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The Collaboration Imperative - Extending Back-office Systems to Automate All Spend


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The Collaboration Imperative - Extending Back-office Systems to Automate All Spend

  1. 1. MC The Collaboration Imperative: Extending Back-Office Systems to Automate All Spend Flint Hills Resources© 2012 Ariba, Inc. All rights reserved.
  2. 2. The Rise of the Networked Enterprise “Increasingly companies are embracing collaboration as part of their strategy to grow.” 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 20102 Ariba, Inc. 2012 All rights reserved.
  3. 3. The Opportunity Lies in the “White Space” thatExists Between Trading Partners’ Back-end Systems “The White Space” Buyers’ Suppliers’ Enterprise Apps Supplier Enterprise Apps Response to inquiry inquiry Request for clarification Sourcing Negotiations CRM Applications Supplier Applications Catalog network creation Catalog Buying support interface Order Procurement Order transmission Management Applications Applications Acknowledge Change order order Acknowledge change Cancel order Advanced ERP Ship Notice Accounting Exceptions Invoice status Apps/ ERP Managing errors Payment status Payment3 © 2012 Ariba, Inc. All rights reserved.
  4. 4. The Complexity of the Business Problem Quickly Demonstrates Itself When You Visualize the Flows (products, information, money) Between a Single Business and Potentially 100,000s of Suppliers… Buyer 1 Supplier 1 Sourcing Sales Procurement Order Mgmt Finance Finance Sales Supplier 2 Order Mgmt Finance Supplier 3 Sales Order Mgmt Finance4 © 2012 Ariba, Inc. All rights reserved.
  5. 5. The Problem Becomes Unworkable Once the Challenge Is Expanded to Reflect the Volume of Transactions and Interactions That Occur Across an Industry’s Ecosystem… Buyer 1 Sourcing Supplier 1 Sales Procurement Order Mgmt Finance Finance Buyer 2 Sourcing Sales Supplier 2 Procurement Order Mgmt Finance Finance Buyer N Sourcing Supplier 3 Sales Procurement Order Mgmt Finance Finance5 © 2012 Ariba, Inc. All rights reserved.
  6. 6. The Rationale for Pursuing Collaborative Commerce… With your ERP system in place and a Supplier Portal enabled, your company has successfully automated key internal processes and some supplier elements… Where you’d like to be 100% -- Complex Collaboration Challenge -- ! % of Total Spend Where you probably are today with an ERP and Supplier Portal approach % of Total B2B Trading Partners 100% …but if your business is anything like the situations Ariba witnessed with our other ERP customers, you still have a significant opportunity to capture additional efficiencies and savings by automating all of your spend types and supplier relationships.6 © 2012 Ariba, Inc. All rights reserved.
  7. 7. The Ariba Global Network ModelAriba has been building towards this for more than a decade… First, we built the Ariba® Network from scratch to enable our existing customers predominantly in North America Second, we acquired Quadrem™, whose technology and geographic strength extends the Ariba value proposition throughout Latam, Africa, Australasia, and Middle East Third, we acquired b-process™ for its two-sided network effect, innovative e-Invoicing solutions and VAT compliance expertise in France and throughout Europe Next, we will expand our global network capabilities and make them seamless for our customers across the globe…7 © 2012 Ariba, Inc. All rights reserved.
  8. 8. Ariba is Building the World’s Largest Business Commerce Network 1,300+ buyers 700K sellers 32K buyers 22M POs 5K sellers 18M invoices 44.4M invoices $200B in spend $80B spend 142 countries 24 compliant countries 72 currencies 36 compliant countries 65 buyers 90K+ sellers 4M purchase orders 3.2M invoices $39B in spend 65 countries8 © 2012 Ariba, Inc. All rights reserved.
  9. 9. Ariba is Building the World’s Largest Business Commerce Network Ariba + Quadrem + b-process > 3 Nearly 1 million trading partners 60+ million Invoices invoices $300+ billion in spend 142 countries 72 currencies 36 VAT compliant countries 2,500+ employees 40+ global offices 18 supported languages9 © 2012 Ariba, Inc. All rights reserved.
  10. 10. Dan Carpenter – Director, Procurement Excellence Russ Hunt – Senior Procurement Analyst Jennifer Winkler – Senior Procurement Analyst Ken Werth - BSA
  11. 11. Flint Hills Resources (FHR) 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; Four 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 Mid-continent and Gulf Coast regions of the United States); FHR 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 © 2012 Ariba, Inc. All rights reserved.
  12. 12. Why did FHR implement Ariba? • Incumbent electronic commerce solution was being discontinued. Failure to act would cause headcount addition in the accounts payable group. Incumbent system used for electronic transmission of purchase orders and electronic receipt of invoices Incumbent system limited to small number of suppliers due to off-market nature of EC tool and cost to enable new supplier Incumbent system could not handle freight, credits or blankets • 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.12 © 2012 Ariba, Inc. All rights reserved.
  13. 13. Mgmt Approval Value Proposition • Value proposition used for management approval was based solely on accounts payable personnel cost savings through the receipt of electronic invoices • Other expected benefits that were not quantified include: Optimization of confirmation process resulting in buyers being able to focus on higher-value tasks Data visibility leading to better analysis Better visibility to supplier issues on a real-time basis (un-invoiced, bad pricing, delivery issues, etc…) Forced business process consistency13 © 2012 Ariba, Inc. All rights reserved.
  14. 14. Document Types • Outbound PO Little value to FHR but high value to our integrated suppliers. Some suppliers willing to offer discounts for electronic POs. • Confirmation Required by FHR on all but service POs Allows us to run business rules on unit price, availability, and estimated delivery data FHR has automated a large percentage of the confirmation process with a structured, rules-based, exception process • Advance Ship Notice (ASN) When used by the supplier, allows us to see shipping documents and in some cases tracking information Would be optimal if all suppliers utilized • Inbound Invoice Fully automated – has allowed for personnel cost savings in the accounts payable group Forced adherence to FHR data requirements Forced adherence to billing amount; must equal FHR PO unit price (elimination of pricing suspensions in Maximo system) – Resolution of FHR expected price vs. supplier’s price occurs during the confirmation exception process.14 © 2012 Ariba, Inc. All rights reserved.
  15. 15. FHR’s Implementation Approach • FHR has made Ariba adoption a key focus and gives preference to suppliers who will transact on the Ariba Network. In several cases, suppliers’ unwillingness to transact on the Ariba Network has caused FHR to move business from that supplier in favor of a supplier that did transact on Ariba. • Tiered our supplier base based on criteria: Annual invoice count Ariba status (currently on network or not) Type of supplier (Materials, Service, Chem/Cat, etc…) Complexity of transactions (blankets, spot, etc…) • First group was a “test group” made up predominantly of suppliers that were previously transacting on our discontinued EC platform. All were existing Ariba customers. • Subsequent groups were based on value added to FHR. High invoice count suppliers or those perceived to be low enablement effort were selected. • Have moved to a more structured approach with scheduled enablements at set intervals. This was done to minimize the internal resources required to manage. • Plan is to enable all “eligible” suppliers with transaction counts that exceed our threshold. We will remove suppliers from the network who have marginal invoice counts but high support costs.15 © 2012 Ariba, Inc. All rights reserved.
  16. 16. Architecture • Communication and transfer of data occurs between Maximo and Ariba utilizing the Maximo Ariba Adapter Built on Maximo Integration Framework, leverages integration capabilities and error handling/management Includes object structures, services, and publishing channels to transact with the Ariba Network Transaction support for purchase order, change order, order cancellation, line level order confirmation, ship notice, invoice, invoice status and remittance advice cXML standard based XML formatting using flexible XSL templates Pre-configured Maximo e-commerce functionality, screen design, Supplier escalations/notifications, error management Supplier AS2 cXML Supplier HTML PO Management Supplier EDI Maximo Invoice Management Email Supplier CSV eCommerce Payment Remittance NETWORK® Adapter Supplier Purchase Order cXML Paper Purchase Order Cancel Oracle Purchase Order Changes Supplier Order Confirmations Advanced Ship Notice Invoices Invoice Statuses Remittance Supplier16 © 2012 Ariba, Inc. All rights reserved.
  17. 17. Monthly17 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Plan Sep-11 Oct-11© 2012 Ariba, Inc. All rights reserved. Nov-11 Dec-11 Jan-12 Touchless Invoices Feb-12 Mar-12 Apr-12 May-12 Jun-12 Actual - Touchless Jul-12 Ramp Up Actuals Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 LTD - Plan Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 LTD - Actual Oct-13 Nov-13 Dec-13 - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 LTD
  18. 18. Achieved Value Proposition • Payable invoice automation/optimization through electronic processing Accounts payable personnel cost savings due to elimination of keyed invoices – 44%+ of our invoices come in via Ariba and are touchless Time saved researching invoice that come in without complete/valid information (PO number, Workorder or Location) Reduced calls to AP to find status of invoice (received, payment date) • Buyer optimization Through the automation of the confirmation process, we have freed up, on average, two hours per day for each buyer (we expect to capture more value in this area as we enable additional suppliers). – 60%+ of our PO Lines run through this automation logic with a majority being touchless • Data visibility 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 into detailed 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. • Forced business process consistency Internal – forces all our sites to conform to defined processes External – forces our suppliers to transact in a compliant manner (accurate and complete data)18 © 2012 Ariba, Inc. All rights reserved.
  19. 19. Lessons Learned • Your implementation pain/joy is directly related to how well the supplier handles their enablement!!! • We found that to be successful, you must ensure key participants within the supplier’s firm are notified and appropriately trained (reduce the surprises). Corporate offices vs. local branch processing Billing, Order Fulfillment, Acct Mgmt • Don’t assume that suppliers currently on the Ariba Network will be a slam dunk. In many cases field office “A” may be well versed in Ariba, but you are doing business with field office “B” who has no idea what Ariba is. • Test with your integrated suppliers. Monitor first transactions to ensure code rolled to production correctly (data mapping issues). • Be aware of the enablement support costs (to include IT) and tailor your enablement around this. “Flippers” who transact infrequently may require more support as they tend to forget how to use the Ariba front end.19 © 2012 Ariba, Inc. All rights reserved.
  20. 20. FHR – Supplier Collaboration • Through the implementation of Ariba, FHR gained insight into our suppliers’ processes. In some cases we found issues within the supplier’s processes and/or systems that were unknown to us, and in some cases, unknown to the supplier. • Through the implementation of Ariba, FHR found holes in internal processes. The visibility created by Ariba can shine a light on internal process optimization opportunities. • By working with our suppliers to optimize the process for both parties, value was created across the PP process. • Key Learning: If you can create value in the supplier’s processes, they are far more likely to readily adopt the tool, which in turn adds value to the buyer’s organization.20 © 2012 Ariba, Inc. All rights reserved.
  21. 21. FHR – Ariba Collaboration • Throughout the implementation process, FHR worked closely with Ariba to configure the tool to support FHR business processes. • In many cases, FHR modified existing business processes based on Ariba tool needs. In these cases, it was determined that Ariba was enforcing best practices. • FHR continues to work with Ariba to suggest changes to the product that FHR believes would benefit the user community (suppliers and buyers). • Ariba has worked well with FHR to solve problems that were encountered during the implementation. In some cases, Ariba has modified their processes to better support the tool and FHR.21 © 2012 Ariba, Inc. All rights reserved.
  22. 22. FHR – IBM Collaboration • Throughout the implementation process, FHR worked closely with IBM to configure the adapter to support FHR business processes. • Short implementation timeframe of two to three months allowed IBM, Ariba, and FHR to leverage adapter to successfully implement customizations. • FHR continues to work with IBM to suggest changes to the adapter that FHR believes would benefit the user community. • IBM has worked well with FHR to solve problems that were encountered during the implementation. In some cases, IBM has modified their processes to better support the adapter and FHR.22 © 2012 Ariba, Inc. All rights reserved.
  23. 23. 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 • Share via email or social media **Come back soon – we are syncing #AribaLIVE audio and video interviews to the presentations**23 © 2012 Ariba, Inc. All rights reserved.