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Sterling commerce idb roi study


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Sterling commerce idb roi study

  1. 1. IDC ExpertROI® SPOTLIGHTIrish Dairy Board Cuts Admin Costs andOptimizes Order-to-Cash Processes withIBM Sterling e-Invoicing SolutionMarch 2011Sponsored by Sterling Commerce, an IBM CompanyOverviewThe Irish Dairy Board (IDB) is a commercial cooperative and the major international exporterof Kerrygold and other Irish dairy products worldwide,with annual revenue of €1.8 billion ($2.4 billion). Business Value HighlightsEstablished in 1961, IDB markets and exports the Irish Organization: Irish Dairy Boarddairy products produced by its member manufacturing Location: Irelandcooperatives and dairy companies. Challenge: To speed receivablesIDB had previously deployed the Sterling Commerce collection with customers across the European Unionflagship B2B integration platform, IBM Sterling B2BIntegrator, to streamline its supply chain. In 2010, IDB Solution: Sterling e-Invoicing solution tied into Sterling B2B Integrator B2Bdeployed the IBM Sterling e-Invoicing solution for integration platformcustomers in 14 of the 27 European Union (EU) countries Cumulative benefits:to speed receivables collection, reduce administrative • €322K for 3-year periodcosts, and improve order-to-cash processes. • ROI of 349% • Payback in 5.4 monthsIDB realized not only the cost savings but also thecompliance benefits of automation that come from Specific annual benefits:implementing a cross-border e-invoicing solution. • Annual cost reduction of €15,860Businesses that trade internationally must deal with • Revenue gain of €79,545 and • Lower administrative costsregional variations in tax and financial regulation, and the enhanced account managementcost of noncompliance can be high. The solution providesup-to-date compliance data from local law firms and tax authorities as well as documentation ofcompliance processes and legal requirements. IDB can archive and revalidate any invoice at anytime and provides summary reports when required by auditors for compliance checking.March 2011 #11C6180 Page 1
  2. 2. Sterling Commerce (continued)ImplementationInstallation of the Sterling e-Invoicing solution began in September 2009. "We had a SterlingCommerce consultant onsite for three days to set up the server and perform the basicinstallation," said Sean Flynn, IDB business analyst. "Two of us helped with the setup andreceived the basic training, which was pretty self-explanatory because of the interface."Independent auditors were brought in to make sure the solution met all the criteria of the EUdirective covering e-invoicing. "We wanted to make sure we were operating at the very higheststandards," said Flynn. The Sterling e-Invoicing solution went live in March 2010.The rollout proceeded in stages. "We started with a batch of customers, testing at each stagebefore going live with the next group," Flynn said. IDB also conducted a review of itstransaction processing from beginning to end. "Two components, e-invoices and e-statements,were very important to us."Before selecting the Sterling e-Invoicing solution, IDB evaluated competitive products butfound them lacking. "We needed to provide both PDF signature authentication and EDI invoiceprocessing to allow businesses of all sizes and IT sophistication to trade easily with us," Flynnexplained. "A lot of companies could provide an EDI solution, but not the PDF capability.Sterling Commerce gave us both, and its archiving solution was more user-friendly."Having Sterling B2B Integrator for customer orders, supplier invoices, and stock movementswas also a factor in the selection. "The IBM Sterling ERP system integration was definitely anadvantage in going with the companys e-Invoicing solution," added Flynn. "The ERP systemprovides the raw data for e-invoices and e-statements, and we couldnt have done the same thingwith the other solutions. Also, the support we received from Sterling Commerce was first class,so we knew we were in good hands."BenefitsBy enabling the earlier detection of customer issues with invoices, the Sterling e-Invoicingsolution has increased customer satisfaction and IDBs cash flow. Having more timely andreliable information has also helped to improve account management and reduce administrativecosts. Additionally, the Sterling e-Invoicing solution has allowed IDB to project theprofessional image it wanted.For IDB, the quantifiable benefits from implementing the Sterling e-Invoicing solution includedsavings from increased staff productivity, reduced operating costs, and business benefits fromfaster collection of receivables and improved customer satisfaction. Figure 1 shows thebreakdown of savings, which total an average of €107,406 annually.March 2011 #11C6180 Page 2
  3. 3. Sterling Commerce (continued)Figure 1. Average Annual Savings Total = €107,406 Cost reduction €15,860 User productivity €12,001 Revenue impact €79,545Source: IDC, 2011User Productivity IncreaseReplacing the manual processing of invoices with the Sterling e-Invoicing solution has savedIDB two hours a day of staff time, freeing employees to perform other critical tasks. Archivingis also simpler and more efficient. Additionally, invoices are easier to trace when queries arise,allowing faster response to customers.IDB sends e-statements twice monthly, giving customers regular visibility into their accounts.This added visibility has more than halved the number of queries IDB receives and has reducedthe time required to resolve them by about five minutes per query. The savings from increasedstaff productivity average €12,001 a year.Cost ReductionBy deploying the Sterling e-Invoicing solution with the companion Sterling B2B Integratorplatform, IDB was able to speed installation and initial setup and further streamline theinvoicing process. "The feed from the ERP system is totally automatic, eliminating the manualprinting of invoices for dispatch to the customer," David ORourke, IDB trade financeexecutive, stated. "The time and cost savings are substantial. We want to make it as easy aspossible for partners and customers to do business with us, and the feedback has already beenvery positive."Selection of the Sterling e-Invoicing solution realized a one-off savings of €16,500 comparedwith the alternative approach considered by IDB. In addition, the savings in paper and postagefrom eliminating mailed invoices and statements have averaged €10,360 annually. Over threeyears, the cost reductions are projected to average €15,860 a year.Revenue Impact: Significant Improvements in Order to CashThe early detection of invoicing issues and the prompt resolution of such issues have helped tospeed the collection of receivables. Before IDB implemented the Sterling e-Invoicing solution,customers often disputed an invoice at payment time, delaying the payment by a business week.By automatically e-mailing invoices and statements on a more frequent basis, IDB has givenMarch 2011 #11C6180 Page 3
  4. 4. Sterling Commerce (continued)customers increased visibility into their accounts and payments coming due and encouragedmore timely payments. As a result, it has reduced disputed and late payments by two-thirds,leading to quicker recognition of revenue. "We set targets for reducing the time it takes to bepaid, and weve met them," Flynn said.Having more timely and reliable information has also helped to improve account management."When our salespeople talk with customers, they can now look at their account to answerqueries and provide them with any statements or correspondence they need," Flynn explained."Our salespeople find it very beneficial."Does the Sterling e-Invoicing solution give IDB a competitive advantage? "Absolutely," saidFlynn. "It presents a very professional image to our customers. We deal with a range ofcompanies, including those in the top tier who have already moved to e-invoicing. We are nowable to meet their requirements."In total, the business benefits from more timely revenue collection and improved accountmanagement and customer satisfaction are projected to average €79,545 a year.Return on InvestmentIDC projects that IDB will realize a three-year return on investment (ROI) of 349% from its useof the Sterling e-Invoicing solution. Payback on the investment occurred within 5.4 months ofthe deployment (see Table 1).Table 1. Three-Year ROI Analysis Benefit (discounted) €259,495 Investment (discounted) €57,745 NPV €201,750 ROI 349% Payback 5.36 months Discount rate 12%Source: IDC, 2011IDC conducted an interview with the Irish Dairy Board to quantify the benefits and theinvestment associated with its deployment of the Sterling e-Invoicing solution and created anROI analysis from the results.IDC calculates the ROI and payback period in a three-step process:1. Measure the savings from increased staff productivity, cost reduction, and other business benefits since deployment.2. Ascertain the total investment.3. Project the investment and benefit over three years and calculate the ROI and payback period. The ROI is the three-year net present value of the benefit divided by the discounted investment. To account for the time value of money, IDC bases the ROI and payback period calculations on a 12% discounted cash flow.March 2011 #11C6180 Page 4
  5. 5. Sterling Commerce (continued)Copyright NoticeExternal Publication of IDC Information and Data — Any IDC information that is to be used in advertising, pressreleases, or promotional materials requires prior written approval from the appropriate IDC Vice President orCountry Manager. A draft of the proposed document should accompany any such request. IDC reserves the right todeny approval of external usage for any reason.Copyright 2011 IDC. Reproduction without written permission is completely forbidden.March 2011 #11C6180 Page 5