No PO-No Problem! Strategies for Ensuring Contract Compliance

No PO, No Problem! Strategies for Ensuring
Contract Compliance
Chris Rauen, Solutions Marketing, SAP Ariba
Andrew Bartolini, Chief Research Officer, Ardent Partners
Eduardo Sanchez, Strategic Sourcing, ADT Security Services
Jeff Phillips, Procure-to-Pay Project Manager, UPS Global Business Services / March 16, 2016
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About Ardent Partners
Andrew Bartolini, Chief Research Officer
Analyst firm focused on supply management
Research, news, & analysis for AP and
finance professionals

The evolution of Accounts Payable
Back Office
Point of
Collaboration
True
Intelligence
Hub

Evolving function, evolving pressures
40% Enhance visibility and analytics
37% Reduce invoice-processing costs
31% Improve procurement collaboration
30% Improve supplier collaboration

Core AP capabilities: best-in-class vs. all others

Performance benchmarks: best-in-class vs. all others
Metrics Best-in-
Class
All Others
Cost to process a single invoice (all-inclusive cost) $2.94 $15.96
Time to process a single invoice 3.6 days 16.6 days
Invoice exception rate 9.8% 19.1%
Percentage of invoices processed “straight-through” 54.1% 17.3%
Percentage of suppliers that submit invoices
electronically
44.0% 12.3%
Percentage of invoices linked to a Purchase Order
(PO)
73.1% 54.5%

What is no PO, no pay?
Financial management concept
All transactions must be attached to a purchase order
Invoices without a PO number get sent back to the supplier

Situations with a no-PO invoice
Recurring services
Utilities
One-off purchases

Matching a non-PO invoice
Contract
Goods receipt note
Statement of Work

Contract management (opportunities to drive value)
Collaboration
Compliance
Supplier performance
Mitigate risk
Realize more savings (improve results)

Poor contract management is quantifiable
The Real Cost of Non-Compliance
To the uninitiated, non-compliant spend may be a low
priority; but, in a survey of more than 250 enterprises,
Ardent Partners research was able to determine that
every dollar of non-compliant spend can have an
additional cost of between 6% and 18%.

Strategies for success
• Manage the source-to-settle process more holistically
• Increase collaboration and linkage between procurement and accounts payable
• Use a contract repository to capture and share key contract info
• Develop a process to clearly communicate new contracts and preferred suppliers
• Monitor contract compliance / regularly report non-compliance

ADT at a glance
For more than a century, ADT has been one of the
most trusted, well-known brands in the industry.
Today, ADT serves more than six million customers,
making it the largest company of its kind in both the
U.S. and Canada.
ADT’s broad and innovative set of products and
services — from interactive home and business
solutions to home health services — exist to meet a
range of customer needs for today’s active and
increasingly mobile lifestyles.

Business process optimization
Lean - Six Sigma legacy
Strong focus in process optimization, efficiency and cost controls
 SAC (Subscriber Acquisition Cost)
 CTS (Cost to Serve)
Leverage existing infrastructure
Ariba Procure-to-Pay (deployed in 2014)
Oracle for financials/supply chain management

Business challenge
Facility management services controlled by local branches
Hundreds of service providers for facilities services
 Janitorial, Coffee / Vending, Pest Control, HVAC, etc.
Non-PO Invoicing
 Invoice review and approval at the local branch
 Limited visibility into the details of the activity
– Unit prices and details of services not captured in any system

Business goals
Centralize negotiation and management of facility services agreements
Consolidate supplier base
Improve contract compliance
Standardize services
Reduce overall costs by 10%-15%

Two-phased approach
Phase 1 – Capture current activity within the P2P environment
Mandate issued to all branches to generate requisitions for all facility services
Phase 2 – Conduct sourcing events for key facility services
Move to national or regional providers
Standardize levels of service
Simplify transactional process - Ariba Contract Invoice functionality

Oracle
S
U
P
P
L
I
E
R
INTEGRATION
TOOLKIT
ARIBA P2P
Remittance Remittance
Remittance
ARIBA
NETWORK
S
U
P
P
L
I
E
R
B
U
Y
E
R
Invoice StatusOK 2 Pay export
Upon submission, Invoice
created on AN
Invoice Status
(Approved OR Rejected)
Invoice
Reconciliation
Set up Contracts
Master
Data
Account Coding
and Approval
Invoice
1 2
Vendor punch-in to Invoice
vs. contract
…and pushed to P2P for
reconciliation
3
4
56
Solution footprint: Ariba Procure-to-Pay invoice vs. contract

Results with SAP Ariba
Phase 1 - Improved visibility into spend details
Line item detail captured within P2P environment
Enabled team to negotiate better contracts with standardized service levels
Consolidation of supply base
Phase 2 – Streamlined invoicing process
Invoice validation against contract with minimal effort from branch managers

Next steps
Expand to new spend categories
IT – Hardware and Software maintenance agreements
Other recurring services
Expand supplier engagement
Require all suppliers to join Ariba Network
 Eliminate all paper invoices

About UPS
Founded in 1907
Corporate Headquarters: Atlanta, GA
Primary Business Units: Small Package, Supply Chain Solutions and UPS Freight
2014 Delivery Volume: 4.6 Billion packages/documents
2014 Total Revenue: $58.2 Billion
Employees: 435,000
2,915 Operating Facilities Worldwide

Challenges
Manual processing of larger volume of paper and invoices
No enterprise contract repository
High number of invoice errors - exceptions
Long invoice processing cycle

Solution approach
Invoice against Contract (SAP Ariba)
Pricing Terms
Catalogs
Approval Workflow
AP Financial Review
Imports to Oracle R12.1.3 as non-matched invoice (ERP)
Final validation of accounting rules
Posting for payment
Invoice Status and Payment Proposals (SAP Ariba)

Results
Metric % Change (2009 to 2015)
Invoice Volume 6.4%
Validated e-Invoice 28.0%
Invoice Exception Volume - 67.9%
Manual Invoices - 37.6%
AP Staff - 19.2%

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No PO-No Problem! Strategies for Ensuring Contract Compliance

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