This presentation covers how EDI can be leveraged to help mature your Procure To Pay (PTP) process. In addition it also focuses on how it affects the perfect order and outlines vendor management implications.
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Presentation: Moving toward the perfect order by automating your procure to pay process
1. A member of The Business Maturity Group
Moving toward the Perfect Order by automating your Procure To Pay Process
An in-depth look in to the PTP process as it relates to automation and EDI
November 6th, 2014
You Innovation and Support Company
For companies leveraging SAP solutions
2. a member of The Business Maturity Group
Q Data SAP Supply Chain Webinar Series
3 Thursdays at 11am CST
â˘10/29: Small Parcel Packing Exception Monitoring
â˘11/6: EDI Automation â Procure to Pay
âStriving for the perfect order from your supplier
â˘11/13: EDI Automation â Order to Cash
âStriving to present the perfect order to your customer
http://www.qdatausa.com
Register at Q Data USAâs website
http://www.qdatausa.com/resources#upcoming
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Q Data SAP EM Webinar Series
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Viewing this and previous webinars
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About the Speaker â Kevin Wilson
Kevin Wilson has more than 24 yearsâ experience in business analysis, solution architecture, project management, solution development & implementation. 18 years of SAP experience covering supply chain, retail, utilities & manufacturing, amongst others. Business case and value engineering expertise covering multiple, integrated SAP solutions with a strategic focus on Supply Chain Management and providing visibility to the extended Supply Chain. Author and thought leader in SAP supply chain execution processes.
Principle SAP Solution Engineer
Q Data USA, Inc.
Email: kwilson@qdatausa.com
Website: www.qdatausa.com
Author: âSAP Event Management
SAPâs best kept secretâŚâ
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About the Company - Q Data USA
â˘Privately held company established in 1994
â˘SAP centric focus, Best Practice Philosophy
â˘Manufacturing, Distribution, Oil & Gas, Transportation, Pharma, High Tech
â˘Methodology to Achieve Business Maturity
We provide pre-go-live implementation and post go-live support services that give our clients the highest-level of Business Performance
As Trusted Advisors, we are continually bridging the gap between IT and the Supply Chain
By following our proven methodologies, we develop innovative solutions and concepts that ensure our clients a high degree of Implementation Maturity from their SAP (ERP) environment
You Innovation and Support Company
For companies leveraging SAP solutions
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Agenda
1.Describing Supply Chain Maturity
2.About EDI
3.The PTP Process
4.Vendor Compliance
5.Summary
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Global Trends and Their Impact on the Supply Chain
ďUnprofitable demand and supply synchronization
âPoor visibility into customer demand, supply fluctuations & channel inventory
âDemand/Supply not aligned
âEscalating costs and inefficient operations
ďInefficient Inflexible execution
âLack of visibility & collaboration across manufacturing & logistics network
âIneffective capacity & asset utilization
âEscalating transportation & logistics costs
ďIncreasing number of supply chain disruptions
âRecurring supplier failure, supply shortages, and inventory liabilities
âRising number of product recalls, counterfeits, and quality issues
âIncreased government regulations and global trade and compliance requirements
âGrowing focus on sustainability and carbon and greenhouse gas emission control
ďIncreased demand and supply volatility
ďGlobal pressure on margins
ďIncreased risk and compliance
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Key Trends
â˘Deliver a Supply Chain Execution platform
âSingle solution for all logistics needs
âProvide end-to-end visibility across the supply chain
â˘Enable Sustainable Supply Networks
âAbility to set, measure and monitor performance across the supply chain
âProvide end-to-end visibility across the extended supply network
âGreen and sustainable practices
âProduct traceability and recall management across the supply chain
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Supply Chain Maturity Work How well are you matching supply with demand? How ârealâ are your supply and demand forecasts? Is your master data and system driving the execution of the process? Are all the tasks in the process being performed in a timely fashion by the correct people? Is the system doing most of the work? People
How well are you or your partners performing? Are you improving?
Are you addressing issues in a timely fashion?
Can you measure success and failure?
How are you notifying users of exceptions?
How are people doing their work? In the system?
Are your people empowered in their day to day responsibilities? System How well are your systems working? Are they integrated with each other? Is there one source of truth in your process? Is the process automated as far as possible? How many manual touches are made in your process? Is the solution mobile enabled? Can you access your information while not wired in? Is the system process aligned with your business process? Reporting, Information Is your organization streamlined to handle the exceptions to the process or are they maintaining the process? Are your people educated in the process? Are the users analytical in focus or custodian in focus? Is change management conducted efficiently in your organization? Are KPIs in place? Can you measure success or failure? Are the reports visible to all necessary parties?
Working together towards a common goal â Scalable, Agile, Efficient, Effective Supply Chain
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The value of a mature Supply Chain
â˘The goals of a mature Supply Chain â We aim to:
âReduce the cost of the supply chain
âImprove Service Levels
âCollapse the Supply Chain through automation
âManage exceptions proactively in a timely fashion
âEnjoy End-to-End status visibility
âReduce compliance errors from vendors
âAchieve the Perfect Order
âHave our work, people, system and information aligned
âDecrease the âTime to insightâ
â˘To provide insightful information to the right people at the right time
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Focus of this sessionâŚ.
⢠Perfect order
âOn Time
âComplete
âFree from damage
â˘Readable format
âAccurate documentation
âCompliant
⢠Vendor compliance
âEliminate gaps in the supply chain
âAlign people, process and system
⢠Visibility to process and performance
Cost SLA
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What main processes drive the Vendor Supply Chain?
1.Vendor Management
âVendor Negotiations
âVendor Contracts
âOn boarding vendors
âMaster data capture
â˘Vendor master
â˘Material master
â˘Pricing
2.Procure to Pay (PTP)
âSupply and Demand forecasting
âPurchase Order management
â˘Acknowledgement
âInbound deliveries
â˘ASNs
â˘Goods receipt
â˘Drop ships
âInvoice Receipts
âReturns
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Agenda
1.Describing Supply Chain Maturity
2.About EDI
3.The PTP Process
4.Vendor Compliance
5.Summary
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What is EDI?
â˘âElectronic Data Interchange (EDI) refers to a system providing global standards for the exchange of structured data, electronically between 2 partiesâ
â˘EDI Standards were developed to document the needed business transactions
âANSI X12 and EDIFACT
â˘Mapping â Transform to / from EDI format to / from internal format
â˘Communication â Envelope for message delivery between 2 partners
ANSI
EDIFACT
Description
850
ORDERS
Purchase Order
855
ORDRSP
PO Acknowledgement
856
DESADV
Advance Ship Notice
810
INVOIC
Invoice
Common EDI PTP Transactions:
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Why EDI?
â˘Reduction in data capture errors
â˘Reduction in handling costs for paper documents
â˘Faster execution of the process
âCollapsing the supply Chain â Time between the end of one activity and the start of the next activity is reduced
âReduction in Supply Chain Cycle Time
Common hurdles to overcome when implementing EDI
1. Change Management â âWe do it this wayâ
2. Cost â Time and Money to enable the functionality
3. EDI Perception: EDI is technical!!!
You can only automate a GOOD MANUAL process
EDI is not the silver bullet to fix your issues in the process
0%
50%
100%
2008
2013
34%
62%
% EDI Adoption for
Purchase Order
$-
$20.00
$40.00
Paper
EDI
$37.45
$23.83
Cost of doing a PO via EDI vs. Paper
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Agenda
1.Describing Supply Chain Maturity
2.About EDI
3.The PTP Process
4.Vendor Compliance
5.Summary
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Describing the PTP Process
Purchase Order (PO):
â˘Vendor, Price, Quantity, Material
â˘Requested Delivery Date
PO Acknowledgment (Confirmation)
â˘âSignatureâ of confirmation of the order. I.e. The binding agreement to delivery the correct materials, at the right quantity, at the agreed price on the required date
Advanced Ship Notice (ASN)
â˘Document that the vendor sends the customer telling them what material and quantity are being shipped
â˘Carrier / Tracking information are also sent so that in-transit status can be obtained
â˘Packing and Serial numbers
â˘Becomes an Inbound Delivery in SAP
Goods Receipt (GR)
â˘Receive goods in to the warehouse against the inbound delivery (the vendor ASN)
Invoice Receipt (IR)
â˘Receive the invoice from the vendor to pay based on what was agreed on in the PO Acknowledgment
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Issues
Recommendations
â˘PO has incorrect details
âMaster data discrepancies
â˘Dates, quantities, terms, product
â˘PO acknowledgments arenât accurate
â˘PO changes are not systemically driven
âCan be untimely
â˘Automation of the process is not a priority (EDI)
âUntimely
â˘Fully utilize the PO acknowledgement
â˘Establish audit function
âEnsure process is followed
â˘Master Data Management
âMaster Data governance
â˘Understand the financial impact of non-compliance
âQuantify disruptions
â˘Strive for fewer PO changes
âMore accurate demand / forecast
â˘Automate the process
âFully utilize EDI where possible
â˘Early warning of potential issues
âReduced customer impact
âCorrect timely info is reflected on the Sales Order schedule for drop ship POs
â˘PO Changes donât lead to âsurprisesâ
â˘PO Rejections are immediately re-sourced
â˘Back-office process savings
âAccount Payable deal with discrepancies
PTP - PO Management Process
Advantages of a mature process
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PTP - PO Management EDI
Process
Procure to Pay PO EDI Process
Customer Supplier
Purchase Order Process
850
855
860
865 Ack. Order Ch.
Sales Order
Process Ack.
Process Ack.
Change Order
PO
Order Ack.
Ack. Order
PO Change
Order Ack.
â 850 â Purchase Order
⢠Ensure vendor compliance
â 855 â Acknowledge Purchase
Order (Vendor agrees to the
terms and detail in the PO)
⢠Workflow exceptions
⢠Thresholds
⢠Impact on SO schedule
â 860 â Purchase Order changes
⢠Change in the system drives
communication
â 865 â Purchase Order Change
Acknowledgement
⢠Vendor acceptance of the
change
⢠Workflow exceptions
It all begins with a signed Purchase Order?
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Issues
Recommendations
â˘ASN Inaccuracy
âPicking, labeling, illegible, PO discrepancy
â˘Vendor process not aligned with the customer process
âPacking / Labeling -> Receiving / Put away
â˘Ineffective PO process
âMaster data discrepancies
â˘PO Changes
â˘No automation of the process
â˘Integration vs. Interface â Best of Breed approach
â˘Master Data Management
âMaster Data Governance
â˘Document the meaning of ASN error and ASN compliance
â˘Understand the financial impact of non-compliance
âBasis for charge-backs
â˘Strive for fewer PO changes
â˘Initiate formal audit process
âEnsure vendor compliance
âPhysical audit
â˘Vendor collaboration
â˘Focus on exception management
â˘Automate the process - Vendor & Carrier EDI
â˘Receive against an ASN
âCan reduce costs up to 40%
â˘Discrepancies known earlier
âPrior to goods receipt
âLess customer impact
â˘Fewer discrepancies in downstream processes
âGR and AP / Invoice Receipt process
â˘Drop ship ď Can send ASN to customer
â˘Visibility in to Vendor compliance
PTP â ASN Process
Advantages of a good process
Why are we here?
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PTP â ASN EDI Process
Procure to Pay ASN EDI Process
Customer Client Supplier Carrier
856 -> Dlv. Idoc
214 -> Ship Status Idoc
214 -> Ship Status Idoc
214 -> Ship Status Idoc
824 â Reject ASN
Receive
Product
Process Shipping
Status
Send Status
Deliver Product
Process Shipping
Status
Ceate Inv.
Receive ASN Send ASN Send ASN
Process Inb.
Dlv
Pickup
Process Shipping
Status
Reprocess
ASN
Send Status
Send Status
Pickup
Receive Inv.
Inb. Dlv
Ship Product
Send Inv.
POD
Transport Product
vPO
Pickup Product
â 856 â Advanced Ship Notification
ď§ Full details are to be sent by the
Vendor
âGTIN must match shipment
with ASN
ď§ Inbound delivery
â 997 â Functional Acknowledgement
ď§ Reject an ASN if the structure is
incorrect or required information
is incorrect
âMissing carton level or pallet
level information
â 824 â Application Advice
ď§ Communicate a functional
rejection of an 856
â E.g. Unknown PO, Duplicate
ASN
â 214 â Tracking status messages to
transact the carrier status messages
to the customers ERP application
ď§ Pickup
The Advanced Ship Notice is key to the receiving process ď§ Proof Of Delivery (POD)
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Issues
Recommendations
â˘Invalid charges
âFreight, tax
â˘EDI related issues
âAmount discrepancies, PO mismatch
âRejections not communicated automatically
â˘Duplicate checking
â˘PO Cancellations
â˘Past due invoice
â˘No impact on Vendor compliance
âScorecard
â˘3 way match
âIR, GR / ASN, Carrier pickup
â˘EDI automation
âCarrier 214 â Pickup / POD
âInvoice Receipt rejection 824
â˘Workflow error handling
â˘Master data governance
â˘Transactional data awareness â PO process
â˘Timely IR posting
âPay within terms
â˘Vendor performance measured
âCharge backs enacted
â˘Efficient IR posting
âLess analysis required to resolve issues
PTP â IR Process
Advantages of a good process
Why are we here?
Open the way to standard and effective IR process
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PTP - IR EDI Process
Procure to Pay IR EDI Process
Customer Client Supplier Carrier
214 -> Ship Status Idoc
214 -> Ship Status Idoc
Receive
Product
Process Shipping
Status
Deliver Product
Ceate Inv.
Pickup
Process Shipping
Status
Send Status
Send Status
Pickup
Receive Inv.
Inb. Dlv
Send Inv.
POD
vPO
Pickup Product
Send Inv.
Accounting
Inv. Rec. Process Inv.
Receipt
810 -> Inv. IDoc
824 â IR Rejection
Reprocess IR
â810 â Invoice Receipt
ď§ Parking
ď§ Invoice and CR / DR
Memos
â997 â Functional
Acknowledgement
ď§ Reject an IR if the structure is
incorrect or required
information is incorrect
â824 â Application Advice
ď§ Communicate a functional
rejection of an 810
â E.g. Unknown PO,
Duplicate IR
â214 â Tracking status
messages to transact the carrier
status messages to the
customers ERP application
ď§ Pickup, POD
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PTP process â Points to note and KPIS
â˘PO Creation
âMRP â Based on Supply and Demand
âMaster data driven
âResources manage exceptions
â˘PO Confirmation â May change (24hrs)
âSKU, Qty, Date, Price
âDecide rules
â˘Backorders, âŚ
âWorkflow Exceptions
â˘(KPI: Confirmations without changes %, Ackâd within SLA %, Ack Errors %)
â˘Ship product -> send an ASN (EDI 856) 1-2 hrs
âCreate inbound delivery
â˘Inbound delivery date = 855 PO response schedule (KPI: Fill Rate)
âWarehouse receives against the inbound delivery and not individually
â˘(KPI: Receiving Errors, Damage %, Wrong SKUs, OTIF, Receipts without ASNs)
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PTP â An understanding
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PTP â An understanding
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PTP â An understanding
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Normalized EDI PTP process
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Normalized EDI PTP process
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Agenda
1.Describing Supply Chain Maturity
2.About EDI
3.The PTP Process
4.Vendor Compliance
5.Summary
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Vendor Management
â˘No KPIs
âNo vendor scorecard
âNo visibility to vendor compliance
â˘No confidence in the data
âRedundant attributes
âRun BI queries to check stock levels
âData governance
â˘Incorrect master data entered
âParts manually entered
â˘Need to improve vendor compliance
â˘Does not embrace the EDI / automation culture
â˘No visibility or transparency of process and issues to / from supplier
â˘Major parts of the process are conducted outside of SAP
â˘Strive towards vendor compliance (Process):
âSet up vendor guidelines
â˘EDI requirements
âCommunicate guidelines
âMonitor, Measure ď Publish
â˘Vendor portal
âEnforce compliance
â˘Charge backs
âPacking process must align with our receiving process
â˘Labeling
â˘Integrate rather than Interface
âUse SAP where possible
â˘Catalog, Forecasting
â˘Data Governance
âSingle source of truth
â˘Instill automation culture
âStrive for EDI compliance
Described Issues
Recommendations
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What is Vendor Compliance?
1. Shipments are:
â Accurate according to our order
⢠On time
⢠Correct quantity
⢠Complete
â Communicated
⢠Timely communication
⢠Electronically (EDI)
â To our specification
⢠Communication matches actual
shipment detail
â Packaged correctly
â Labeled correctly
⢠Legible
⢠In support of our process
2. Products are:
â Good quality
⢠Damage free
â Correctly labeled
3. Regulations
â Comply with safety regulations
â Comply with social and
environmental regulations
â Comply with legal terms and
conditions
How well are our suppliers performing?
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Path to Vendor Compliance
Develop Guidelines
â˘Goes in SBA
â˘Clear and unambiguous
â˘EDI automation
requirements
â˘Performance SLA
â˘Chargeback agreement
â˘Clear expectations
â˘Determine non-compliance
cost
Communicate
Guidelines
â˘Accessible through
Supplier portal
â˘FAQs available on
Supplier portal
â˘Begin enforcement
âcultureâ
â˘Communicate cost of
non-compliance
Monitor, Measure &
Publish
â˘Measure compliance
against the target
â˘Communicate
compliance values
against target to
supplier
â˘Stakeholder visibility
â˘Allow but track
exceptions
Enforce Compliance
â˘Violation management
- Chargebacks
â˘Performance trending
â˘KPI visibility
â˘Vendor coaching
opportunity
â˘Revise guideline for
supplier as required
â˘Audits â Warehouse
and system
Normalize System and
Process
â˘Standardize SAP EDI
interface / IDocs
â˘Develop mapping
templates for IDocs
<-> EDI
â˘Update vendor EDI
specifications
â˘Implement workflow
error handling
Normalized process
Realization
â˘Publish specifications
to Supplier portal
â˘Enable PTP process
through EDI and IDocs
via PI
â˘Enable KPI reporting
â˘Update on-boarding
procedure
Support process
â˘Ensure efficient use of
workflow and IDoc
technology
â˘Manage relationship
with EDI service
partner
â˘Execute on-boarding
procedure
Compliance Support
â˘Ensure status
management is
performed at EDI
service partner
IT
Business
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Agenda
1.Describing Supply Chain Maturity
2.About EDI
3.The PTP Process
4.Vendor Compliance
5.Summary
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To summarize what is needed
1.Vendor management
âInstill EDI culture
âDocument meaning of errors
âCharge backs
âCollaboration
2.EDI Automation
âNormalize SAP EDI PTP process
â˘PO Ack, PO Changes, ASN, IR
âNew vendor guidelines
âCommunicate / publish guidelines
âException management focus
3.Data governance
âVendor, Material
4.Financial impact
âNon compliance
5.Receiving process
âVendor packing process aligned with DC receiving
âAudit function
âReceive against ASN
6.Integration
âCarrier collaboration
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SAP Logistics and Fulfillment Management - Innovation
ďOptimize transportation to decrease spend, increase asset utilization, and improve customer service
âSAP TM
ďManage all global aspects of inventory movement, including export and import compliance
âSAP GTS
ďEnable supply chain collaboration â PTP transaction collaboration, inventory movements, and asset optimization
âSAP SNC
ďPTP Status Visibility and âTrack and Traceâ
âSAP Event Management
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Next Steps
â˘Contact us to discuss details / provide clarity
ď¨
â˘Perform an on-site Scoping Assessment
âUnderstanding full requirements â Match requirements with correct technology stack to address the needs
âProvide high level design for architectural and budget consideration
âAnswer open questions around available technologies
âProvide road map to implementation success ď Value
ď¨
â˘Budget -> Plan -> Execute -> VALUE
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YOU SAP INNOVATION AND SUPPORT COMPANY
Kevin Wilson
kwilson@qdatausa.com
http://www.qdatausa.com
THANK YOU