Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Exceptions are inevitable. But does your struggle against them have to be?

97 views

Published on

Struggling with resolving exceptions such as missing or incorrect purchase receipts, inaccurate POs, inconsistent invoice details or misrouted invoices?

In this session, Simplot share their strategy for avoiding a high cost of re-work in handling exceptions, covering how to:

- Prevent exceptions from re-occuring in the future
- Implement key workflow technologies and hear Simplot’s key results from this combined strategy

Published in: Education
  • Be the first to comment

  • Be the first to like this

Exceptions are inevitable. But does your struggle against them have to be?

  1. 1. sharedserviceslink.com’s Annual Procure-to-Pay Leaders MeetingExceptions are inevitable. But does your struggle against them have to be? May 25, 2012 Kathleen Hamm, Accounts Payable Manager J. R. Simplot Company
  2. 2. Agenda Company overview Procure-to-pay design Using the Six Sigma Approach • DMAIC Results Summary Bringing Earth’s Resources to Life
  3. 3. J R Simplot Overview Privately held Industries Revenues = $5 billion • Food processing • Mining 10,000 employees • Fertilizer • 6,500 NA employees • Farming Global presence • Cattle feeding • US (33 states) • Industrial products • Australia • Feed ingredients • China • Silica sand • Canada • Turf and horticulture • Japan • Retail farming supplies and services • Korea • Mexico Bringing Earth’s resources to life
  4. 4. Procure-to-Pay DesignProcurement structure Accounts payable structureDecentralized structure Centralized AP process170 buyers / receivers 19 AP employees150,000 purchase orders / 480,000 line items Process 600,000 invoices annually • 36% PO based (216,000)US & Canadian operations • 44% non-PO (4 business groups) • 20% Interfaced • 3 mining facilities US & Canadian operations • 14 manufacturing / processing • Agribusiness group 45% plants • Food group 43% • 2 import & distribution terminals • Land & livestock group 5% • 95 retail stores • Corporate group 7% • 2 feedlots • Joint ventures / small businesses • 30 farms Multiple invoice types • IT equipment / services Multiple systems Multiple purchasing types Multiple systems
  5. 5. Transforming exception managementUtilizing the Six-Sigma approach Improve Measure Take actions to improveNew manager joined Measure processes and meetdisbursement team performance and defined performance manage accordingly. expectations. April 2009 November 2009 April 2011 May 2012 Janauary 2010 June 2011 Dig into the details to Follow up, continuous A new direction for AP identify improvement team to assure we are measurement and opportunities. change management. working hard on the right things. Analyze Analyze Control Define
  6. 6. Transforming exception management Define – what are exceptions?Discrepancy between PO Receipt and Vendor Invoice on 3-way PO Match.An invoice that does not make it through the AP process to pay and gets rejected to a queue requiring human intervention.Simplot exception reasons • No receiver • Price discrepancy • Quantity discrepancy • No PO provided on invoice • Invalid container ID/ticket • Wrong PO no. • Items not on PO • Freight unreconciled • Other • Miscellaneous
  7. 7. Transforming Exception Management Define –Business ImpactTime & Money • Manual processing & research (45 days on average to resolve exception) • Communicating exception issues (30 seconds per exception) • Additional processing time (5 working days in processing queue)Decreased Efficiencies • Impacts service level commitments • Causes payment delays • Increases support center callsFrustrations • Vendors • Internal customers • AP processors / business partnersPerception of poor service delivery • Accounts payable / shared services reputation
  8. 8. Transforming exception managementMeasure – the good, the bad, and the ugly The good The bad The uglyException processing activity Lack of exception control Exception activity on the rise250,000 PO invoices processed by fiscal year 25% 22% 20%200,000 19% 50,887 20% 38,608150,000 15% 32,879100,000 10% 50,000 5% 0 0% FY2009 FY2010 FY2011 Exceptions No Exceptions Exception Percentage of Total Invoices
  9. 9. Transforming exception managementMeasure – the cost ….to get buy-in Avg Avg Hours / # Hrs / Salary Who Month Months # People Year / Hour Total Cost Field Staff 4 12 150 7,200 $30.29 $218,088 Accounting 15 12 20 3,600 $36.06 $129,816 AP Processing 15 12 12 2,160 $24.52 $52,963 AP Exception Processors 170 12 1.5 3,060 $26.52 $81,151 Estimated Totals 204 183.5 16,020 $482,018
  10. 10. Transforming Exception management exception ManagementAnalyze – digging deeper – breaking it up! Exceptions by Exceptions by reasons operating group 0%5% 8% 6%4% 17% 4% 51% 12% 26% 67%n=4,012 n=4,012 No Receipt Price Discrepancy Corporate Agribusiness No Container ID Freight Unreconciled L&L Food Group SGS Items not on PO MiscellaneousIdentified our greatest opportunities for improvement.
  11. 11. Transforming exception managementAnalyze – ask the tough questions? What – specifically causes the exceptions? Who –specifically is causing exceptions? Where – are our “biggest” pain points? Why –do we continue to have exceptions? How – can we fix the root problems and reduce exceptions? Evaluate / Communicate / Educate
  12. 12. Transforming exception managementImprove - evaluate Built a dedicated team  Worked with business to increase • Repurposed our existing resources knowledge of complete procure- to-pay process o Shifted resolution responsibilities • Getting to Know You Assembly • Redefined exception processing • Shadowing Programs o Shifted focus from managing to resolving exceptions  Expand to outside locations • Short term pain is worth the long  Created subcommittees for a more term gains defined focus Customized technology based on need • JRS Wholesale-to-JRS SGS Activity • Created PO classifications to • Six Sigma Project - SGS Exceptions manage specific invoice types o Railcar o JOB/CIP
  13. 13. Transforming Exception management exception Management Improve – communicate & educateDeveloped alliances with business partners • Took advantage of opportunities to enhance AP presence. o Participated in sales/department meetings (3) o Attended Location visits (6) o Encouraged visits from business (10) • Listened to our customers o Understand business and challenges o Offer choices that support policies & procedures • Continuously assess training needs • Continuously provide training opportunities
  14. 14. Transforming exception managementControl Make sure the improvement efforts are working • Continue to share results +/- • Follow up and follow through • Monitor and report • Seek improvement opportunities • Don’t give up….
  15. 15. Transforming exception management Where are we today?Exception Activity4/30/12 0% Successes: 17% 2% • Increased PO matched invoiced for all operating groups. 12% • Decreased average days to complete PO 69% exceptions (from 50 days (June 2011) to 17.84 days on average (May 2012) • Decreased number of exceptions overall from n=2,015 4,012 (June 2011) to 2,015 (May 1012) • Maintained overall match percentage rate Corporate Agribusiness L&L Food Group Retail with “new” business sectors and acquisitions 50Still room for improvement…………………… Average Calendar Days to Complete PO Exceptions 40• Overall PO match rate remains stagnant 30at 78% - Goal of 90% by Dec 2012 20• Retail exception rate has increased 10• Culture change – be patient 0 Corp AB L&L Food SGS AVG• Continue with improvement efforts, Corp AB L&L Food SGS AVGsubcommittees, education process Accounts Payable 3.7 3.4 3.3 4.1 5.6 4.0 Locations 6.2 13 5 11.9 33 13.8 Total 9.9 16.4 8.3 16 38.6 17.84
  16. 16. Summary Define Exceptions Improve• Caused by human interactions • Evaluate• Impact our disbursement efficiencies • Communicate• Affect disbursement performance • Educate• Influence service perceptions • BE PATIENT – IT MAY NOT• PREVENTABLE HAPPEN OVERNIGHT! Measure Performance• 22% of invoices to exception Control• $500,000 in additional costs• Ranked in 4th quartile for % of exceptions • Consistently review, measure and• ROOM FOR IMPROVMENT adjust to assure improvement efforts are working Analyze• Break up into categories?• What’s the data telling us – are there specific areas of concern?• Continue to ask the questions (Who, What, Where, Why & How)• FOCUS ON WHAT’S IN OUR CONTROL?

×