Turn Your P2P Function into a Strategic Profit Center
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Procurement and AP operate in low power mode when paper PO’s and invoicing are the fuel that drives the engine. This session will examine the strategic components and key performance measures for moving beyond productivity to improved compliance, cost savings, and working capital optimization across the P2P function. Attend this session to learn breakthrough strategies to “turn on the power” in across your P2P processes.
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Turn Your P2P Function into a Strategic Profit Center
- 1. Turn Your P2P Function into a Strategic Profit Center Key Strategies and Metrics for Achieving World-Class Performance Moderator: James Tucker, Ariba Guest Speakers: James McDonald, ING Art Noe, QuadGraphics © 2013 Ariba, Inc. All rights reserved.
- 2. There are people who see the world differently. They see things in new ways. They invent, create, imagine. We make tools for these kinds of people. Because while some might see them as the crazy ones, we see genius.
- 3. © 2013 Ariba, Inc. All rights reserved.
- 4. #AribaLIVE Think Different • How is Proc/AP/Shared Service perceived by your company today? • What would it take to become a “strategic weapon”? • What are key requirements for your success? • What are potential solutions? • How should you define and measure success? © 2013 Ariba, Inc. All rights reserved.4
- 5. #AribaLIVE Inquiries & Exceptions Discounts & Payments Matching & Approvals Common Challenges in Invoice-to-Pay Processing 5 Inquiries & Exceptions Discounts & Payments Matching & Approvals Receipt & Capture Receipt & Capture High cost of Paper Invoices Lack of Compliance Too many Exceptions Lack of Control “Nearly 77% of all incoming invoices are still paper based.” - Aberdeen, 2012 “15% of invoices have exceptions adding 6.6 days to the cycle.” - TAPN, 2010 “50% of prenegotiated discounts are never captured.” - Aberdeen, 2012 “$4.6 million in contract leakage per billion in spend on average.” - The Hackett Group, 2012
- 6. #AribaLIVE The Strategic Weapon: Business Network Leading the Networked Economy Transformation “ Networked enterprises are 50% more likely to be a market leader. ”
- 7. #AribaLIVE The Business Case for Success It’s as easy as 1+2+3+4 = $10M Savings / $1B in Spend Ariba, Inc. 2013 All rights reserved.7 CHALLENGE SAVINGS OPPORTUNITY SUCCESS 1. Process $1M per $1B in spend for average to large Payables and Procurement organizations - Billentis 2. Discount $2M+ in discount savings for every $1B in discountable spend – Aberdeen,Ariba 3. Working Capital $2.7 million in working capital impact for every $1 billion per day of improvement of DPO, DSO, DIO 4. Compliance $4M in savings leakage for every $1B in spend under contract – Hackett “4-for-1” “1-for-1” “2-for-1” “3-for-1” Source: Billentis, The Hackett Group 2011 P2P Benchmark Report, Aberdeen, and Ariba results Republic Service
- 8. #AribaLIVE © 2013 Ariba, Inc. All rights reserved.8 D r. M i c h a e l H a m m e r
- 9. James McDonald, ING © 2013 Ariba, Inc. All rights reserved. 9
- 10. #AribaLIVE Introduction • James McDonald Director, Procurement Operations – Lead teams that support P2P process and assoc. programs • About ING U.S. ~7500 U.S. employees, $850M total spend, $500M PO spend Centralized Procurement, Decentralized buying, Central Accounts Payable (AP) – Atlanta, GA Systems: – Ariba Buyer (Invoicing) 9r1 – Ariba Network (250 active supplier relationships) – PeopleSoft Financials (AP, GL) 9.1 © 2013 Ariba, Inc. All rights reserved.10
- 11. #AribaLIVE Business Challenges • Doing more with less… Still need to handle high invoice volumes Savings goals haven’t gone down Resources required for strategic projects • Quantifying the value we deliver… Optimizing use of programs and technology Protecting against labor arbitrage Managing compliance © 2013 Ariba, Inc. All rights reserved.11
- 12. #AribaLIVE Solutions • Must focus on the right areas to optimize efficiency and deliver value: © 2013 Ariba, Inc. All rights reserved.12
- 13. #AribaLIVE Solutions © 2013 Ariba, Inc. All rights reserved.13 Strategic goal Solution Solution details Optimize efficiency eInvoicing Non-PO processing • Embracing the “1:many” low-maintenance integration to Ariba Network (over 250 active suppliers) • Resources redeployed from processors to enablers • Distributed Keying via Ariba eForm Enhance value PCard Manage compliance • $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
- 14. #AribaLIVE Performance Measures 1 of 2 © 2013 Ariba, Inc. All rights reserved.14 82% of PO invoices on eInvoice/ghost card
- 15. #AribaLIVE Performance Measures 2 of 2 © 2013 Ariba, Inc. All rights reserved.15
- 16. #AribaLIVE Benefits • Value tracked and reported to senior leadership via dashboard • Vision and strategy clear with direction and progress visible to management and team • Prioritization decisions and impacts of other initiatives immediately clear © 2013 Ariba, Inc. All rights reserved.16
- 17. #AribaLIVE Key Learning • Ensure strategy drives efforts and resource allocation Make eInvoicing and AP automation a priority – Identify strategic goals; build into employee objectives Look to redeploy processors as automation enablers – AN enablement, PCard growth Aggressively manage compliance – Mandated training – Compliance KPIs • Metrics must be actionable, not just pretty! © 2013 Ariba, Inc. All rights reserved.17
- 18. #AribaLIVE Next Steps • Improve reporting Data Warehouse reporting • Continue efficiency and value efforts Continue AN campaigns Non-PO eInvoicing solution Dynamic discounting © 2013 Ariba, Inc. All rights reserved.18
- 19. Art Noe, QuadGraphics © 2013 Ariba, Inc. All rights reserved. 19
- 20. #AribaLIVE Introduction • Art Noe - Director, Corporate Purchasing – Lead strategic P2P initiatives (E-procurement, E-Payables) – Responsible for Procurement tools training & Integration of new acquisitions • About Quad/Graphics $5 Billion Sales at ~75 print production facilities on three continents Systems: – Ariba PO and Invoice Automation – Quad/Graphics in house procurement tools • Process Centralized Strategic Procurement and AP Indirect Materials - decentralized buying Direct Materials - purchased by Poland subsidiary resources • Ariba Scope $600 Million Spend 326K Invoices 540 Suppliers © 2013 Ariba, Inc. All rights reserved.20
- 21. #AribaLIVE Pain and Business Challenges Implementation: Start Date 8/1/2012 – As of 4/12/2013 have 120 Suppliers & 105,000 Annualized Invoices Service PO Implementation (Invoices routed for approval) Internal Dirty Laundry – Selling an external solution to internal stakeholders – Vendor categorization to determine proper scope for ROI – Some inconsistent procurement processes from plant to plant – Item Catalog data management Supplier challenges – Diverse supplier capabilities and technical knowledge » E-mail and Ariba Confirmations » Paper and Ariba Invoices – Willingness of large suppliers to pay fees © 2013 Ariba, Inc. All rights reserved.21
- 22. #AribaLIVE Solutions • Launching pad for “Touchless” • Drive more spend to require a PO • Resources cost reduction (AP & Buyers) • Increased “pay readiness” for discounts E-PO & E-Invoicing • Cash flow improvement • $63.5M program, 244 Suppliers (still growing) • P-Card implementation for non strategic spend E-Payables • 31 New Suppliers • Additional $78 Million in Spend Discount Payment Terms © 2013 Ariba, Inc. All rights reserved.22
- 23. #AribaLIVE Ariba Objectives 80% of Invoices (Scope) Spend 71% Invoices 80% Payments 42% PO's 82% Suppliers 7% AP Invoice Processors 55% PO Processing (Expeditors) 120 to TBD Missed Discounts 10% to 0% © 2013 Ariba, Inc. All rights reserved.23
- 24. #AribaLIVE Key Learning • Suppliers Multiple contacts required at each supplier Stronger initial message on requirement to use Ariba Get alignment with Integrated or complicated Portal suppliers – Internal training of supplier branch employees – Multiple PO and Invoice processes Don’t underestimate the power of CSV • Internal Train and Retrain Buyers Define what is Ariba process versus Internal process E-Commerce “Tab” Executive Sponsorship Dedicated and capable resource to manage onboarding Engulf acquisitions quickly to maximize benefits of Ariba Coherent, knowledgeable, dedicated implementation team © 2013 Ariba, Inc. All rights reserved.24
- 25. #AribaLIVE Next Steps • Continue monitoring ROI • Continued supplier onboarding • Service PO / Invoice Routing for Approval • Catalog Cleansing • Touch-less PO • Advance Ship Notice © 2013 Ariba, Inc. All rights reserved.25
- 26. Questions? © 2013 Ariba, Inc. All rights reserved. 26
- 27. #AribaLIVE Please Complete Session Survey Go to Surveys © 2013 Ariba, Inc. All rights reserved.27 Select Session Click Choose one Rate Session Thank you for joining us
Editor's Notes
- Processing invoices without purchase orders presents challenges for any organization. In this session, you will learn how contract invoicing with Ariba allows you to build invoices off contracts to improve compliance and prevent tens of millions of dollars in contract leakage from rogue spend.
- According to a recent survey 59% of finance leaders think that the AP function could become more strategic, and that an improved AP performance can have a positive impact on profitability. There is a clear need for automation of the P2Pfunction. But we must think different. In 2005 Apple launched an ad campaign called “Think Different”. It’s commercial played a pivotal role in helping Apple achieve one of the greatest corporate turnarounds in business history.
- Moneyball
- Inspirational thinking…What is a strategic weapon? When is it used? How is it used? Who uses it? The Executive (i.e. POTUS, CEO/CFO, etc.). Give example of a company (i.e. ING – that thinks of turning AP/SS into a strategic weapon)Traditionally, AP has been thought of as …, Capital One humorously portrays Vikingsas savvy warriors of financial management. For Ariba’s James Tucker, this analogy of savvy financial warriors armed with the right weapons aligns with his vision of transforming Finance and Accounts Payable (AP) functions into strategic weapons for companies. James is the global director for Ariba’s network and finance solutions and he’s a passionate advocate for helping financial professionals unleash the prowess within their functions. With data visibility, process automation and trading-partner collaboration powered by business networks, Finance and AP can become unshackled from the burdens of too much paper, too many people, and inefficient processes. The results transform Finance and AP into nimble functions that are skilled at slashing costs and capturing more cash. Doing so, Finance and AP help enable innovation and business growth.
- The challenges that most of you share across the invoice-to-pay process can be boiled down into four major categories:Too much paper – paper invoices are the most expensive to process when compared to e-Invoicing. Companies across the globe still have about 80% of their invoices coming in as paper. Too many exceptions – Paper handling is inefficient, and it also introduces additional cost and effort for AP for handling invoice exceptions. According to a recent TAPN survey, about 15% of invoices have errors and exceptions on average. And it costs anywhere between $20 and $200 to address each error. So for 100K invoices that is about $300K in incremental cost. At a conference last year, I heard someone say that at HP they have errors and exceptions on 39% of their invoices. 39%!Lack of ComplianceComplying with preferred vendors and pricing can also lead to significantly higher costs. A recent Hackett Group study shows that companies lose over $4 million per billion in spend under contract by paying for invoices that don’t comply with negotiated prices. For poor performing organizations, that leakage figure is many times larger.Too many missed discounts and late payments Early payment discount and dynamic discounting is an emerging best practice that can deliver over $2 million per billion in discountable spend. But most companies simply can not approve and pay their invoices on time, and miss over 50% of their discount savings.So as your listening to your prospects share their problems, dig into the pain, ask them to expand on a day-in-the-life of the invoice receipt process. Get your prospects to think about these inefficiencies, the cost, the waste, the missed opportunities.===================================================
- Michael Martin Hammer (13 April 1948 – 3 Sept 2008) was an American engineer, management author, and a former professor of computer science at the Massachusetts Institute of Technology (MIT), known as one of the founders of the management theory of Business process reengineering (BPR).[1]Reengineering the Corporation: A manifesto for Business Revolution, the book written by him in 1993 along with James A. Champy was instrumental in capturing the focus of business community towards BPR
- AP – Redeployment or not replacing/adding with acquisitionsBuyer regionalization in storerooms