MANAGE SPENDING AND DRIVESUPPLIER PERFORMANCE WITHPROCUREMENT IN THE CLOUDThis report summarizes a workshop conducted inMa...
MANAGE SPENDING AND DRIVE SUPPLIER                  PERFORMANCE WITH PROCUREMENT IN THE CLOUD     A typical business using...
•    Quickly analyze price differences among suppliers                    Mr. Thakur explained that Rent-A-Center is a cla...
Manage Spending and Drive SupplierPerformance with Procurement in the Cloud waspublished by CFO Publishing LLC, 51 Sleeper...
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Source-to-Settle Process - Rent-a-Center Case Study

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Source-to-Settle Process - Rent-a-Center Case Study

  1. 1. MANAGE SPENDING AND DRIVESUPPLIER PERFORMANCE WITHPROCUREMENT IN THE CLOUDThis report summarizes a workshop conducted inMarch, 2011 at the CFO Rising Conference in Orlando.Leaders: Ravi Thakur, VP of Services and Support atCoupa, and Scott Mars, Engagement Manager at Emptoris
  2. 2. MANAGE SPENDING AND DRIVE SUPPLIER PERFORMANCE WITH PROCUREMENT IN THE CLOUD A typical business using cloud-based, spend-management solutions can save $40 on every purchase order (PO) processed. Moreover, 10% of the annual spend on direct and indirect materials can be eliminated. Finance executives are intrigued by these messages—and they want to learn how automation can address inefficiencies in procurement, payables management, sourcing, and contract management. The great promises of business automation have always been cost A critical point: automation allows a procurement team to cut the reduction, faster cycle times, and information accuracy. Procure- time spent on purchasing by 20%. It also eliminates the time that ment and payables management are functional areas that have long has to be spent by accounts payables staff resolving data problems been rich but resistant targets. That is about to change, as cloud- on invoices and other documents essential in the P-to-P process. based computing enters the scene. Kicking off a workshop on this theme, Ravi Thakur, vice president of services and support at Coupa, Automation also promises to reduce maverick spending by 33%, explained his “simple $40-per-PO formula” for optimizing spend according to Mr. Thakur. Maverick spending, of course, occurs when management. The idea, he argued, is to confront problems and employees purchase goods or services from vendors who are not waste caused by paper-based procurement and invoice processing. on their company’s approved list. In addition, automation promises The typical procure-to-pay (P-to-P) process is rife with opportuni- to deliver granular views of the business drivers of financial results. ties for dramatic process improvement, and automation is the key to Conceivably, those perspectives can enable the finance managers to eliminating as much paper as possible. improve the guidance they provide to unit managers trying to meet monthly or quarterly financial targets. For example, with faster and To demonstrate his point, Mr. Thakur urged attendees to answer easier access to data about impending purchases, financial analysts candidly this list of questions: can increase the accuracy of forecasts and then, if need be, alert the controller that he or she ought to intervene and prevent unnecessary • Are you able to stop maverick spending? spending. This is crucial when margins unexpectedly come under • Are employees spending too much time keying paper-based pressure. The key here is that automation delivers information that data into systems? finance teams can turn into actions. • Are documents unsecure or often lost? • Is it difficult to analyze spend patterns and provide useful In contrast, Mr. Thakur noted, automated processing yields guidance to procurement staff? practical information that senior finance executives can access via • Does it take too long to identify which departments or units dashboards. are going to exceed their budgets for direct and indirect spending by the quarter’s end? Looking beyond the $40 per-PO cost-reduction model, “best-in- • Do you lack the time needed to improve the sourcing of high- class organizations are now saving, on average, 10% of their annual value categories of spend? spend on direct and indirect materials by adopting electronic • Can you drive more spend on individual POs? contract-management and e-sourcing capabilities,” contended • Does it take too long to obtain goods and services needed to Mr. Mars, engagement manager at Emptoris. These solutions operate efficiently? deliver “spend analytics” that provide the financial or procurement analyst with vital transaction-level data that then sets the stage for improved negotiations with suppliers. Specifically, these solutions permit companies to:2| © 2011 CFO PUBLISHING LLC JUNE 2011
  3. 3. • Quickly analyze price differences among suppliers Mr. Thakur explained that Rent-A-Center is a classic low-margin• View addressable spend by category retailing operation that has to watch every dollar of spend. “Late• Analyze payment terms data doesn’t allow for proactive guidance, and it works to subvert• Leverage flexible and interactive reports, including: the accurate measurement of and prediction of business perfor- • On/off PO mance.” A core question for a company like this is: How can the • Working capital analysis organization get 18,000 people to act uniformly as they go about • Preferred-supplier spend recoding information about the types of services they are • On/off contract spend purchasing, and from whom? “Whether it’s a computer repair ser- vice or the crew that arrives at midnight to clean a store, the problem“You can use a spend-analysis tool to support market analysis and de- is that you cannot get that many people to conform to a common setvelop category-specific procurement strategies. It can help you to see of definitions, no matter how hard you try. And as a result, you getotherwise hidden opportunities to reduce costs,” said Mr. Mars. There murky data that you cannot easily consolidate and decipher,”is a clear trend, he added, among Emptoris customers: “They want to he said.bring 80% of their spending into the system to do robust analysis.” Asfor contract management, these e-sourcing solutions allow a business Another issue is that people want to see screens. With the prolifera-to create contracts directly from sourcing events and to control spend tion of social media and personal computing, people are used toby automatically tracking spending against contracts. seeing and relating to digital screens. If you don’t provide a comfort- able digital interface, they will resist any regime you try to imposeCase Study: Rent-A-Center to drive data input consistency. “So even if you have great systems,Rent-A-Center is the largest U.S. operator in what is known as the if you don’t have employees who want to use those systems, you’re“rent-to-own” industry, with approximately 35% market share based sunk,” offered Mr. Thakur. “You must invest in technology peopleon store count. With more than 3,000 stores and over 18,000 employ- will embrace.”ees, Rent-A-Center in 2009 reported annual revenue of more than$2.8 billion. After adopting innovations in e-procurement and With the right technology solutions, Rent-A-Center gained readye-sourcing with inherent spend analysis capabilities, this organization access to fact-based and forward-looking information at thewas able to report savings of $1 million in just two months. corporate level, as well as a tool that could be easily mastered by its retail employees. The organization was able to perform “real-timeIn 2010, Rent-A-Center adopted Coupa’s P-to-P solution along with synchs between Lawson [its ERP system] and Coupa for easythe Emptoris solution for sourcing, contract management, and spend reconciliation.” It also enjoyed seamless business processinganalysis. Mr. Thakur explained that this retailer had been over- between locations, corporate-level AP, and senior management.whelmed by spending data coming from 31 locations doing business In all, the business enjoyed an integrated solution that involved:with more than 3,000 suppliers. “The issue was how to consolidateall that data and offer proactive guidance,” said Mr. Thakur. By the • Sourcingtime finance managers who were supporting the regional and district • Contract managementmanagement teams received the consolidated and reviewed data, the • Spend analysisview was outdated and murky. They were unable to notify the right • Procure-to-paypeople in time for them to take immediate action. They were unable tooffer decision support about how to drive better spend decisions. Rent-A-Center ended up with “a closed-loop solution,” said Mr. Thakur. Moving forward, the company is focused on continuousThere are several root causes of “murky data:” process improvement and ongoing productivity improvements that• Manual processes will no doubt yield bottom-line enhancement. • Paper-based • Entry errors (miscodings), omissions• Separate, siloed systems • Difficult to access and aggregate • Data shared between systems is limited• Decentralized operations • Inconsistent data • Local, unknown suppliers• Working around the system • PO-less invoicesJUNE 2011 © 2011 CFO PUBLISHING LLC |3
  4. 4. Manage Spending and Drive SupplierPerformance with Procurement in the Cloud waspublished by CFO Publishing LLC, 51 Sleeper St.,Boston, MA 02210. Please direct inquiries to LisaNelson at (617) 790-3249 or lisanelson@cfo.com.CFO Conferences is a unit of CFO Publishing LLC,which also incorporates CFO magazine, CFO.com,and CFO Research Services.June 2011Copyright © 2011 by CFO Publishing LLC, whichis solely responsible for its content. All rightsreserved. No part of this report may bereproduced, stored in a retrieval system, ortransmitted in any form, or by any means,without written permission.

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