On February 9th 2009 Andrew Bartolini Vice President & Group Director, Global Supply Management for Aberdeen Groups gave this tremendous presentation on many different facets of the Procure to Pay cycle. Bartolini breaks of costs of processes and best practice benchmarking to deliver real value.

1. P2P Rising
Andrew Bartolini
Vice President & Group Director,
Global Supply Management
February 9, 2009
© AberdeenGroup 2008

2. P2P Rising
Table of Contents
Introduction
2009 – Revive, Refresh, Renew
CPO Rising
A/P Rising
Summary & Recommendations
Q&A
2 • © AberdeenGroup 2009

3. Introduction
© AberdeenGroup 2008

4. P2P Rising
My Bio
Title
Vice President & Group Director
Summary
• Recognized expert in sourcing, procurement, and supply management
• Leader of Global Supply Management Research at Aberdeen Group
• Twice named a “Pro to Know” by Supply and Demand Chain Executive
Experience
Leadership roles in sales, marketing, and services at Ariba and
Commerce One; Rich experience in strategic sourcing, business
process transformation, and software implementation. Background also
includes consulting and investment banking
Education
• MBA – Indiana University
• BA – Holy Cross College (MA)
4 • © AberdeenGroup 2009

5. P2P Rising
About Aberdeen Group (Boston, MA)
Founded in 1988
394,000+ Panel Members and over 2 million readers
Benchmarked over 700,000 enterprises
Aberdeen research is used by more than 90% of the
Fortune 1000
10 distinct research coverage areas
Aberdeen will publish over 1800 Reports in 2009 which
will be read by more than 1 million readers
ALL Reports are FREE (some for limited time)
5 • © AberdeenGroup 2009

6. P2P Rising
Aberdeen’s Research Coverage
Global Supply Management (GSM)
Manufacturing
Supply Chain
Enterprise Technology
Service Chain
Communication
Information Technology
Sales & Marketing
Product Innovation
Enterprise Administration
Over 5500 On-Line Research Documents are available
serving 300,000+ User Sessions / Month
6 • © AberdeenGroup 2009

7. P2P Rising
Aberdeen’s GSM Research Coverage
Role-Based
Analyze Source Contract Procure Pay Research
Source-to-Settle CPO
CFO
CIO
Complex Categories
Suppliers
T&E
Contract Labor & Professional Services
Real Estate & Facilities
Strategic Meetings
Print/Marketing
7 • © AberdeenGroup 2009

8. P2P Rising
Global Supply Management Research Panel:
68,893 & Growing
Size of Companies Roles at Companies
% of Users By Revenue % of Users By Title
18% 15% 8%
11%
51%
34% 43%
20%
<$50M $50-$250M $250M - $1B >$1B C-Level VP/Dir. Manager Other
Geographical Representation Research Advisory Council
% of Users by Region 24+ Industry Leaders
13% 3%
22%
62%
N. America EMEA Asia Pac. Rest of World
8 • © AberdeenGroup 2009

9. P2P Rising
Research and Demographics (for today’s
discussion)
Hypothesis
900+ Professionals
Aberdeen believes that 2009 will be a
year of significance for the Size
Procurement & Payables, a year of Large (Greater than $1B) – 58%
the “P2P Rising” – rising to meet Mid-Market ($50M to $999M) – 29%
new challenges, rising to new Small (Less than $50M) – 13%
operational heights, and rising in
prominence within the enterprise. Yet,
with increased visibility comes an Region
expectation of consistent execution North America – 62%
and delivery. EMEA – 31%
Asia Pacific – 7%
Approach
Industry
Aberdeen Group conducts web- Manufacturing – 11%
based surveys to target Technology – 8%
professionals in our research
membership pool Finance – 7%
We then followed up with interviews 29 other categories
from survey respondents
9 • © AberdeenGroup 2009

10. 2009 – The Year Ahead
Revive, Refresh, Renew…..
Rebound?
© AberdeenGroup 2008

11. P2P Rising
Times are Changing
“It is not necessary to change. Survival is not
mandatory.”
- W. Edwards Deming
“If you don’t like change, you will like irrelevance even
less.”
- General Eric Shinseki
“Change is inevitable…. except from a vending
machine.”
- Robert C. Gallagher
11 • © AberdeenGroup 2009

12. P2P Rising
Times are Tough
Global Crisis
Bailouts & Credit Crunch
Layoffs & Uncertainty
Tough Times Demand Smart Strategies
12 • © AberdeenGroup 2009

13. P2P Rising
2009 - The Year Ahead
2009 will be a very challenging year
71% of CPOs expect significant increase in Supply
Risk
44% of CPOs have already delayed major initiatives
Budgets are constrained or shrinking
CPOs remain focused on increasing Spend
under Management
Cost Savings remains the top goal
13 • © AberdeenGroup 2009

14. P2P Rising
Smart Strategy #1 – Manage Supply Risk
Case Study — Supply Risk and Contingency Planning
A Global manufacturer (and Fortune 100 company) noted
that supply base risk management is the absolute top
priority for his team in 2009 and has invested significant
training in financial ratio analysis and contingency planning
for a team of 30 buyers of the most risky categories.
"We expect the recession will have severe consequences for
our top tier Canadian suppliers. We don't know which
suppliers will be impacted, but we spent the last six months
developing a contingency plan for every North American-
based supplier.“
North American VP of Direct Materials
14 • © AberdeenGroup 2009

15. P2P Rising
What if a CEO had:
A CFO who did not know the company's cost of
capital and lacked visibility into calculating its gross
margin or quick ratio
15 • © AberdeenGroup 2009

16. P2P Rising
What if a CEO had:
A CFO who did not know the company's cost of
capital and lacked visibility into calculating its gross
margin or quick ratio
A VP of Sales who did not know the company's
average deal size or sales win percentage and
lacked visibility into the current sales pipeline
16 • © AberdeenGroup 2009

17. P2P Rising
What if a CEO had:
A CFO who did not know the company's cost of
capital and lacked visibility into calculating its gross
margin or quick ratio
A VP of Sales who did not know the company's
average deal size or sales win percentage and
lacked visibility into the current sales pipeline
A VP of Manufacturing who did not know a
product‘s total cycle time and lacked visibility into
any utilization or quality metrics
17 • © AberdeenGroup 2009

18. P2P Rising
Incompetence or Malfeasance?
What are the Implications?
Should someone lose his/her job?
Should many people lose their jobs?
Does the Board need to be involved?
Would you buy stock in this company?
18 • © AberdeenGroup 2009

19. P2P Rising
What if a CEO had a Chief Procurement
Officer (CPO) that….
Does not have a
formal spend analysis
program
Lacks good visibility
into overall spend
Fails to leverage
spend data in
sourcing activities
19 • © AberdeenGroup 2009

20. P2P Rising
What if a CEO had a Chief Procurement
Officer (CPO) that….
Percentage of all enterprises
Does not have a
formal spend analysis 26%
program
Lacks good visibility
into overall spend 42%
Fails to leverage
spend data in 52%
sourcing activities
20 • © AberdeenGroup 2009

21. P2P Rising
WHAT ARE THE IMPLICATIONS?
For the CEO……
For the CPO…….
For the Procurement Dept…….
For the enterprise……
21 • © AberdeenGroup 2009

22. P2P Rising
Smart Strategy #2 – Analyze Your Spend
The Impact of Spend Analysis on Procurement Performance
Incremental
Performance Metric
Benefit
1
Average savings achieved
from a sourcing effort 93.0%
Spend under management 39.4%
Contract compliance rates 30.6%
Maverick spend reduction 16.3%
1 Average incremental gains achieved by 280+ survey respondents
Source: AberdeenGroup October 2008
22 • © AberdeenGroup 2009

23. P2P Rising
Spend Analysis Automation
Fully manual
13%
26%
11% Partially automated
Fully automated, disparate
systems
50% Fully automated, common
enterprise-level system
Source: AberdeenGroup October 2008
23 • © AberdeenGroup 2009

24. P2P Rising
Average Savings by Level of Automation
11%
8%
5%
4%
Fully automated, single Fully automated, Partially automated Fully manual
system disparate systems
Source: AberdeenGroup October 2008
24 • © AberdeenGroup 2009

25. P2P Rising
Why What You Do Is Important: Top-Line versus
Bottom-line Impact
Revenue (in millions)
$350
$10 Million in
Savings equates $300
to….. $250
$200
$150
$100
$50
$0
Finance CPG Mfg. Hi-Tech
Savings Impact: Income Statement & Market Capitalization
25 • © AberdeenGroup 2009

26. CPO Rising
© AberdeenGroup 2008

27. P2P Rising
On The Procure-to-Pay Process
“The intelligence and fidelity exercised in the
purchase, care, and use of supplies,
influences directly the cost of construction
and operations, and affect, therefore, the
reputations of officers and the profits of
owners…The subject needs elucidation on
many accounts."
~ Marshall M. Kirkman, The Handling of Railway
Supplies: Their Purchase and Disposition; 1887
27 • © AberdeenGroup 2009

28. P2P Rising
Evolution of Procurement/Supply Management
Procurement
Purchasing Clerical Operations Managerial Strategies Supply
Pre-1900 Pre-WWI WWI & WWII 1950s-1960s 1970s-1980s Management
Independent Purchasing is Obtaining raw Processes Emphasis on
function in established as materials, become more purchasing
railroad a clerical role supplies, & standardized strategy and
industry services developing the
became vital to People
ability to
Limited trained for the
operations source goods
traction in function
at an efficient
other
price
industries
Best practices
28 • © AberdeenGroup 2009

29. P2P Rising
Supply Management - Recent History
1980’s & 1990’s
Dominant supplier strategy for key commodities
“Spend Under Management” via long-term contracts
Buying power / aggregation
Strategic Sourcing
Quality
2000’s
Technology-enabled transformation
Globalization
CPO (C-Level procurement executive)
29 • © AberdeenGroup 2009

30. P2P Rising
The CPO’s Strategic Agenda
No formal plan
21%
Formal one-year plan
Formal multi-year plan
45%
34%
Source: AberdeenGroup
30 • © AberdeenGroup 2009

31. P2P Rising
Top Ten KPIs
KPI % Selected
79% of
Identified cost reduction/savings 72%
Enterprises
% of spend under management 64% track Supply
Assurance
Cost avoidance 58%
Implemented / realized cost reduction savings 55%
Procurement ROI (savings / operating costs) 52%
% of suppliers = 80% of spend 51%
Supplier performance (price, delivery, quality,
49%
service, etc.)
Procurement spend as % of revenue dollars 46%
Requisition, PO or invoice transaction volume 34%
Procurement spend per procurement
33%
employee
31 • © AberdeenGroup 2009

32. P2P Rising
Maturity Framework
Definition of Maturity
Mean Class Performance
Class
Best-in-Class:
Top 20% of aggregate More than 70% of spend under management
performers
Industry Average:
Middle 50% of aggregate Between 40% to 70% of spend under management
performers
Laggard:
Bottom 30% of aggregate Less than 40% of spend under management
performers
Source: AberdeenGroup,
32 • © AberdeenGroup 2009

33. P2P Rising
CPO’s Top Priorities
69% 67%
51%
47%
44% 42%
39%
33%
People Suppliers Spend Technology
BIC All Others
Source: AberdeenGroup,
33 • © AberdeenGroup 2009

34. P2P Rising
CPO Goal: Increase SPEND Under Management
What strategies will CPOs employ to increase spend under mgmt.?
Analyze and distribute spend data 74%
Demonstrate/market the value of the
49%
procurement group
Improve visibility into compliance 49%
Policy changes and mandates 36%
Increase procurement automation 30%
Source: AberdeenGroup,
34 • © AberdeenGroup 2009

35. P2P Rising
CPO Goal: Improve SUPPLIER Development &
Collaboration
What do you hope to gain from supplier-focused efforts?
Product quality and supply
74%
performance
Remove time/cost from supply chain 66%
Develop/improve capabilities and capacity 62%
Supply market constraints and inflation 36%
Product and process innovation 33%
Supplier diversity 18%
Source: AberdeenGroup,
35 • © AberdeenGroup 2009

36. P2P Rising
CPO Action: Improving SUPPLIER Development &
Collaboration
66%
Risk 41%
34% 34%
Cash
Improve supplier Improve planning Dedicated supplier Improve electronic
performance and forecasting development teams "supplier
measurement enablement" across
Source-to-Settle
Process
Source: AberdeenGroup,
36 • © AberdeenGroup 2009

37. P2P Rising
CPO Goal: Increase Process Automation
(TECHNOLOGY)
26%
E-Procurement 55%
31%
Spend Analysis 48%
32%
E-Sourcing 42% Planned
38% In Use
Contract Management 39%
32%
E-Payables 36%
Supplier Network or 34%
Portal 34%
Source: AberdeenGroup,
37 • © AberdeenGroup 2009

38. P2P Rising
CPO Goal: Enhance PEOPLE Skills and Capabilities
Need people
with different 74%
job skills
Need people
with better 53%
education
Need more
people due 46%
to growth
Source: AberdeenGroup,
38 • © AberdeenGroup 2009

39. P2P Rising
Barriers to Procurement Transformation
76%
65%
62%
50%
45%
42% 42%
39%
27%
18%
Misaligned Recruiting and Supplier contract Lack of budget Lack of executive
processes and retaining skilled compliance support
systems talent
Source: AberdeenGroup,
BIC All Others
39 • © AberdeenGroup 2009

40. P2P Rising
CPO Operational Excellence Framework
Laggards Industry Average Best in Class
Cost Savings Rate • 0-2% • 2-5% • 5% or more
• Minimal visibility • Reported with visibility • Tied to enterprise
outside of procurement financial metrics
Procurement ROI • 100-300% • 300-700% • 700% or more
Spend Under • 0-40% • 40-70% • 70% or more
Management • Includes common • Includes core categories • Includes complex
categories (e.g., supplies) (e.g., raw materials) categories (e.g., services)
Budgetary Process •Independent of •Based on input from • Procurement is an
procurement procurement integral part
Finance • Ad hoc interaction • Regular interaction • Continuous interaction
Relationship • Reporting to CFO • Have trust of CFO
Technology •Basic or partial supply • Broad suite • Full Suite
Utilization management suite • Linked to finance • Strong linkage to finance
• Strong analytics • CPM systems in place
Source: AberdeenGroup 2009
Source: Aberdeen Group 2007
40 • © AberdeenGroup 2009

41. Accounts Payable Rising
Yes, Accounts Payable
Is Rising
© AberdeenGroup 2008

42. P2P Rising
The A/P Department is Coming of Age
In the past 2 years, role of A/P has
become more strategic in 56% of
enterprises. 18 months ago, 40% of
enterprises believed A/P was playing a
“more strategic” role.
42 • © AberdeenGroup 2009

43. P2P Rising
However, Paper Remains The “Rule,” Not The
Exception
PAYMENTS INVOICES
Electronic Electronic
Paper/Manual Paper/Manual
21%
38.5%
61.5%
79.0%
Source: AberdeenGroup September 2008
43 • © AberdeenGroup 2009

44. P2P Rising
Maturity Framework
Definition of Maturity Class Mean Class Performance
Best-in-Class: $2.18 cost to process an invoice
Top 20% of aggregate performance
scorers 2.8 days to process an invoice
Industry Average: $9.38 cost to process an invoice
Middle 50% of aggregate
performance scorers 15.8 days to process an invoice
Laggard: $34.11 cost to process an invoice
Bottom 30% of aggregate
performance scorers 35.1 days to process an invoice
Source: AberdeenGroup September 2008
44 • © AberdeenGroup 2009

45. P2P Rising
Best-in-Class: Real-Time Visibility
All Others Best-in-Class
Liabilities/credits by 44%
vendor 26%
Line item detail of PO 44%
invoice 30%
44%
Status of POs
27%
Avoidance of missing 40%
bills and late pmts. 12%
Line item detail of 40%
non-PO invoice 13%
Discounts, rebates, 36%
and other terms 12%
Source: AberdeenGroup September 2008
45 • © AberdeenGroup 2009

46. P2P Rising
Best-in-Class: Fully Automated A/P Activities
Payment status tracking 64%
22%
55%
Electronic receipt of invoices
13%
Payment scheduling 55%
25%
56%
Electronic payment processing 16% Best-in-Class
44% All Others
PO matching
14%
E-documents for invoice approval 49%
19%
Duplicate invoice verification 40%
27%
Source: AberdeenGroup September 2008
46 • © AberdeenGroup 2009

47. P2P Rising
Best-in-Class Technology Usage
Best-in-Class All Others
82%
60%
55%
45% 44%
38% 40% 40%
30% 28%
22%
12%
Electronic Imaging and Supply chain Comprehensive Supplier Spend analysis
payment system workflow finance solutions A/P automation networks, XML, or solutions for
solutions (EIPP) EDI invoices
Source: AberdeenGroup September 2008
47 • © AberdeenGroup 2009

48. P2P Rising
Best in Class Characteristics (Strategies
for Success
Place a significant emphasis on gaining clear visibility
into A/P operations (process and data)
Leverage e-payables solutions to a significant
advantage
Strong collaborative ties with internal and external
stakeholders
Strong audit controls
48 • © AberdeenGroup 2009

49. Summary & Recommendations
© AberdeenGroup 2008

50. P2P Rising
P2P Will Matter MORE in the Future
Global CEO’s View : 1
Top Pressures… Top Areas for Innovation…
Revenue Products &
83% 64%
Growth Services
Cost
Reduction 64%
Operations 43%
Asset
45%
Utilization
Business
40% 40%
Risk Model
“
“ It is one of the things that keeps me awake at night – ensuring that
we have a source of supply at the right cost to be competitive.
Clay Jones, Chairman & CEO
Rockwell Collins
1 - Source: IBM Global CEO Study 2006
50 • © AberdeenGroup 2009

51. P2P Rising
The Big Picture
Innovator & Pioneer
Thomas Alva Edison
51 • © AberdeenGroup 2009

52. P2P Rising
70 years to “invent” the electric light bulb?
The first electric In 1882,
light was made Thomas Edison
in 1809 got it right.
52 • © AberdeenGroup 2009

53. P2P Rising
Edison’s Innovation: Network
Distribution
Efficient & Accessible
Many Participants
Multiple Uses/Types
Leveraged Infrastructure
53 • © AberdeenGroup 2009

54. P2P Rising
Procurement’s Light Bulb
Supplier
Analyze Source Contract Procure Pay Management
Supply Management
Source-to-Settle (aka P2P) Process
Automated
Data-Driven
Numerous Supplier Touch-Points
Linear
54 • © AberdeenGroup 2009

55. P2P Rising
Aberdeen Recommendations - Procurement
People (Internal & External)
Formalize your people management program
Establish competency models
Develop a career path planning program
Utilize strategies from other functions
Intensify efforts to collaborate with business and
functional stakeholders
Expand supplier enablement programs
55 • © AberdeenGroup 2009

56. P2P Rising
Aberdeen Recommendations - Procurement
Process
Champion the standardization of source-to-settle
processes across the enterprise
Work with finance to define how all enterprise-level
savings metrics are measured and tracked
Develop and track a spend management pipeline
Technology
Integrate Spend Analysis Solution with Sourcing Tools
and Processes
Support Accounts Payable investment in e-payables
solutions
56 • © AberdeenGroup 2009

57. P2P Rising
Aberdeen Recommendations: Accounts
Payable
Drive for enterprise-level visibility across A/P
operations
If the case for full A/P automation cannot be made,
start with the most labor-heavy tasks
Integrate e-payables solutions with transactional
systems.
Develop a comprehensive supplier enablement
strategy
Set goals to convert a significant percentage of
manual payments to electronic
57 • © AberdeenGroup 2009

58. P2P Rising
The Search for “CPO” - Results
Center for Prosthetics Orthotics (CPO.biz)
University of Tennessee - CIRCLE PARK ONLINE
CPO Science (cpo.com)
CPO Makita, CPO Bosch & MANY CPO-Tools Sites
Corn Products International (ticker:CPO) – MANY Sites
CPO Ltd (Imaging Products & Document Mgmt Services)
Wiki – Chief Petty Officer
CPO® certification courses… Certified Pool/Spa Operator
Wiki – Certified Pre-Owned – MANY other Car sites
Citizen Participation Organization (CPO) Program Washington
County, Oregon
CPO Community Properties of Ohio
Certified Paraoptometric Examination
58 • © AberdeenGroup 2009

59. P2P Rising
The Search for “CPO” - Results
The Correctional Peace Officers (CPO) Foundation
CPO Commerce, Inc. of www.cpooutlets.com “fame”
CPO is the third largest food pantry in North Carolina
Contingency Planners of OHIO (CPO)
Chief People Officer
NOAA's Climate Program Office (CPO)
CPO of Myrtle Beach is a promotional company
“Welcome to the Goatlocker” (CPO History and Traditions)
Charged Particle Optics Software
“What does CPO Stand for?”
48 Results including Czech Philharmonic Orchestra & Chief
Petting Officer, Copiapo Chile airport (“CPO”)
59 • © AberdeenGroup 2009

60. P2P Rising
Aberdeen Recommendations
Visit Google.com
Search for CPO
Advance until you see “CPO’s Agenda” or CPO
Rising”
Repeat every day for 3 months
Make all staffers perform this twice per day for 3
months
CPO Rising……. in Search Results!
60 • © AberdeenGroup 2009

61. P2P Rising
Q&A (and Contact Info)
Andrew Bartolini, Vice President & Group Director
Global Supply Management,
AberdeenGroup
Andrew.Bartolini@aberdeen.com
617.854.5310
For More Research Please Visit:
www.aberdeen.com/channel/procs.asp
61 • © AberdeenGroup 2009