The Big Payoff - Top Payables Performance Metrics and How to Achieve Them
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The Big Payoff - Top Payables Performance Metrics and How to Achieve Them
- 1. MC The Big Payoff Top Payables Performance Metrics… and How to Achieve Them April 2012 © 2012 Ariba, Inc. All rights reserved.
- 2. The Rise of the Networked Enterprise 77% increased access to 63% increased 55% knowledge marketing better effectiveness 41% information sharing 43% improved greater collaboration market across silos 24% share increased revenue 8% higher margins “ Networked enterprises are 50% more likely to have increased sales, higher profit margins, gain market share, and be a market leader. ” Source: McKinsey & Company, “The rise of the networked enterprise, Web 2.0 finds it’s payday.” Survey of 4,394 executives. December 2010 2 Ariba, Inc. 2012 All rights reserved.
- 3. Process Automation AND Performance Measurement • Process automation gives top performing organizations a 92% cost savings advantage • However, technology alone is not a silver bullet… “If you do not re-engineer and measure your processes you will fail to gain the full benefits of the technology.” – Pierre Mitchell, The Hackett Group 3 Ariba, Inc. 2012 All rights reserved.
- 4. Performance Measurement A process for collecting and reporting information and assessing results in light of target objectives. 4 © 2012 Ariba, Inc. All rights reserved.
- 5. Four Performance Pillars to Manage Cash Better -- $15 Million for Every $1 Billion in Spend CHALLENGE OPPORTUNITY “ Process Efficiency “ 1-for-1 60-80% cost take out – or about $1 million for average to large Payables organizations “ Discount Capture “ 2-for-1 $2 Million in discount savings for “ every $1 Billion in discountable spend Contract Compliance “ 9-for-1 $9 Million in contract leakage savings for “ every $1 Billion in spend under contract Working Capital “ 3-for-1 $2.74 Million in working capital impact for 1 days of payables extension (DPO) on every $1 Billion in spend Source: The Hackett Group 2011 P2P Benchmark Report and Ariba Results 5 Ariba, Inc. 2012 All rights reserved.
- 6. MC The Big Payoff: Top Payables Performance Metrics…and How to Achieve Them Al Barbee Director, North America Shared Financial Services, GlaxoSmithKline © 2012 Ariba, Inc. All rights reserved.
- 7. GlaxoSmithKline • World-leading research-based pharmaceutical and healthcare companies • Leading the way in Consumer Healthcare for our OTC, oral care and nutritionals products • 2010 total company sales £28.4bn (~$45bn) • Emerging Markets: 24% of total GSK turnover • One of the largest development pipelines a in the industry with approximately 30 late-stage assets* * As of March 2011 Our Mission To improve the quality of human life domore feelbetter livelonger 7 © 2012 Ariba, Inc. All rights reserved.
- 8. GSK Structure CBS Finance HR Procure -ment Real IT Estate R North Europe Asia E G America Pacific I O N A L Business Service Centers G L O B Business Process Outsourcing A L 8 © 2012 Ariba, Inc. All rights reserved.
- 9. Performance Management Visual Management & Metrics Performance DISCIPLINE management enables Tiered Accountability sustained service & Comms Cells improvement and PRACTICE consistent focus on excellent everyday Leader Standard Work support services & Gemba TOOLS Problem Solving & Root Causing 9
- 10. What We Measure Operations Overview Global Dashboard • By Regional Payment Center Working Capital – Trade • By Region Payables (Value, DPO) Paid on Time BPO Service Level Compliance Purchase Order Compliance Problem Resolution SLA eInvoicing Compliance Voice of the Customer Standard Payment Terms • By Business Unit Compliance Paid on Time PO Compliance eInvoicing First Pass Yield 10 © 2012 Ariba, Inc. All rights reserved.
- 11. GSK – Global P2P Dashboard Purchase Order e-Invoicing Volume >60 Region Paid on Time Compliance Compliance Days North America UK GMS Europe N/A N/A N/A AsiaPac Metric Achieved Metric Missed Trend Current % vs. Previous Month 11 © 2012 Ariba, Inc. All rights reserved.
- 12. Regional Operations - Overview Working Capital Update Electronic Invoicing % 62 600 100% 506 12% 16% 90% 15% 90% 60 463 90% 90% 90% 450 500 80% 39% 58 439 481 437 70% 451 Axis Title 414 400 60% 56 50% 54 300 88% 84% 85% 40% 52 30% 61% 200 20% 50 10% 48 100 0% 52 57 56 59 59 61 59 59 Jan '11 Nov '11 Dec '11 Jan '12 46 0 Paper 39% 12% 16% 15% Oct' 11 Nov' 11 Dec' 11 Target Electronic 61% 88% 84% 85% NA DP O UK DP O Target 90% 90% 90% 90% NA TP B alances £M UK TP B alances £M Paid On Time First Pass Yield (Invoice Processing) 100% 80% 95% 75% 90% 70% 65% 85% NA JDE UK JDE One Merps Jan'11 90% 94% 94% 60% NA JDE UK JDE One Merps Nov'11 93% 94% 97% Nov'11 69% 71% 74% Dec'11 92% 95% 95% Dec'11 69% 70% 76% Jan'12 90% 97% 94% 90% 90% 90% Jan'12 70% 68% 74% Target Target 75% 75% 75% 12 © 2012 Ariba, Inc. All rights reserved.
- 13. Business Unit Operations - Overview NA PO % by Division 120% 100% 80% 60% 40% 20% 0% NA Canada Canada - Canada - Puerto NA R&D NA Corp NA Corp IT NA Cons NA Stiefel NA ViiV Tempro Others NA Overall Pharma Pharma R&D ViiV Rico Nov'11 84% 88% 89% 85% 79% 81% 89% 84% 85% 89% 91% 96% 68% 84% Dec'11 84% 92% 91% 90% 80% 86% 86% 80% 85% 83% 93% 96% 58% 86% Jan'12 85% 90% 89% 93% 85% 87% 92% 80% 88% 88% 93% 87% 65% 87% Target % 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 13 © 2012 Ariba, Inc. All rights reserved.
- 14. How Ariba e-Invoicing Helps Improve Our Metrics • Increased Productivity / Efficiency • Invoice accuracy – “Right first time” (business rules) • Vendors demand PO usage (PO Flip) • Web portal – Vendor self service • Working Capital Benefits • Paid on time • Reduced cycle time provides capability to leverage discounts or use supply chain financing 14 © 2012 Ariba, Inc. All rights reserved.
- 15. MC The Big Payoff: Top Payables Performance Metrics…and How to Achieve Them Mark Chapman Manager, Marketing Intelligence & IT Support Entergy © 2012 Ariba, Inc. All rights reserved.
- 16. Entergy • Entergy is a Fortune 500 company with revenues of more than $11 billion in 2010. • Entergy employs 15,000 people. • Owns and operates power plants with approximately 30,000 megawatts of electric generating capacity. Mark Chapman • The second-largest nuclear generator in the • Manager, Market Intelligence and United States. IT Support • Delivers electricity to 2.7 million utility • Project Manager – Electronic customers in Arkansas, Louisiana, Mississippi Invoice Presentment and Payment and Texas. • Supplies natural gas to approximately 191,000 customers in Baton Rouge and New Orleans. • Operates a system composed of more than 15,500 miles of high-voltage transmission lines and 1,550 transmission substations. • Entergy and its Charitable Foundation awarded grants totaling $16.3 million in 2010. 16 © 2012 Ariba, Inc. All rights reserved.
- 17. Target Benefits • Timely invoice payments • Early pay discounts captured • > 50% of invoices submitted electronically • Cycle time < 3 days • All payments are electronic • Front end validations on pricing and quantity • Elimination of mismatched (price and quantity issues) received in Asset Suite 17 © 2012 Ariba, Inc. All rights reserved.
- 18. Target Measures PROCESS DISCOUNTS • > 50% of invoices submitted • 75% of Early Pay Discounts captured electronically • Invoice Cycle Time < 3 Days • 90% of Payments On-Time SUPPLIERS • 100% Electronic Payments • Eliminate Price and Quantity • 400 by end of 2012 Exceptions (perhaps target 98% Touchless PO-Invoicing) 18 © 2012 Ariba, Inc. All rights reserved.
- 19. Strategy Environment • Purchase and Contract Orders sent via Business Commerce Network • Invoices processed in the Network, matching and approvals performed in Asset Suite and payments generated in ERP system Approach • 11 suppliers rolled out in pilot group • Seven planned waves of supplier enablement • Suppliers receive new POs and contracts (including releases), as well as legacy contract orders thru Ariba Network ARIBA • Ariba Buyer • Ariba Network – PO Automation, Invoice Automation, Discount Professional 19 © 2012 Ariba, Inc. All rights reserved.
- 20. Don’t Miss the General Session Panel Today at 5:15 p.m. • Sustainable Supply Chains through Vested Trading Partner Relationships Long-term, mutually beneficial partnerships between buyers and suppliers are increasingly being described as vested relationships, defined by a shared vision, agreed-upon desired outcomes, transparency, trust, and win-win. Developing such trading partner relationships pays dividends in many ways, particularly when your goal is ensuring a sustainable supply chain. Join Tim Minahan, chief marketing officer for Ariba, as he explores the concept with Kate Vitasek, author of Vested Outsourcing, and Tim McBride, general manager for global finance shared services at Microsoft. Mr. Minahan and his guests will engage with Ariba customers who will talk about such investments at their companies, and the impact they have on their comprehensive sustainability programs. 5:15 p.m. – 6:00 p.m. – Florentine III and IV 20 © 2012 Ariba, Inc. All rights reserved.
- 21. MC APPENDIX © 2012 Ariba, Inc. All rights reserved.
- 22. What Should We Measure? Payables Performance Measures Key Performance Indicator (KPI) Laggards Average Innovators Invoice cycle time receipt-to-approve (P) 45 days 21 days 5 days Invoices per FTE (H) 6,797 11,364 32,830 Percentage of invoices with exceptions (A) 30% 17% 12% First pass match rate (H) 65% 70% 85% Percent of electronic invoices (H) 7% 25% 67% Days Payables Outstanding (REL) 30 33 36 Percent of spend under Discounts (H) 0% 0.018% 0.133% Percentage of discounts captured (A) 15% 24% 31% Number of e-enabled suppliers (AN) 20 400 3000 (P) PayStream Advisors (H) The Hackett Group (A) Aberdeen (REL) The Hackett Group/REL (AN) Ariba Network 22 © 2012 Ariba, Inc. All rights reserved.
- 23. Sources • Paystream Advisors eInvoicing Adoption Benchmarking Report, 2011 Dynamic Discount Management: Finding the “Treasure” in Treasury, 2012 • Aberdeen Invoicing and Workflow: Integrating Process Automation to Enhance Operational Performance, 2011 Understanding Your Cost to Pay: Effective Measurement in Accounts Payable, 2011 Liquidity Management: Leveraging Technology to Improve Cash Forecasting, 2011 • The Hackett Group Build Your Business Case for Procure-to-Pay Automation -- webinar http://www.ariba.com/resourcelibrary/views/resource_library_asset_brief.cfm?asset_id=834 • The Hackett Group/REL REL 2011 Working Capital Survey • Ariba Network Network Insight – aggregate performance measurement from over $300 billion in spend transacted between nearly one million trading partners 23 © 2012 Ariba, Inc. All rights reserved.
- 24. Share This Session…NOW…from your mobile! • All presentations are posted: Guidebook mobile app – Search Apple or Android app store for Guidebook – Enter code “collabor8” Or at Slideshare.net/Ariba • Share via email or social media **Come back soon – we are syncing #AribaLIVE audio and video interviews to the presentations** 24 © 2012 Ariba, Inc. All rights reserved.
Editor's Notes
- The Big Payoff: Top Payables Performance Metrics…and How to Achieve ThemThis session will examine the business case for automating accounts payable for both hard dollar savings and process improvements. You will hear about essential benchmarks across the procure-to-pay function for catalog management, order delivery, invoice processing, scanning, workflow, discounts, working capital, payments and supplier management. Participants will discuss the key performance indicators (KPIs) they are using to drive process efficiency and effectiveness and share strategies for setting targets and measuring results against stated objectives. Session participants will walk away with an actionable blueprint for successful performance measurement. Speakers:Al BarbeeGSKMark ChapmanManager, Marketing Intelligence & IT Support Entergy
- enterprises see the benefits that the combination of cloud computing, enterprise apps, mobile and community can bring to their business…CFO Magazine study of global finance executives: View using Networked technologies to better discover, connect, and collaborate with their customers, suppliers, banks, and other trading partners as a top priority for agility and growth.CIO Magazine study found IT executives prioritizing investments to improve external collaboration.Research from Harvard Business Review points to inter-enterprise collaboration as THE key competitive competence going forward.McKinsey’s study on the impact of the Networked Enterprise found Networked Businesses outpace their less Networked peers in nearly every category of business performance…by a wide margin.Sources: CIO: "Increasing the Value of ERP with Cloud-Based Business Commerce Solutions," July 11, 2011CFO Research Services: "The New Deals: Why Companies Are Deepening their Alliances with Customers, Suppliers and Bankers in a Post-Recession Economy, ” April 2011.
- Performance MeasurementA process for collecting and reporting information regarding the performance of an individual, group or organizations. It can involve looking at whether outcomes are in line with what was intended or should have been achieved.To Evaluate how well a public agency is performing. To evaluate performance, managers need to determine what an agency is supposed to accomplish. (Kravchuk & Schack 1996). To formulate a clear, coherent mission, strategy, and objective. Then based on this information choose how you will measure those activities. (You first need to find out what are you looking for).Benchmarking is a traditional form of performance measurement which facilitates learning by providing assessment of organisational performance and identifying possible solutions for improvements.To Improve What exactly should who- do differently to improve performance? In order for corporation to measure what it wants to improve it first need to identify what it will improve and develop processes to accomplish that.Also you need to have a feedback loop to assess compliance with plans to achieve improvements and to determine if those processes created forecasted results (improvements).To Motivate Giving people significant goals to achieve and then use performance measures- including interim targets- to focus people’s thinking and work, and to provide periodic sense of accomplishment.To Promote How can public managers convince political superiors, legislators, stakeholders, journalists, and citizens that their agency is doing a good job.Between your strategy and performance measures, you require a set of performance objectives that describe what you must do well in order to execute your strategy. Objective statements are just that - concise statements that describe the specific things you must perform well if you are to successfully implement your strategy. The objectives you create will act as bridge from the high-level strategy to the performance measures that you will use to determine your progress toward overall goals.Strategic performance measures monitor the implementation and effectiveness of an organization's strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency.Good Performance MeasuresFocus employees' attention on what matters most to success Allow measurement of actuals to targetProvide a common language for communication Are explicitly defined in terms of owner, unit of measure, collection frequency, data quality, expected value(targets), and thresholds Are valid, to ensure measurement of the right things Are verifiable, to ensure data collection accuracy
- What CBS provides as a common core infrastructurePartners positively and effectively with the businessMakes us agile and competitiveLeverages advances in technology and the global marketplaceInvests in global, standard enterprise-wide solutions Has a mature service delivery capability and continuous improvement cultureTransforms the current user experience – providing joined up, easy to access and use services.