Best Practices in Vendor Management, Strategic Sourcing, Procure to Pay and Discount Management
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Supplier Relationship Management Initiatives are playing a critical role to drive Sustainable savings, operational efficiency and optimizing cash in many organizations especially in today's highly volatile commodity markets and risk-prone global supply chains. Yet many organizations do not realize the ROI and value that can result out of a best in class Supplier Relationship implementation that addresses all aspects of Spend categories including complex services. This session would focus on best practices that can be employed across the entire Procurement life-cycle including Invoice and Payment processes that help achieve quantifiable ROI and value.
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Best Practices in Vendor Management, Strategic Sourcing, Procure to Pay and Discount Management
- 1. Best Practices in Vendor Management, Strategic Sourcing, Procure to Pay and Discount Management to Help Drive Supplier Relationship Management ROI Dan Gercak, Director, Commerce Services Jarod Schrock, Director, Supplier Enablement Services © 2013 Ariba, Inc. All rights reserved.
- 2. #AribaLIVE Agenda • Overview of Vendor Management • Vendor Management in Ariba • Vendor Management by Application Area • Open Discussion © 2013 Ariba, Inc. All rights reserved.2
- 3. #AribaLIVE A Few Starting Points… • For this presentation, “Supplier” equals “Vendor”. • While most of the topics here are generic across Ariba, there are some topics which are more pertinent to Ariba OnDemand vs OnPremise. • Ask any question when you want. © 2013 Ariba, Inc. All rights reserved.3
- 4. #AribaLIVE Agenda • Overview of Vendor Management • Vendor Management in Ariba • Vendor Management by Application Area • Open Discussion © 2013 Ariba, Inc. All rights reserved.4
- 5. #AribaLIVE 12-month decline in B2B marketing impact: 50% (Source: Marketing Sherpa) Revenue leaked due to compliance issues: 5% (Source: Aberdeen Research) THE CORPORATE EPIDEMIC Transactions completed manually: 80% (Source: Celent Communications) Cost of ineffective business collaboration: $650 BILLION(Source: Basex Research) Inefficient Processes Between Companies Hinder Results Wanted: Better Business Commerce 5
- 6. #AribaLIVE The Opportunity Lies in Better Collaboration… Over the past two decades, large global businesses successfully streamlined and optimized their business processes within the four walls of the business with ERP systems… Master Chart of Accounts Unified item master Centralized/Standardized HR & Payroll …enabling faster closing of books …enabling internal process streamlining …enabling lower inventory requirements © 2013 Ariba, Inc. All rights reserved.6 Your Company’s ERP …but no company is an island on to itself…you are part of an extended supply chain. With your house in order, you must now look to your supply chain and your relationships with your trading partners for the next wave of savings. -- Key ERP Efficiency Gains --
- 7. #AribaLIVE Network-Centric Approach Conquers Legacy Challenges © 2013 Ariba, Inc. All rights reserved.7 Poor User Experience Disconnected Processes Static Company Profiles Missed Business Opportunities • Cumbersome registration with separate Terms of Use • Lack of consolidated dashboard to view Buyer activity • Duplicate, non- synchronized profiles across multiple applications, updated individually • Requires rekeying of redundant information for each event • Multiple product- specific logins with single roles • Difficult navigation between separate solutions • Inability to cross- market to other decision makers • Marketing isolated to specific environment (no broad marketing capabilities)
- 8. #AribaLIVE • Single Login with Linked accounts with multiple roles • Single Click navigation between Seller Solutions • Consolidated and synchronized profiles across Seller Solutions • Simplified Profile Management with ability to link child profiles to parent • Increased awareness to real decision makers in their market • Key step toward developing a universal business commerce directory • Simplified single- page registration with consolidated Terms of Use • View Seller Sourcing events in a single collaboration dashboard Seamless User Experience Comprehensive Trading Partner Discovery Single Company Profiles Unified Solution in the Cloud What if You Could Have… © 2013 Ariba, Inc. All rights reserved.8
- 9. #AribaLIVE © 2013 Ariba, Inc. All rights reserved.9 Typical Supplier Management Processes and Components Supplier Portals Vendor Master Management Risk Management Diversity/Green/ Corporate Responsibility Registration & On-boarding Process Performance Management Supplier Management Supplier Discovery The Critical Components • Highly usable Web-Based Portal for suppliers to register and manage information collaboratively with customers • Supplier Information Management that unifies platform, process and supplier profiles across the company and keeps it current, complete and correct. • Supplier Performance Management capabilities including process workflow and approvals, surveys and scorecards, flexible role based dashboards and customizable reports • Supplier Risk Management and Mitigation through a robust technology platform that seamlessly integrates in- context supplier info such as parentage, financials, diversity and sustainability • A Unified Supplier Record merging data and process flows to third party systems and data sources Supplier Management Processes
- 10. #AribaLIVE Agenda • Overview of Vendor Management • Vendor Management in Ariba • Vendor Management by Application Area • Open Discussion © 2013 Ariba, Inc. All rights reserved.10
- 11. #AribaLIVE Seller Collaboration Console is a key element of Ariba’s vision to enhance the seller experience with greater exposure, convenience, and control What is Seller Collaboration Console? A New Way for Sellers to Experience Ariba • Centralized Administration • Single User ID for All Ariba Commerce Cloud Seller Solutions • Common terms of use • Common Ariba Cloud Profile © 2013 Ariba, Inc. All rights reserved.11 Profile/Doc Repository Seller Sales Order Mgmt Finance Orders & Invoices Leads Proposals Contracts Seller Collaboration Console
- 12. #AribaLIVE SELLER VALUE • Easy access and navigation across all solutions for all customers • Accurate information through a centrally managed Ariba Cloud Profile • Greater efficiency through simplified registration and user management • Increased exposure to real decision makers in their market These Capabilities Deliver More Value to Both Buyers and Sellers © 2013 Ariba, Inc. All rights reserved.12 BUYER VALUE • Streamlined and unified on- boarding process across Ariba Commerce Cloud solutions • Increased completeness, accuracy and timeliness of seller profiles • Integration of seller lifecycle (from identify, to bid, to transact) • Increased pool of qualified suppliers with rich profile information
- 13. #AribaLIVE Ariba Offers Collaborative Commerce Solutions to Help Companies Buy, Sell and Manage Cash Better © 2013 Ariba, Inc. All rights reserved.13 BUY MANAGE CASH SELL Sales & Marketing Finance Sellers IT Accounts Receivable Buyers Sourcing & Procurement Finance IT Accounts Payable Improve spend control and performance with reduced costs, lower risk, improved and enhanced compliance. The discipline of using collaborative solutions to make your money work for you and your trading partners Accelerate sales through efficient processes fostering stronger relationships with new and existing customers. Collaborative Finance Working Capital Management Electronic Invoicing Payment Automation Matching & Compliance Scanning & Workflow Discount Professional P-Card Settlement Receivables Finance Supply Chain Financing Collaborative Procurement PO Automation Supplier Enablement Supplier Portal Connectivity Services
- 14. #AribaLIVE Collaborative Business Commerce Addresses These Challenges for Sellers © 2013 Ariba, Inc. All rights reserved.14 Source Select Procure Receipts PayIdentify Contract BUYER: DISCOVER-TO-PAY Bid Sell Fulfill Invoice CollectMarket Contract SELLER: MARKET-TO-CASH Online negotiating E-Marketing and exposure Business opportunities Better compliance Automated collaboration Greater visibility Early payment opportunities
- 15. #AribaLIVE Ariba Solution Portfolio – Enabling Closed-Loop Integrated Source-to-Settle Process Excellence Using Ariba Network © 2013 Ariba, Inc. All rights reserved.15 Ariba Collaborative Commerce via Ariba Network Procurement Content Spend Visibility Sourcing Contract Mgmt. SIPM P-2-P Services Procurement Invoice Pro Payment Pro Discount Pro Discovery Cloud Infrastructure Network Centric 2-Sided Business Model Engaged Community Open Integration
- 16. #AribaLIVE 5) Be Invoiced Invoice Pro Process Invoice 4) Buy it Procure to Order Request Approve Receive Another View of the Solution Portfolio © 2013 Ariba, Inc. All rights reserved.16 With close to 1 Million suppliers Ariba Network This needs to be procured Sourcing Contracts Purchase Orders Order Confirmation Shipping Notices eInvoices Invoice Status Payment Status Early Payments Catalogs 2) Sign the Deal Contract Management Contract 1) Find a Deal (Sourcing) Spend Visibility Ariba Discovery Ariba Sourcing Supplier Information & Performance Mgt Analyze Discover Plan Tender/ Negotiate Track Performance 3) Broadcast it Procurement Content Broadcast Catalog Procure to Pay 6) Pay Discount Payment Mgt Manage Cash
- 17. #AribaLIVE Agenda • Overview of Vendor Management • Vendor Management in Ariba • Vendor Management by Application Area • Open Discussion © 2013 Ariba, Inc. All rights reserved.17
- 18. #AribaLIVE Overall Points to Consider • Ariba is not meant to "remove" communication between Buyers and Suppliers; it is meant to remove "noise" between Buyers and Suppliers • The processes associated with the following applications represent a “closed loop” and are meant to be repetitive • Rationalization of the supplier identification in Ariba needs to occur initially, and be managed throughout • “Delegation of Authority” rules will need to be defined as these various tools are rolled out Who can create a Supplier record? Who can approve? What processes will each supplier be included in? © 2013 Ariba, Inc. All rights reserved.18
- 19. #AribaLIVE Create a summary of your need Publish on Ariba Discovery Relevant suppliers will be notified Review & Select new suppliers Invite them to your SOURCING project Discovery Post & Search to the ENTIRE network © 2013 Ariba, Inc. All rights reserved.19 12k lightbulbs for week 56 Ariba Sourcing Check it out! http://discovery.ariba.com Ariba Discovery HOT Poke the Market
- 20. #AribaLIVE You Online Weighted Triangulation Commodity Inference Artificial Intelligence* Inference Engine Source Data Hints Supplier Name Supplier Address Expense Description GL AccountMaterial Group Part Description GL Cost Center other hints Suppliers Analysis Database 180 million Suppliers Matching & Parentage Enrichment: Industry (SIC), Credit Rating, Revenue, Diversity Item Description Analysis Database Text Reading Learned Models Your Company Processes & Mappings Database Custom Mapping Custom Rules (if, then) Manual Approval “a judicious mix of algorithms for different types of classification issues (e.g. supplier classification, others for different categories of goods) with a lot of experience will generally produce better results.” - Forrester, April 2008 Spend Visibility HOT $3 Trillions Classified so far…
- 21. #AribaLIVE Sourcing: Beyond RFPs and Auctions Connecting with a Networked Community of Sellers © 2013 Ariba, Inc. All rights reserved.21 • Networked Community of Suppliers • Proactive Ariba seller recommendations based on intelligent matching • Project Mgt Workspace to drive process compliance and savings • Sourcing Optimization, Analysis and Reporting • Global, Multi-Lingual and Multi-Currency Capabilities • Bundled Support Services, EDM and Best Practice Center support • Savings Pipeline and Tracking
- 22. #AribaLIVE Contracts © 2013 Ariba, Inc. All rights reserved.22 Solution Elements Monitoring - Overview Authoring/Negotiations Internal/External Review Publish Results Develop Agreement Clause Library Repository
- 23. #AribaLIVE SIPM Supplier Performance and Information Management © 2013 Ariba, Inc. All rights reserved.23 Supplier “A” 1. Plan 2. Periodic Tracking 3. Reporting Program Goals Delivery On Time (ERP) Product Quality Supplier Collaboration 1 Quality Scorecard ERP DATA SURVEYS 2 Reporting/Trends3 SPM is the process of measuring, analyzing, and managing supplier performance to improve quality, reduce costs, mitigate supply risk and drive continuous improvement in the supply base. Enabled by common, consistent measurements that focus resources, identify performance glitches, and determine the total cost of ownership of supply relationships, products, and entire supply chains.
- 24. #AribaLIVE Upstream Points to Consider • Spend Visibility Development of a standard “language is important across Ariba, but is critical here This will allow for a more consistent identification of spend opportunities • Supplier Profile Questionnaires (SPQ) SPQs should balance how a Supplier would respond with the Buyer's requirements Do not try to get all info at once – may only use the supplier in a Sourcing event • Sourcing Event templates should balance how a Supplier would respond with the Buyer's requirements Communication during the event is key, including the Award and the "Dear John" memos Flow of the events (RFI to RFP/Q to Auction) should continue to become more focused, do not repeat questions already asked © 2013 Ariba, Inc. All rights reserved.24
- 25. #AribaLIVE Procurement Content The simplest of all types of integrations © 2013 Ariba, Inc. All rights reserved.25 NO CHANGES Your Systems (Create PO) Your processes (Sending PO) XML Search in the Catalogs and Return Results to ERP
- 26. #AribaLIVE Ordering SuppliersBuyers Optimization: Ordering P2O MATCH eInvoice creation and conversion Purchase & change orders Purchase Order Change Order Goods Receipts Order Acknowledgement Advanced Shipment Notices Quick Secure delivery and no more fax • No more “lost orders” (about 2% of all orders are lost) • Online and on-time status, cancellations and responses • 2 days gain in lead times on average © 2013 Ariba, Inc. All rights reserved.26
- 27. #AribaLIVE Invoicing Suppliers Buyers Optimization: Invoicing MATCH eInvoice creation and conversion Purchase & change orders Make sure the whole process stays “electronic” • Invoices are created from a Purchase Order • They are automatically matched • No invoices without PO • 100% paperless and can be legally archived • Remittance Advice is the single most important benefit for the supplier of your p2p initiative Remittance Advice Invoice Support credit and debit adjustmentsInvoice Status © 2013 Ariba, Inc. All rights reserved.27
- 28. #AribaLIVE Invoice Business Rule Filters Suppliers AS2 EDI HTML Paper cXML Email CSV RULES Your Ariba 98%+ Auto Post Supplier Name / ID Bill To / Ship To VAT / GST ID’s Invoice Number Non-PO Contact PO Number Remit Access Currency Price Variance Unit Of Measure PO Line Reference Receipt Consumption Variance Total Amount Sub Total Amount Contract Compliance Tax Code Compliance Line & Header Tax Invoice Exception Exception Exception Exception Goal : TOUCHLESS processing • Faster Cycle Times • Lower Risk © 2013 Ariba, Inc. All rights reserved.28
- 29. #AribaLIVE Discount & Payment Management Timing & Discounts © 2013 Ariba, Inc. All rights reserved.29 Exceptions & Approvals Payment & Reconcile Timing & Discounts Receipt & Capture Too Little Return on Cash Too Few Early Pay Terms Too Little Savings on Early Pay 36% 1% .25% % APR Earned BIC LAGAVG 20% 3-5% 1% % Suppliers w/ Discount terms BIC LAGAVG € Million saved per €1 Billion BIC LAGAVG €3 €0.5 €0.25 Timing & Discounts Too Many Missed Discounts 50% 10% % potential discounts captured BIC LAGAVG 95+% • Payment status and cash flow portal gives suppliers visibility into the opportunity to accelerate payment, and the Capability to do so on demand. • Automatic & Ad-Hoc Dynamic Discounts offer flexibility and increase adoption • Collaborate with suppliers to earn 16%-24% APR and earn €2-3 Million per €1 Billion targeted spend.
- 30. #AribaLIVE Downstream Points to Consider • Flight Plan The approach and plan for Supplier management has to be defined, agreed to and executed against. This can be by spend area, category, geography, and / or some combination A compliance strategy must defined as well to drive conversations and potential conflicts with suppliers. • Models / Templates Standard business and technical processes should be the going in position. This includes PO and Invoice specs and transaction models such as Requisition to Invoice and Payment, Requisition to Pcard charge, Invoicing Against Contracts • Catalogs / Contracts Where possible, catalogs should be made available and promoted. This assumes that an agreement (contract) has been established with the Supplier. © 2013 Ariba, Inc. All rights reserved.30
- 31. #AribaLIVE Downstream Points to Consider • Invoicing / Payments Invoice / invoice exception rules should balance Buyer accounting policies (tolerances) with efficiency to payment. Payment terms need to be rationalized and managed throughout • Reporting Using Spend Visibility, key metrics such as spend per supplier, commodity spend, and catalog / contract compliance reporting needs to be performed on a regular basis © 2013 Ariba, Inc. All rights reserved.31
- 32. #AribaLIVE We’ve Been Building this for over a Decade Ariba Network Growth 1999 - 2011 © 2013 Ariba, Inc. All rights reserved.32
- 33. #AribaLIVE © 2010 Ariba, Inc. All rights reserved.© 2013 Ariba, Inc. All rights reserved.33 Accelerate Time to Value with Ariba 33 TECHNOLOGY • Broadest and most widely used strategic sourcing solution with SaaS architecture resulting in faster time to value, lower TCO, and more-frequent innovation • Seamless integration of Technology with a broad portfolio of sourcing transformation services and global supply market expertise • Integrated Supplier Discovery • Security: WebTrust and SaaS 70 Type II Certified, PCI Compliant • Performance: SLA guaranteed uptime of 99.5 percent COMMUNITY • Improve collaboration with the world’s largest trading community – the Ariba Network for efficient and effective supplier discovery, qualification, risk assessment and competitive negotiations • Share best practices, ideas, and innovation within Ariba’s open community – Ariba Exchange CAPABILITIES • Supplement in-context category and supply market expertise, best practices, and benchmarking to maximize savings and organizational performance – all with flexible delivery options from full-service consulting to web-based delivery • Leverage Ariba enablement services including deployment, training, and adoption • Enable shift of internal resource to focus on more strategic objectives
- 34. #AribaLIVE ProcurementInvoiceCatalogSupplier Collaboration Options Standardized Approach © 2013 Ariba, Inc. All rights reserved.34 PO Change Order Cancel Order Order Confirmation Adv. Shipment Not. Spot Buys Catalog Upload Catalog Change Buyer Approval Invoices Invoice Status Remittance Adv. •Need Help? Call us or email us •Here’s the tool to manage everything •Here is your comprehensive pricing One single solution For several of his clients
- 35. #AribaLIVE Proven Results - Buyers and Suppliers sign up and stay on the Ariba Network © 2013 Ariba, Inc. All rights reserved.35 350K suppliers currently participate 99% retention rate of suppliers transacting on the Network 100% of suppliers with 3 or more customers renew their annual membership 99% retention rate of buyers transacting on the Network No other provider has more suppliers, more reach, more experience or more people focused on supplier enablement
- 36. #AribaLIVE Proven Value Delivered © 2013 Ariba, Inc. All rights reserved.36
- 37. #AribaLIVE Agenda • Overview of Vendor Management • Vendor Management in Ariba • Vendor Management by Application Area • Open Discussion © 2013 Ariba, Inc. All rights reserved.37
- 38. #AribaLIVE Open Discussion • Jarod Schrock – jschrock@ariba.com • Dan Gercak – dgercak@ariba.com © 2013 Ariba, Inc. All rights reserved.38
- 39. Questions? © 2013 Ariba, Inc. All rights reserved.
Editor's Notes
- Taking this paradigm of a networked economy, from a B2B perspective, there’s lots of room to grow in the Networked Economy.Companies have spent billions of dollars in personnel, reengineering, and systems over the past two decades to improve their internal process and information flows within their four walls. These “Islands of Efficiency” are disconnected from the outside world and fall down where it matters most – when buying, selling, or exchanging cash with other businesses. For example:80% of POs, Invoices, and other transactions still take place offline…Additionally, Marketing Sherpa has reported a decrease of 50% in B2B marketing impact over the previous year as people utilize more consumer driven sources of information such as Google and blogs and not the marketing/sales materials produced by your companyAlso, Aberdeen Research reports that 5 – 9% of revenue is leaked due to contract compliance issues and other inefficienciesLots of paper…lots of people…and lots of inefficiency.All this inefficiency costs business $650 billions per year in missed sales opportunities, higher operating and supply chain costs, and slower cash flow cycles.
- Faster quarterly closes…More with fewer people….Standardization of processes across divisions…
- The Seller Collaboration Console is a new way for sellers to experience Ariba. In order to consumerize business commerce, we need to bring all aspects of the buyer/seller collaboration under one umbrella. So now instead of separate Ariba profiles and logins, you can access all your Ariba customer relationships through the Seller Collaboration Console. This includes:Leads, through Ariba DiscoveryProposals, through Ariba SourcingContracts, through Ariba Contract ManagerOrders & Invoices, through Ariba Network.All untilizing a shared profile and document repository
- Discuss of Source-to-Settle ProcessSolutions that fit along continuumEnable collaborative commerce via Ariba Network
- Sourcing extends beyond just automating RFQ’s and quotes. eSourcing has been in existence for more than 15 years and companies like Tata Motors, British Airways, have executed thousands of sourcing projects addressing billions of dollars in spend driving more than $200M in negotiated savings to the bottom line with reduction in transaction costs by 40%.However companies looking to tackle “Complex categories” beyond the “low hanging fruits” need to incorporate a Category management approach using collaborative tools paired with ready access to a networked community, decision support tools, knowledge management/ best practices and real-time market intelligence to drive optimal decisions pivoted against Price, Performance and Risk. In addition many organizations likeAs such an effective Sourcing solution offers: Achieve Sustainable Savings – Results and Enablement (Tata Motors, BA, Emerson) Seamless access to global suppliers to help drive savings (Winn-Dixie, Tupperware and OSU Medical center) Total Information Visibility (HP, BP) Performance Measurement (Sonoco, Pentair) Improved Collaboration and Risk Mitigation (BP, GD)
- The first step in the Invoice Management process is Receipt & Capture [click]While there may be many different spend categories identified in the collaborative procurement use case (Example: indirect, direct, MRO, services), AP is ultimately responsible for processing all invoices. Some of these may be electronic, but most organizations still have a very high percent of paper invoices. Paper invoices cost more to process than electronic invoices, and are manually intensive and result in very inefficient processes. [click]It’s important to establish a benchmark with your prospect to determine the scope of the opportunity identified in the discovery process. Regarding paper invoices; recent benchmarks from the Hackett Group show that on average, 25% of invoices are electronic, which means that 75% of invoices are still paper! Best-in-class organizations are over 60% automated, and laggards only have about 7% of their invoices automated. [click]Cost per invoice can be complicated and controversial to measure across regions, industry verticals. I find a better measure for cost and efficiency is the number of invoices processed per full time equivalent (FTE) AP staff. On average, an AP staff FTE processes about 11K invoices annually. Best-in-class AP staff will process about 33K invoices annually, and laggards about 7K. [click]These benchmarks help you measure the opportunity. Then you can begin to map out what our solution for invoice receipt & capture might look like.Our primary objective is to help companies join the Networked Enterprise, and as you’ll see electronic invoices are THE document for strategic advantage when it comes process, discount, working capital, and compliance savings. But not all suppliers will participate right away, so we help companies looking for a scanning/OCR solution with Ariba Invoice Conversion Services. ICS is a fully outsourced, scalable service that streamlines paper invoice handling. Our “smart invoicing” solution allows customers to migrate paper invoice suppliers to electronic automatically by assigning network accounts to all suppliers, and notifying suppliers when they’ve hit a prescribed threshold where they should consider moving to e-Invoicing with Ariba.Ariba Invoice Automation allows buyers to reach a much higher percent of electronic invoices by enabling all suppliers regardless of their volume, location, or technical sophistication. Our “smart invoicing” approach drives greater efficiency because most errors and exceptions, especially for PO-invoices, are captured at the moment the supplier submits the invoice. So the buyer’s AP department only receives valid invoices. Additionally, the supplier portal included in this solution, provides suppliers real-time visibility into their invoice and payment status, thus eliminating costly inbound inquiry calls asking when the check is going to be in the mail.By helping companies get to 80% or more electronic, we can help reduce 50-60% of related AP staff cost. In fact, Caterpillar has achieved 90% electronic invoices globally with 98% in NAMER. This efficiency led to a 75% reduction in their AP headcount. 75%!! In many cases, AP staff is reassigned to higher value-add roles like working capital impact, discount capture, contract compliance, etc.