The document outlines the spend management strategy of The Hartford, focusing on implementing a seamless source-to-pay process using Ariba, aimed at increasing transparency and compliance while reducing unnecessary expenses. Key features include consolidated purchase systems, contract management, and performance monitoring of suppliers, alongside a transformation plan that covers implementation timelines and metrics for success. The overarching goal is to achieve a streamlined and efficient procurement experience by consolidating processes and ensuring all spending is authorized and documented properly.

1. Blueprint for Rapid and Sustainable Spend Management SuccessMichael Knipper Senior Vice President

2. The Hartford200 year old multi line financial Services company26,000 employees primarily based domestically$1.4 Billion in sourceable spend and increasingEnterprise services – Real Estate, Procurement/Negotiation, Commodity Management and Operations

3. Overview – Our JourneyVisionSelectionImplementationASIA – All Spend in Ariba

4. VisionProcurement will deliver measurable value to the company. Value is defined as:Transparency of all spend paid through Accounts PayableEnsure all spend is approved prior to purchaseEnsure all invoices in managed categories are matched to a purchase order or contractDefined sourcing process for all managed categoriesConsistent categorization of spendSpend reporting that provides data to guide decisions and actionsReduce expense and be able to prove it!Key EnablersSingle entry point for all purchasesOnly one system generates an okay to pay file

5. Source to Pay ProcessSOURCINGCONTRACTINGREQUISITIONING AND PURCHASE ORDERSRECEIVE/ INVOICINGPAYREPORTINGVENDOR MANAGEMENTProcurement works with stakeholders to select suppliers

6. Employee needs are fulfilled after approval

7. Procurement with legal establishes T’s and C’s

8. Goods & Services received. Invoice reconciled, approved

9. Most cost effective method is used to Pay invoice

10. Monitor compliance to process

11. Monitor Supplier performancePurposeSpend Analysis

12. Volumes

13. Locations and business units

14. Suppliers

15. Pricing

16. Specifications

17. Market analysis

18. Competitive situation

19. Suppliers

20. Market segmentation

21. Internal needs analysis

22. Supplier search

23. RFI/RFP Development and Issuance

24. Reverse Auctions

25. Negotiations

26. Catalogs are established for contracted vendors

27. Release contracts are used where applicable

28. NCPR used where no catalog or contract exists

29. Orders are routed electronically to suppliers after full internal approval

30. All requirements and service levels are included in contract

31. Risk assessment and mitigation

32. Certifications, proof of insurance, information protection

33. Establish pricing terms for contract compliance during invoicing

34. Goods are centrally received or at desktop

35. Supplier submits electronic invoice

36. Requester approves invoice to validate receipt where receiving is not turned on

37. Invoices have to reconcile against approved PO or contract

38. Invoice exceptions created to flag non compliant behavior

39. Fully approved invoices are paid

40. Use ghost cards and P cards where possible

41. Optimize payment terms to get discounts for early payment (Through managing payment terms in contracts and PO’s)

42. Ensure source to pay process is used

43. Identify contracted vs. consumed spend for business units to manage reserves and budgets

44. Monitor exceptions and develop policy and new processes

45. Ensure spend is appropriately classified by commodity category

46. Identify suppliers that require management based on spend and criticality

47. Develop processes and metrics to continuously benchmark supplier performance

48. Develop supplier specific surveys and reporting

49. Monitor market conditions to maximize value from suppliersTasksIntegrated Procure to Pay system

50. Contract Authoring and Contract compliance

51. Integrated Procure to pay system

52. Peoplesoft AP

53. P cards

54. Sourcing, Spend Visibility, AHP

55. Spend Visibility

56. Reporting

57. Supplier performance managementTools# of suppliers with negotiated agreements

58. # of suppliers per spend category

59. Sourcing cycle time

60. % non competed sourcing events

61. Savings from sourcing

62. % spend on catalog orders

63. # transactions through catalog orders

64. # of orders manually transmitted

65. PO processing cost per PO

66. Requisition to order cycle time

67. # of contracts negotiated per year per quarter per month

68. # of contracts touching legal

69. Contract negotiations and agreement cycle times

70. # of invoices per year

71. % of paperless invoices

72. % of invoices having exceptions

73. Average cost per invoice

74. % of goods returned\

75. Cycle times for invoices

76. # of finance FTE’s in Invoice process

77. % of invoices paid with check or Wire transfer

78. # of invoices paid within 30 days

79. Discounts obtained through early pay

80. Dollars paid through P cards

81. % Compliant spend

82. BU’s with non compliant spend

83. % of spend classified

84. # of suppliers managed through a comprehensive process

85. Supplier performance report card

86. Cost

87. Delivery

88. Service levels

89. Quality

90. ValueKey Metrics

91. Selection

92. Selection ProcessRFP delivered to six providersKey requirementsOn demand toolComplete tool set to support Source to PayWhy we implemented a new toolInconsistent approvals prior to purchaseInconsistent authorization to spend levelsInconsistent and in some cases no existent invoice to purchase order contract matchingAntiquated contract repositoryNo sourcing toolHighly customized tool, difficult and expensive to maintain

93. Implementation

94. ImplementationStrategic Intent – Implement entire source to pay tool set by May 15th 2011 (six months). Go live success defined as including:All spend commoditiesAll historical contracts loadedAll users trained Consistent company wide end to end processContract signed September 2009Implementation started mid-November 2009Live May 10th

95. Implementation – Guiding PrinciplesAriba will be the single place to initiate all purchases and all purchases must be made through the approved processes/ methods within the tool

96. All invoice payments will be routed through Ariba and paid by approved methodology (PCard, ACH, check). Predetermined exceptions to the use of Ariba will be clearly defined (i.e., Legal fees, agent commissions, claim systems payments).

97. PCards will be used for payment whenever possible to maximize the savings opportunity

98. Ninety percent of all requisitioned items will be available in Ariba catalogues and the catalogue “punch-out model” with HIG controlled pricing being the preferred model

99. Commodity approvers will be defined and required for the following commodities: IT hardware and software, meetings, RE, Marketing Services, print, and others to be clearly defined

100. All procurement contracts will be in Ariba

101. The receiving function in Ariba will not be utilized. Invoices for office supplies will be routed through auto requisition match/ auto pay. All other invoices will be auto requisition or contract matched and routed to the initial requistioner to validate receipt/ acceptance

102. There will be one consistent enterprise wide approval process needed to acquire and pay for goods and services

103. Approvals will be obtained only once -at the requisition or project approval stage- whenever possible

104. We will minimize (no more than 5) the number of approvers requiredImplementation – Big Bang ApproachEntire Source to Pay transformation involving 5 module implementationProcure to Pay Day 1 scopeConfigured Requisitioning/ Contract Compliance/ Receiving/ Invoicing/ P cardsComplete redesign of approval processRe-approval of all contracts (over 20,000)40 catalogsEnabled 1000 SuppliersContracts20,000 legacy contracts converted500+ contracts enabled for complianceSpend Visibility$2 Billion of Annual Spend classifiedReporting TransformationTwo year history Sourcing and SPM implemented for Process TransformationCommunication and training to all employees

105. Implementation – Change Management ProcessTurn off the old systemTurn on the new systemHope to survive

106. Implementation – What We LearnedVanilla is not a dirty wordOther than interfaces, no IT concernsForces an enterprise view with consistent processRemoves temptation to “over customize”We were in worse shape than we thoughtContracts vs. InvoicesOpen purchase ordersBilling errorsSignificant volume of spend no compliant with policyInconsistent coding

107. Implementation – Current StateAverages 4,500 purchase orders per month, 80% of the transactions are through catalogsPost conversion, we are averaging 200 new contracts or amendments per monthAverage 7,000 monthly invoices, 71% electronic72.5% of “okay to pay” is from ARIBA452 suppliers fully enabledUser experience far better than expected

108. ASIA – Program OverviewSonny Mehta – 860.547.2037

109. ASIA – Program CharterSTRATEGIC INTENTBy year-end 2011, all spend being paid by Accounts Payable will follow approved Source-to-Pay (S2P) processesOBJECTIVESEvaluate and existing S2P practices

110. Baseline the S2P cycle through the development and use of metrics

111. Establish, document and implement approved S2P policies + workflows

112. Identify categories of spend to follow appropriate sourcing practices

113. Determine the path forward to process all invoices through Ariba

114. Operate one system to create an “OK to Pay” file that feeds PeopleSoft Accounts Payable

115. By eliminating direct input to PeopleSoft

116. Note: Payments for claims, payroll, agent incentive compensation and trade settlement are out of scope

117. Clarify roles and scope for contracting

118. Optimize use of enabling technologies (operating platforms) across the S2P cycle

119. Implement capability to handle Sales + Use Tax requirementsASIA – Program FrameworkIdentify(ASIA Priorities) Assess (S2P Cycle) Solve (S2P Solutions) Implement (Deliver End-state) Operate (S2P Value)Data Analysis

120. Spend Category Segmentation

121. Spend Levels

122. Strategic Value

123. Sourceable versus Non-Sourceable

124. Key Commodities

125. Key Associated Suppliers

126. Assess S2P Cycle (across spend categories)

127. Source

128. Contract

129. Requisition + PO

130. Receive/Invoice

131. Pay

132. Report

133. Vendor Management

134. Define Current + Future States

135. Role Clarity

136. Baseline Metrics

137. Evaluate Policies

138. Workflow Analysis

139. Identify Opportunities + Gaps

140. Deliver on Actions

141. Test + Implement Requirements

142. Business Readiness

143. S2P Methods + Processes + Technologies

144. Training

145. Supplier Enablement

146. Operate End-state

147. Business Metrics

148. Effectiveness

149. Efficiency

150. Policy Compliance

151. Continuous Improvement

152. Define Requirements

153. Design End-state Solutions

154. Streamlined

155. Best Practices

156. Maturity Model

157. Identify What Changes

158. Define Actions

159. Sequence

160. Timing

161. Accountable Owners

162. Critical Paths

163. Scope Development

164. Prioritized Targets and workplan for ASIA ProgramProgram Management(Planning, Scope + Risk Mgt, Roles + Responsibilities, Workstreams, Milestones, Deliverables, Communications, Dashboard)Phase 1 = PeopleSoft Input Phase 2 = Direct Payment Systems Phase 3 = S2P Optimization

165. ASIA-Spend Category Segmentation – PeopleSoft Direct Input (Illustrative)Identify(ASIA Priorities)Strategic SpendCritical SpendHDistributionChannelsBrokersTPA’sShows differentiated nature of spending

166. Strategic

167. Leverage

168. Critical

169. Low-Critical

170. Forms the basis of priorities + scope

171. Drives appropriate S2P solution (sizing)BankingServicesDataSvcLegalConsultingStrategic ValueIT OutsourcingProjectsConf +Mtg’sBoardAssociationsHealthNetworksDirectorsFeePostageOutsideTravelCivicDonationsEx-GratiaFieldGivingTransportationState InsDeptsSub-scriptionsPrintingGiftMatchingLLow-Critical SpendLeverage SpendLHSpend

172. Assess(S2P Cycle)ASIA – Assessing the S2P CycleSourceWhat sourcing methods do we apply today? Under what circumstances?

173. What is our process capability? What opportunities exist to rationalize suppliers? ContractWhat’s our contracting strategy? Who negotiates? What contract methods should we use?

174. What is our process capability? How do we handle sales/use taxes?Requisition/POWhat commodities should be approved prior to ordering? What’s our policy?

175. How much “Maverick” spending is occurring? Where? Receive/ InvoiceWhat categories of spend are subject to receiving? How do we validate?

176. Are processes documented and policies published and understood by the enterprise?PayWhat payment/settlement method do we use? Special handling? What circumstances?

177. How do we handle sales and use tax requirements? What spend requires a PO/Contract? What are the exceptions? ReportWhat business intelligence is used to monitor, manage and enhance the S2P cycle?

178. How do we measure value to the enterprise? VendorMgtHow do we evaluate vendor relationships? What’s our process? What’s the result?

179. How do we manage our suppliers? Against what SLA requirements?ASIA – S2P Process Paths (Illustrative)ChannelProcessMethodAssess(S2P Cycle)Understanding the applicable S2P processes and methods:

180. Enables assessment of current practices

181. Ensures consistent application of appropriate practices across the S2P cycleASIA Team Guiding Principles + TenetsChange Agents- Question the status quo. Nothing should be sacred or immune from change. Don’t pave the cow-pathsTransformation- Simplify processes, clarify roles, measure valueExternally Focused- Take a customer-centric view when developing solutionsTransparency - There are no hidden agendas. The goal is the agenda.Knowledge Exchange- Communicate early and oftenTeam Effectiveness- Collaborate, Collaborate, CollaborateExpediency - Act with urgency

182. What’s Next..Improved vendor management processIncrease sourcing activities, including auctionsUtilize supplier portal for selling our productsSolve the “project problem”