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2. “Touchless” Tail Spend
The New Benchmarks and Business
Case for World-Class P2P

3. Agenda

Benchmarking World-Class P2P Performance

The P2P Process – The Happy Path

Happy Path Detours

P2P Process Use Cases

Building the Bullet-Proof Business Case

4. Benchmarking
P2P Performance Efficiency
P2P Efficiency
World-Class
P2P Transaction Cycles
Peer Group
100%
90%
80%
PO Based Invoice Approval
3
70%
15
60%
3.3
50%
Ad-Hoc Req-to-PO
40%
2
30%
20%
1
Catalog Req-to-PO
10%
3.5 Hours
0%
% POs
% POs No Re- % Invoices
Automated
Work
1st Pass
Match



% Early Pay
Discounts
Taken
% Spend
With Line
Item
Visibility
Cycle Time Days - Peer Group
Cycle Time Days - World Class
~80% or More POs Automated, Early Pay Discounts Taken, and Line Item Spend Visibility for Top Performers
90%+ POs Processed and Invoices Matched On First Pass
Transaction Cycle Times 40-80% Faster
Source: Hackett Group Procurement Benchmarks

5. Benchmarking
P2P Performance Effectiveness
P2P Effectiveness
Peer Group
3.00%
World-Class
% Indirect Cost Savings
6.69%
0.85%
% Indirect Procurement Process Cost as % Spend
Nearly 10X ROI
0.68%
0.018%
% Early Payment Discounts as % Spend
0.13%
0.000%


1.000%
2.000%
3.000%
4.000%
5.000%
World-Class Generates Nearly 3X More ROI at 20% Lower Process Cost
Almost ¾ of Cost Savings is Cost Reduction vs. Cost Avoidance
Source: Hackett Group Procurement Benchmarks
6.000%
7.000%
8.000%

6. P2P Process – The Happy Path
Requisition
Buy
Transmit
Catalog
Auto Workflow
“Touchless” PO
xCML/EDI/Portal
Pay
Approve
Invoice
Receive
EFT/P-Card
Auto Match
(3 or 2 Way)
E-Invoice
Goods Receipt

7. P2P Process – Happy Path Detours
Top Performers - On Catalog
The Guided Path
Off-Catalog/On-Contract


77% Off-Catalog Spend for Top Performers
94% Off-Catalog Spend for Others
50%
40%
30%
20%
10%
0%
Transactions
42%
Transactions
Spend
% Negotiated Cost Reduction Lost Due to Maverick Buying
The (Buyer) Guided Path
Off-Catalog/Off-Contract


1.6%
Top Quartile
Significant Maverick Buy Potential
6x More Lost Savings for Worst Performers
Bottom Quartile
3.9%
World-Class
Peer Group
4.6%
Peer Group
9.6%
Bottom Quartile
2.0%
The Bread Crumb Path


Higher Non-PO Indicates Less Control
1 in 5 are Non-PO for Even Top Performers
World-Class
Top Quartile
0.0%
No PO Invoices
Spend
23%
4.0%
6.0%
8.0% 10.0%
% Non-PO Transactions
40%
30%
20%
10%
0%
38%
21%
World-Class
Peer Group
World-Class
Peer Group
Source: Hackett Group Procurement Benchmarks

8. The P2P Use Cases
The Happy Path
On-Catalog/On-Contract
Use Case Scenario
3 Click Shop and Checkout
Auto-classify to correct category
code, invoke category-specific
workflow, map to GL account and
default ship to/bill to from profile

9. The P2P Use Cases
The Guided Path
Off-Catalog/On-Contract
Use Case Scenario
Guided Form for non-catalog contracted service
Menu of guided e-Forms for off-catalog requisitions
instead of blank, free-form requisitions

10. The P2P Use Cases
The (Buyer) Guided Path
Use Case Scenario
Off-Catalog/Off-Contract
“Req-to-Quote” - Guided Form for noncontracted item routed to buyer for
quote
Guided form, wizard interface to prompt for required
attributes and specifications if “off-catalog” service or
configurable product

11. The P2P Use Cases
The Bread Crumb Path
Use Case Scenario
No PO Invoices
Invoice approval workflow for No PO
invoice
Invoice Manager
• Flip PO to enter invoices
• Review recvd. eInvoices
Non-PO
Invoice
Supplier
Non-PO
Invoice
e
Confirm (Optional)
Send for Matching
Invoice Reviewer (as per
business rule
• Review / Modify
• Accept / Match again
Rule-based Automatic
Invoice Matching- Flag Non PO Invoice
Invoice On-hold
Matching
Exceptions
Return in case of insufficient information
Auto-matched
Invoice Matched
Optional
Invoice Approver(s)
Accept Invoice with Exceptions
Payment Approver
• Confirm Amount
• Schedule Payment Release
Approve
• Approve / Return / Cancel
• Review / Modify
Optional
Invoice Approved
Scheduled for Payment
Paid

12. Building The P2P Business Case
`
Pro-Forma Business Case
Business Metrics - Annual Spend & Transaction Volume
Total Adressable Spend
Estimated Compliant Spend (%)
Realized Savings (%)
Annual Requisition Volume
Annual Purchase Order Volume
Annual Invoice Volume
Esitmated Non-Compliant Spend (%)
$300,000,000
30%
8%
9,297
12,396
18,594
Targeted Compliant Spend (%)
Req-to-Order Cycle Time (Days)
Invoice Processing Cycle Time (Days)
Per PO Processing Cost
Per Invoice Processing Cost
Business Value - Savings & Process Improvement
Component
Incremental Realized Savings($) - Contract Compliance
Incr. Realized Savings ($) - P-Card Rebates/PP Discounts
PO Processing Cost ($)
Invoice Processing Cost ($)
Current
Incremental
Improvement
Target
Performance
Incremental
Savings
30%
30%
$30
$39
40%
10%
23%
92%
70%
40%
$23
$3
$9,600,000
$600,000
$86,772
$663,434
Total Savings
$10,950,206
Cycle Time Improvement:
Requisition-to-Order Cycle (Days)
Invoice Processing Cycle (Days)
7
21
* Note: Assumes Best-in-Class Cycle Time Achievement with P2P of 1 Day Order and 3.8 Days Invoice Process Cycle Times
86%
82%
1*
4*
70%
70%
7
21
$30
$39

13. Business Case Assumptions
ROI Improvement Opportunity
Performance Area
Laggards
Average
Best-in-Class
ROI GAP
Spend Under
Management
22%
62%
80%
58% More Spend Under
Management
Procurement Contract
Compliance
11%
30%
78%
67% More Compliant
Spend
2%
8%
12%
10% More Savings
Realized
Requisition-to-order
cycles
7-8 days
2-3 days
< 1 day
85% Faster Cycle Time
Requisition-to-order
costs
$30
$27
$23
23% Savings per PO
20.8 days
9.7 days
3.8 days
82% Faster & 2x Higher
Early Payment Discount
$38.77
$15.61
$3.09
92% Savings per Invoice
Realized/Implemented
Savings
Invoice process cycles
Invoice process costs
Source: Aberdeen Group – The State of Strategic Sourcing 2011, Invoicing and Workflow 2011, Effective E-Procurement 2010, E-Procurement
Benchmark Report 2008 , E-Procurement Trials and Triumphs 2007,