering your sales org with the tools they need to improve the top line. Let’s look at an example.
- So Which segment offers the biggest bang for your efforts? Let’s take a deeper look into the Sodexo Compliance report. As you can see that of 7,100 operators, the biggest opportunity for improvement to Company A’s top line exists within the travel leisure market. That information can then be deployed to the sales team for execution of strategic targeting. This same information is available for existing customers.
- For example, our reporting can show you clients that have purchased historically, but are not currently purchasing products. It opens up questions into distribution such as Why are these clients not purchasing and where is the distribution going? All of these reports allowing you to directionally identify white space within your distribution matrix and guide your sales team to open opportunities.
- Lastly I want to show you our multi dipping report. This reporting identifies operator units receiving the same product from the same distributor against different contractees during the same time period, indicating that a double dip or a multi dip has occurred… This is a rolling year report that allows you to identify trends and make actionable insights for preventing multi dips in the future. It essentially assists you with stopping the bleeding….
- In conclusion trade investment both in process and execution has elements of hard and soft ROI. our goal is to provide visibility to our customers to make it more transparent. We do that through our value prop of automation, audit, and analytics , providing the KPI dash that will assist you in determining How you are maximizing your ROI today and how your partnership with AFS can help you continue to improve?