The Hartford's Michael Knipper on Blueprint for Rapid and Sustainable Spend Management Success
Blueprint for Rapid and Sustainable Spend Management Success<br />Michael Knipper <br />Senior Vice President<br />
The Hartford<br />200 year old multi line financial Services company<br />26,000 employees primarily based domestically<br />$1.4 Billion in sourceable spend and increasing<br />Enterprise services – Real Estate, Procurement/Negotiation, Commodity Management and Operations<br />
Overview – Our Journey<br />Vision<br />Selection<br />Implementation<br />ASIA – All Spend in Ariba<br />
Vision<br />Procurement will deliver measurable value to the company. Value is defined as:<br />Transparency of all spend paid through Accounts Payable<br />Ensure all spend is approved prior to purchase<br />Ensure all invoices in managed categories are matched to a purchase order or contract<br />Defined sourcing process for all managed categories<br />Consistent categorization of spend<br />Spend reporting that provides data to guide decisions and actions<br />Reduce expense and be able to prove it!<br />Key Enablers<br />Single entry point for all purchases<br />Only one system generates an okay to pay file<br />
Source to Pay Process<br />SOURCING<br />CONTRACTING<br />REQUISITIONING AND PURCHASE ORDERS<br />RECEIVE/ INVOICING<br />PAY<br />REPORTING<br />VENDOR MANAGEMENT<br /><ul><li>Procurement works with stakeholders to select suppliers
Selection Process<br />RFP delivered to six providers<br />Key requirements<br />On demand tool<br />Complete tool set to support Source to Pay<br />Why we implemented a new tool<br />Inconsistent approvals prior to purchase<br />Inconsistent authorization to spend levels<br />Inconsistent and in some cases no existent invoice to purchase order contract matching<br />Antiquated contract repository<br />No sourcing tool<br />Highly customized tool, difficult and expensive to maintain<br />
Implementation<br />Strategic Intent – Implement entire source to pay tool set by May 15th 2011 (six months). Go live success defined as including:<br />All spend commodities<br />All historical contracts loaded<br />All users trained <br />Consistent company wide end to end process<br />Contract signed September 2009<br />Implementation started mid-November 2009<br />Live May 10th<br />
Implementation – Guiding Principles<br /><ul><li>Ariba will be the single place to initiate all purchases and all purchases must be made through the approved processes/ methods within the tool
All invoice payments will be routed through Ariba and paid by approved methodology (PCard, ACH, check). Predetermined exceptions to the use of Ariba will be clearly defined (i.e., Legal fees, agent commissions, claim systems payments).
PCards will be used for payment whenever possible to maximize the savings opportunity
Ninety percent of all requisitioned items will be available in Ariba catalogues and the catalogue “punch-out model” with HIG controlled pricing being the preferred model
Commodity approvers will be defined and required for the following commodities: IT hardware and software, meetings, RE, Marketing Services, print, and others to be clearly defined
The receiving function in Ariba will not be utilized. Invoices for office supplies will be routed through auto requisition match/ auto pay. All other invoices will be auto requisition or contract matched and routed to the initial requistioner to validate receipt/ acceptance
There will be one consistent enterprise wide approval process needed to acquire and pay for goods and services
Approvals will be obtained only once -at the requisition or project approval stage- whenever possible
We will minimize (no more than 5) the number of approvers required</li></li></ul><li>Implementation – Big Bang Approach<br />Entire Source to Pay transformation involving 5 module implementation<br />Procure to Pay Day 1 scope<br />Configured Requisitioning/ Contract Compliance/ Receiving/ Invoicing/ P cards<br />Complete redesign of approval process<br />Re-approval of all contracts (over 20,000)<br />40 catalogs<br />Enabled 1000 Suppliers<br />Contracts<br />20,000 legacy contracts converted<br />500+ contracts enabled for compliance<br />Spend Visibility<br />$2 Billion of Annual Spend classified<br />Reporting Transformation<br />Two year history <br />Sourcing and SPM implemented for Process Transformation<br />Communication and training to all employees<br />
Implementation – Change Management Process<br />Turn off the old system<br />Turn on the new system<br />Hope to survive<br />
Implementation – What We Learned<br />Vanilla is not a dirty word<br />Other than interfaces, no IT concerns<br />Forces an enterprise view with consistent process<br />Removes temptation to “over customize”<br />We were in worse shape than we thought<br />Contracts vs. Invoices<br />Open purchase orders<br />Billing errors<br />Significant volume of spend no compliant with policy<br />Inconsistent coding<br />
Implementation – Current State<br />Averages 4,500 purchase orders per month, 80% of the transactions are through catalogs<br />Post conversion, we are averaging 200 new contracts or amendments per month<br />Average 7,000 monthly invoices, 71% electronic<br />72.5% of “okay to pay” is from ARIBA<br />452 suppliers fully enabled<br />User experience far better than expected<br />
ASIA – Program Overview<br />Sonny Mehta – 860.547.2037<br />
ASIA – Program Charter<br />STRATEGIC INTENT<br /><ul><li>By year-end 2011, all spend being paid by Accounts Payable will follow approved Source-to-Pay (S2P) processes</li></ul>OBJECTIVES<br /><ul><li>Evaluate and existing S2P practices
Baseline the S2P cycle through the development and use of metrics
Establish, document and implement approved S2P policies + workflows
Identify categories of spend to follow appropriate sourcing practices
Determine the path forward to process all invoices through Ariba
Operate one system to create an “OK to Pay” file that feeds PeopleSoft Accounts Payable
Assess(S2P Cycle)<br />ASIA – Assessing the S2P Cycle<br />Source<br /><ul><li>What sourcing methods do we apply today? Under what circumstances?
What is our process capability? What opportunities exist to rationalize suppliers?</li></ul> Contract<br /><ul><li>What’s our contracting strategy? Who negotiates? What contract methods should we use?
What is our process capability? How do we handle sales/use taxes?</li></ul>Requisition/<br />PO<br /><ul><li>What commodities should be approved prior to ordering? What’s our policy?
How much “Maverick” spending is occurring? Where?</li></ul> Receive/ Invoice<br /><ul><li>What categories of spend are subject to receiving? How do we validate?
Are processes documented and policies published and understood by the enterprise?</li></ul>Pay<br /><ul><li>What payment/settlement method do we use? Special handling? What circumstances?
How do we handle sales and use tax requirements? What spend requires a PO/Contract? What are the exceptions?</li></ul> Report<br /><ul><li>What business intelligence is used to monitor, manage and enhance the S2P cycle?
How do we measure value to the enterprise?</li></ul> Vendor<br />Mgt<br /><ul><li>How do we evaluate vendor relationships? What’s our process? What’s the result?
How do we manage our suppliers? Against what SLA requirements?</li></li></ul><li>ASIA – S2P Process Paths (Illustrative)<br />Channel<br />Process<br />Method<br />Assess(S2P Cycle)<br /><ul><li>Understanding the applicable S2P processes and methods:
Ensures consistent application of appropriate practices across the S2P cycle</li></li></ul><li>ASIA Team Guiding Principles + Tenets<br />Change Agents- Question the status quo. Nothing should be sacred or immune from change. Don’t pave the cow-paths<br />Transformation- Simplify processes, clarify roles, measure value<br />Externally Focused- Take a customer-centric view when developing solutions<br />Transparency - There are no hidden agendas. The goal is the agenda.<br />Knowledge Exchange- Communicate early and often<br />Team Effectiveness- Collaborate, Collaborate, Collaborate<br />Expediency - Act with urgency<br />
What’s Next..<br />Improved vendor management process<br />Increase sourcing activities, including auctions<br />Utilize supplier portal for selling our products<br />Solve the “project problem”<br />