From Silo to Synergy

How E-Invoicing Drives Value into a Larger Procure-to-Pay Initiative

James McDonald, Director, Proc...
Agenda

•
•
•
•

2

Introduction
Flint Hills Resources
ING US
Q&A

© 2014 Ariba – an SAP company. All rights reserved.
Procurement
Businesses Struggle with Inter-Enterprise
Collaboration
Buyers

Manual Paper-based
Collaboration
Point to Point EDI, Porta...
The Solution: The Business Network
Business Networks facilitate inter-enterprise
collaboration between trading partners

B...
Commerce Level 1: Concentrated
Siloed Processes
Sourcing &
Procurement

Mail
Scan
OCR

Mail
Email
Fax

AP
Supplier

6

© 2...
Commerce Level 2: Connected
Supplier Portals
Sourcing &
Procurement

Send PO
Invoice
Receipt &
Status
AP
Supplier

7

© 20...
Commerce Level 3: Collaborative
Closed Loop Value Chain
Analyze
“Actual”
Spend
Data

Source

Contract

Defined & Approved
...
$10 Million Opportunity

9

© 2014 Ariba – an SAP company. All rights reserved.
Shelly Pratt, Controller/AP Manager, Flint Hills Resources
Zach Turner, Procurement Manager, Flint Hills Resources

FHR: A...
Flint Hills Resources – Background
FHR is a direct, wholly owned subsidiary of Koch Resources LLC, which is wholly
owned b...
Why did FHR implement Ariba?

•

Growth in business increased the volume of manual transactions; the
incumbent electronic ...
Why did FHR implement Ariba?
Purchasing
• Confirmation that Purchase Orders

•

•
•
•
13

were received
Inconsistencies wi...
Flint Hills Resources – Journey

•
•
•
•
•
14

Limited use of a tool that was being discontinued.
Growth caused an increas...
2,000

-

15

1,2701,667
1,667 1,692
1,667
1,667

May-11
Jun-11
Jul-11
Aug-11
Sep-11

© 2014 Ariba – an SAP company. All r...
16
© 2014 Ariba – an SAP company. All rights reserved.

Nov-13

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

May-13

Apr-13

Ma...
Achieved Value Proposition
•

Payable invoice automation/optimization through electronic processing.

•

Buyer optimizatio...
Lessons Learned
•

It is a team effort. AP, purchasing, suppliers and Ariba are key to success.

•

Supplier enablement is...
Future Strategy
Continue to enable vendors that meet our invoicing and PO threshold
Work with our top 10 vendors (which ac...
James McDonald, Director – Procurement Operations, ING

ING: PROCUREMENT & AP
DRIVING NETWORKED RESULTS
20

© 2014 Ariba –...
ING Background

•

Our company
•
•
•

•

Procurement/Finance structure
•
•
•

21

7000 employees
$850M total spend
$500M P...
ING’s Journey

•
•
•
•
•
•
22

Baseline – Situation prior to Ariba
Challenges
Overall solutions sought
Results
Lessons lea...
Baseline

•

•

Decentralized AP – no managed Procurement function
“Authorization Tables” to identify who had the authorit...
Challenges

Capturing
controllable
spend on PO

24

Integrating PO
and Invoice
processes

© 2014 Ariba – an SAP company. A...
Solutions Sought

•

We first changed our organization
Procurement
goal
AP
goal

• Buy right good/service
• Buy from right...
Solutions Sought

•
•

Centralized AP
Managed Procurement
- Decentralized AP
- No managed
procurement
function

•
26

- Ce...
Solutions
Challenge

Solution

Solution details

Establish P2P standardized
processes/policy

“Procurement Guide”

•

Comp...
Solutions
Challenge

Solution

Solution details

Build governance

Procurement Operations

•

•
•
•
•

Enhance value

PCar...
Results

Cost Savings
•

•

Significant FTE
reduction/redeployment
Early pay discounts capability

•
•

PCard rebate reven...
Results
Process efficiency
•
•

Receipt-to-approve days: automated workflow via e-procurement
Invoices per full-time staff...
Lessons Learned/Key Insights

•

Ensure strategy drives efforts and resource allocation
Make e-invoicing and AP automation...
Future Plans

•

Improve reporting
Data Warehouse reporting

•

Continue efficiency and value efforts
Continue Ariba Netwo...
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From Silo to Synergy: How E-Invoicing Drives Value into a Larger Procure-to-Pay Initiative

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Accounts Payable and Procurement are both critical links in the P2P value chain. Procurement negotiates the right rates from the right suppliers, while Accounts Payable is tasked with paying the right amount at the right time. But too often they are separated by both organizational and process silos, and neither knows what the other is doing.

As a result, companies lose millions in negotiated savings and opportunity costs each year because of operational inefficiencies and lack of visibility into the entire P2P process. In this session, you will learn how to align Procurement and Accounts Payable through an end-to-end, closed-loop source-to-settle process to achieve operational excellence and, in the process, transform Accounts Payable into a high-performing profit center.

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  • DREW
  • DREWFrom a technology perspective, business networks help solve this by connecting people and processes across silos internally and with external partners as well.  Business networks are about automating and improving processes and connecting the right information to the right people at the right time within the right process to make the right decisions to obtain the right results.  Why is this important?...  Because with the Rise of the Networked Economy come significant, concrete benefits for those companies that embrace networked collaboration.
  • DREW
  • From Silo to Synergy: How E-Invoicing Drives Value into a Larger Procure-to-Pay Initiative

    1. 1. From Silo to Synergy How E-Invoicing Drives Value into a Larger Procure-to-Pay Initiative James McDonald, Director, Procurement, ING Shelly Pratt, Controller, Flint Hills Resources Zach Turner, Procurement, Flint Hills Resources #AribaLIVE @ariba © 2014 Ariba – an SAP company. All rights reserved.
    2. 2. Agenda • • • • 2 Introduction Flint Hills Resources ING US Q&A © 2014 Ariba – an SAP company. All rights reserved.
    3. 3. Procurement
    4. 4. Businesses Struggle with Inter-Enterprise Collaboration Buyers Manual Paper-based Collaboration Point to Point EDI, Portals & Single Process Solutions Higher Operating and Supply Chain Costs Missed Sales Opportunities Wasted Time and Resources Delayed Payments, Overpayments, and Missed Discounts, Slow Cash Flow Limited Visibility and Elevated Risk 4 4 © 2014 Ariba – an SAP company. All rights reserved. Suppliers
    5. 5. The Solution: The Business Network Business Networks facilitate inter-enterprise collaboration between trading partners Buyers Suppliers “65% of Best in Class companies have the capability to effectively collaborate with their network of suppliers versus only 21% of laggards.” B2B Integration and Collaboration: Strategies for Building a ROI Business Case, Aberdeen Group. June 2011
    6. 6. Commerce Level 1: Concentrated Siloed Processes Sourcing & Procurement Mail Scan OCR Mail Email Fax AP Supplier 6 © 2014 Ariba – an SAP company. All rights reserved.
    7. 7. Commerce Level 2: Connected Supplier Portals Sourcing & Procurement Send PO Invoice Receipt & Status AP Supplier 7 © 2014 Ariba – an SAP company. All rights reserved.
    8. 8. Commerce Level 3: Collaborative Closed Loop Value Chain Analyze “Actual” Spend Data Source Contract Defined & Approved catalogue Content catalogues Pay Manage/ Approve © 2014 Ariba – an SAP company. All rights reserved. Order Acknowledgement & Ship Notice Supplier Perfect Invoice Match Invoice Receipt Order Perfect PO Payment Visibility, Execution & Remittance 8 Requisition
    9. 9. $10 Million Opportunity 9 © 2014 Ariba – an SAP company. All rights reserved.
    10. 10. Shelly Pratt, Controller/AP Manager, Flint Hills Resources Zach Turner, Procurement Manager, Flint Hills Resources FHR: AP CAPTURING AND ADDING VALUE TO PROCUREMENT 10 © 2014 Ariba – an SAP company. All rights reserved.
    11. 11. Flint Hills Resources – Background FHR is a direct, wholly owned subsidiary of Koch Resources LLC, which is wholly owned by Koch Industries, Inc, a privately held company involved in most aspects of the oil and gas industry. The operations of FHR and its subsidiaries include the following: Three crude oil refineries (approximately 816,525 bpd of crude oil refining capacity); Six chemical production facilities; Five ethanol production facilities and two biodiesel facilities; A 50% interest in Excel Paralubes, a general partnership engaged primarily in the manufacture of lubricant base oils; Proprietary pipelines and pipeline investments (located principally throughout the Midcontinent and Gulf Coast regions of the United States); FHR’s is the United States’ 9th, and the World’s 24th, largest refiner. In addition, FHR is the United States’ 5th largest producer of ethanol. FHR is also a leading producer and marketer of petrochemicals, producing about nine billion pounds of building-block chemicals. 11 © 2014 Ariba – an SAP company. All rights reserved.
    12. 12. Why did FHR implement Ariba? • Growth in business increased the volume of manual transactions; the incumbent electronic commerce solution was being discontinued. Manual transactions would lead to increased staffing for invoice input. Incumbent system was no longer an option. • 12 FHR wanted to move past basic electronic commerce into a value-added method of transacting with suppliers. FHR felt we could create a competitive advantage in our PP process by optimizing our processes and leveraging new tools. © 2014 Ariba – an SAP company. All rights reserved.
    13. 13. Why did FHR implement Ariba? Purchasing • Confirmation that Purchase Orders • • • • 13 were received Inconsistencies with process to confirm POs Inconsistencies with process to handle price discrepancies Processing time for manual confirmations Better visibility to vendor data © 2014 Ariba – an SAP company. All rights reserved. Accounts Payable • Efficiency • Enhanced supplier communication • Supplier billing improved • Prevent processing and • • payment delays Capture discounts Focus on value-added tasks rather than data entry
    14. 14. Flint Hills Resources – Journey • • • • • 14 Limited use of a tool that was being discontinued. Growth caused an increase in manual transactions. A robust electronic solution was needed. Ariba fit the need for both Purchasing and AP. A team approach was taken for planning and implementation with Purchasing leading the project. Continue the team approach with AP taking the lead on Ariba administration and supplier enablement. © 2014 Ariba – an SAP company. All rights reserved.
    15. 15. 2,000 - 15 1,2701,667 1,667 1,692 1,667 1,667 May-11 Jun-11 Jul-11 Aug-11 Sep-11 © 2014 Ariba – an SAP company. All rights reserved. 5,000 5,000 5,000 Jul-13 Aug-13 Sep-13 6,667 5,000 Jun-13 Nov-13 5,000 May-13 6,667 5,000 4,498 2,907 5,137 5,094 3,659 3,870 3,880 4,030 3,680 2,469 2,851 1,427 1,750 2,577 4,554 4,487 3,032 3,319 3,240 2,347 3,515 3,659 2,038 2,089 2,009 8,000 Oct-13 5,000 Apr-13 3,333 Sep-12 Mar-13 3,333 Aug-12 5,000 3,333 Jul-12 Feb-13 3,333 Jun-12 5,000 3,333 May-12 Jan-13 3,333 Apr-12 5,000 3,333 Mar-12 Dec-12 3,333 Feb-12 5,000 3,333 Jan-12 Nov-12 3,333 Dec-11 5,000 3,333 Nov-11 2,164 4,082 6,000 Oct-12 3,333 Oct-11 4,000 3,032 2,108 1,667 744 Apr-11 Touchless Invoices 12,000 10,000 Above Plan Plan
    16. 16. 16 © 2014 Ariba – an SAP company. All rights reserved. Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Cancel/Rejection Rate 8.0% 7.0% 6.0% 5.0% Cancel Rate 4.0% Reject Rate 3.0% Target Line 2.0% 1.0% 0.0%
    17. 17. Achieved Value Proposition • Payable invoice automation/optimization through electronic processing. • Buyer optimization • Data Visibility • Forced business process consistency 17 © 2014 Ariba – an SAP company. All rights reserved. Reduction in staffing due to decrease in data entry, mail and scanning. Improved supplier billing through validations and instant feedback. More timely payment/capture of discounts. Reduced supplier inquires to AP regarding the status of invoices. Through the automation of the confirmation process we have freed up, on average, 2 hours per day for each buyer (we expect to capture more value in this area as we enable additional suppliers). By having suppliers return their catalog code and contract/catalog price on the confirmation, we can better analyze the data. Prior to Ariba we had limited visibility to detail spend data unless we asked the supplier for the information (high number of “material” orders). By taking in the supplier’s price we can see where we have issues between our expected price and the supplier’s ask price. Using this data to better manage our suppliers. Internal – all our sites to conform to an agreed upon standard process, with few exceptions. External – suppliers to transact in a compliant manner (accurate and complete data)
    18. 18. Lessons Learned • It is a team effort. AP, purchasing, suppliers and Ariba are key to success. • Supplier enablement is also a joint effort between Purchasing and AP: • Follow-up and Monitoring: 18 © 2014 Ariba – an SAP company. All rights reserved. All players in the game have different reasons for wanting the implementation of Ariba but they share a common goal. Understand the benefits to each group and process for optimal value and cooperation. Engaging AP and Purchasing in the implementation prevented biased decision making. Knowledge sharing that came out of the implementation helped us identify and proactively solve processing concerns. The cooperative relationship between purchasing and AP has continued past implementation. Finding the correct contacts in the supplier’s company in critical. Engaging both the AP contacts and the buyer contacts will help reach the right people (Billing, Order Fulfillment, supplier’s accounting team / AR) Communicate with Corporate & Local branches. Volume of transactions should not be the only consideration when setting priorities on which supplier to enable. Monitor first transactions to ensure code rolled to production correctly (data mapping issues). Early monitoring for new suppliers will catch potential issues. Continue to communicate between AP, Purchasing and the Supplier.
    19. 19. Future Strategy Continue to enable vendors that meet our invoicing and PO threshold Work with our top 10 vendors (which account for 80% of our transactions) to improve their transactional efficiency Drive down support costs – – – – 19 Better selection of the “right vendors” to bring on Collaborate with other buyers to find best practices Build training materials for the vendor to use for “how to’s” on YouTube Suggest improvements to Ariba to the network to encourage easier use © 2014 Ariba – an SAP company. All rights reserved.
    20. 20. James McDonald, Director – Procurement Operations, ING ING: PROCUREMENT & AP DRIVING NETWORKED RESULTS 20 © 2014 Ariba – an SAP company. All rights reserved.
    21. 21. ING Background • Our company • • • • Procurement/Finance structure • • • 21 7000 employees $850M total spend $500M PO spend Centralized Procurement Decentralized buying Centralized Accounts Payable (AP), Atlanta, GA © 2014 Ariba – an SAP company. All rights reserved. • Systems • • • Ariba Buyer (Invoicing) 9r1 Ariba Network (330 active supplier relationships) PeopleSoft Financials (AP, GL) 9.1
    22. 22. ING’s Journey • • • • • • 22 Baseline – Situation prior to Ariba Challenges Overall solutions sought Results Lessons learned and key insights Future strategy © 2014 Ariba – an SAP company. All rights reserved.
    23. 23. Baseline • • Decentralized AP – no managed Procurement function “Authorization Tables” to identify who had the authority to approve which invoices (manually maintained) No automation No technology enabled to support process Only had controls around approving and paying PROCURE 23 © 2014 Ariba – an SAP company. All rights reserved. APPROVE RECONCILE PAY
    24. 24. Challenges Capturing controllable spend on PO 24 Integrating PO and Invoice processes © 2014 Ariba – an SAP company. All rights reserved. Improving invoices per AP FTE (lower cost per invoice) Establishing standardized P2P policies and processs by expense type Building governance over P2P process in decentralized buying model
    25. 25. Solutions Sought • We first changed our organization Procurement goal AP goal • Buy right good/service • Buy from right supplier • Buy at the right price • Pay right supplier • Pay right amount • Pay at right time At first glace, the goals of Procurement and AP seem independent: …but Procurement and AP objectives and processes are actually INTERDEPENDENT 25 © 2014 Ariba – an SAP company. All rights reserved.
    26. 26. Solutions Sought • • Centralized AP Managed Procurement - Decentralized AP - No managed procurement function • 26 - Centralized AP - Managed Procurement - AP reporting into Procurement Procurement Services - Strategic Sourcing - P2P Operations - AP -Travel We made an investment in technology to integrate and automate procure-to-pay (P2P) using Ariba © 2014 Ariba – an SAP company. All rights reserved.
    27. 27. Solutions Challenge Solution Solution details Establish P2P standardized processes/policy “Procurement Guide” • Comprehensive listing of all expense types with associated process and tool referenced All controllable spend requires PO • Invoices without PO for a controllable expense type were rejected and PO forced to be entered and approved prior to resubmitting invoice • Implemented Ariba Buyer to capture all spend to begin consolidating spend onto one platform with associated workflow controls. Greater visibility of spend both in process and reporting to assist Sourcing Capturing spend on PO Ariba Buyer - AP policy for PO invoices Integrate PO and Invoice processes Ariba Invoice Improve invoices per FTE eInvoicing • • Non-PO processing 27 © 2014 Ariba – an SAP company. All rights reserved. Embracing the “1:many” low-maintenance integration to Ariba Network (over 330 active suppliers) Resources redeployed from processors to enablers • Distributed Keying via Ariba eForm •
    28. 28. Solutions Challenge Solution Solution details Build governance Procurement Operations • • • • • Enhance value PCard Manage compliance 28 © 2014 Ariba – an SAP company. All rights reserved. P2P process and technology owner ensures “somebody watching the shop” at all times Focus is on the customers’ needs and satisfaction - #1 metric is customer satisfaction Build compliance through education and awareness Manage supplier enablement campaigns to increase eInvoicing and Pcard suppliers Manage Pcard program and all Ariba enhancement requests and issues • • $65M program, over 62K transactions/yr Various solutions include Ariba-embedded ghost cards and single-use accounts • Drive compliance through “awareness campaigns” and active reporting
    29. 29. Results Cost Savings • • Significant FTE reduction/redeployment Early pay discounts capability • • PCard rebate revenue Procurement policy compliance
    30. 30. Results Process efficiency • • Receipt-to-approve days: automated workflow via e-procurement Invoices per full-time staff: touch-free e-invoices Results # Electronic straight through invoices 78% Active AN-e-Invoicing suppliers 330 Invoices converted to Pcard 58% Invoices per AP FTE 15,000 Best Practices • • Use PO and e-invoicing Align AP with Procurement • PCard 2011 Innovation Award recipients (JPMC)
    31. 31. Lessons Learned/Key Insights • Ensure strategy drives efforts and resource allocation Make e-invoicing and AP automation a priority – Identify strategic goals; build into employee objectives Look to redeploy processors as automation enablers – Ariba Network enablement, PCard growth Aggressively manage compliance – – 31 Mandated training Compliance KPIs © 2014 Ariba – an SAP company. All rights reserved.
    32. 32. Future Plans • Improve reporting Data Warehouse reporting • Continue efficiency and value efforts Continue Ariba Network campaigns Implement Ariba ICS Dynamic discounting Utilize Ariba Value Realization to optimize use of Ariba 32 © 2014 Ariba – an SAP company. All rights reserved.

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