14-15 September 2016

Lisbon, Portugal

#DeloitteSharedServices

Deloitte Shared Services, GBS & BPO Conference

Breakout 8: J&J Continuous improvement within P2P: How J&J used continuous improvement in the P2P process to improve effectiveness and grow the organisation

David Mansfield, Johnson & Johnson

Agenda

Introduction to Johnson & Johnson

Procure to Pay status in J&J

A P2P Powerhouse?

• P2P design objectives

• EMEA specific challenges

Automation of the core AP process

E-Invoicing

• Why? What? How? Status? Future?

Closing remarks

Our Company

Caring for the world, one person at a time ... inspires and unites the people of Johnson & Johnson.

We embrace research and science - bringing innovative ideas, products and services to advance the health and well-being of people.

Employees of the Johnson & Johnson Family of Companies work with partners in health care to touch the lives of over a billion people every day, throughout the world.

Our Family of Companies comprises:

The world’s premier consumer health company

The world’s largest and most diverse medical devices and diagnostics company

The world’s fourth-largest biologics company

And the world’s eighth-largest pharmaceuticals company

We have more than 250 operating companies in 60 countries employing approximately 129,000 people

Worldwide headquarters: New Brunswick, New Jersey, USA

Financial results – 2015

Sales: $70 bn (Medical Devices 36%, Pharm 44%, Consumer 20%)

Visit the company website: for further information www.jnj.com

Johnson & Johnson Background

EMEA Deployment of Standard P2P Platform

Note: North America P2P Invoices are processed by GFS EMEA AP Team

ORIGINAL SCOPE:

11 countries – 89 entities – 3 currencies - 7 languages

CURRENTLY LIVE:

35 countries – 147 MRCs – paid documents in 42 currencies to 138 countries

worldwide – provide service in 16 languages

Country Pharm Cons MD&D

Ori

gin

al Scope

Austria

Belgium

France

Germany

Ireland

Italy

Netherlands

Portugal

Spain

Switzerland

UK

Exte

nded S

cope

Nordics

Baltics

CZ, SK

Poland

Russia

UAE/ME

Saudi Arabia

Greece

Turkey

Hungary

Romania

Bulgaria

Slovenia

Croatia

Making P2P a Powerhouse

Not seeing it as “a transactional factory” but as a service adding value to the corporation

1. Bring value to EVERY party involved in P2P

2. Increase automation levels to drive further cost reduction

3. Drive further Cash Discounts benefits

4. Expand services to upstream process steps & services

Critical to Quality – Know what each party wants

Stakeholder Outcome KPI

Business SpeedSimplicityValue

On time deliveryEase of use / user satisfactionRight price

Supplier SpeedSimplicity

Paid On TimeEase of doing business with J&J / satisfaction

Procurement ComplianceValue generation

Compliance to contractsLeveraging Preferred SuppliersSavings

Finance Accurate Books Correct GL AccountCorrect VAT treatmentTimely receipting of goods/services

Shared Services •Service Delivery•Cost to Serve

Cycle times within SLAPaid On TimeProductivity increaseCost per transaction

Treasury •Cash Mgt …

Driving Automation: Make it Part of the Design

P2P Process Design Objectives for EMEA

Automated data input (scanning, e-invoicing)

Automated 3-way match (PO, GR, Invoice)

Automated workflow for exception handling

Supplier & employee self-service capabilities

Automated electronic payment processing

TOUCHLESSINVOICE

PROCESSING& PAYMENT

Core AP Process

Upload to SAPMatching Process/

Tolerances/Duplicate

Return Process/ Credit Note

Mismatch(blocked invoice)

Payment

Receiving

PO Change/ Cancel

Invoice Log (on AP Web Portals)

Or

Or

Or

Data Validation & Missing PO

Or

After the Fact/Non-

Compliant POs

Affiliate (Ariba/ Proc. systems)

JnJ GBS (SAP)

eInvoice

Paper invoice

Focus

Exception Multiple bank accounts

Exception PO Closed

Exception others

Exception Credit Notes

Validation of the Invoicex% of paper and y% of electronic pass

automatically

Matching Invoice to PO Linesa% of paper and b% of electronic pass automatically

Touchless processing = N%

e-Invoicing Approach

OB10 [now Tungsten] selected as key partner back in 2006

Current e-Invoicing Solutions offered:

1. Fully integrated solution [OB10]

Supplier provides invoice data and submits these as a file to OB10, who processes-signs-delivers to J&J

Preferred method for suppliers with HIGH volumes of invoices

2. J&J Supplier Portal

Supplier enters J&J PO number and this gets “converted / mirrored” into a draft invoice

Supplier completes missing data and submits invoice

Preferred method for suppliers with SMALL / MEDIUM invoice volumes

What have we achieved so far?

2008-2009: focus on high volume suppliers

• Using OB10’s fully integrated solution

2010-2011: focus on deployment of e-Invoicing

• Continue with high-volume suppliers

• Interoperability – where useful

• Rejecting paper invoices from suppliers live on e-Invoicing

2012-13: focus on J&J portal

• Free of charge solution reduces resistance from suppliers

• Dynamic Discounting Phase 1

2014:

• Enhance J&J portal: allow attachments, Invoice line description, PO Line split

2015-16 Focus Areas

• Enable Dynamic Discounting for countries where Credit Note is required

• Age invoices based on Date of Receipt where “e” is allowed

Many new affiliates joining the P2P platform

AP productivity Gains

From the 2006 go-live, the productivity increased by +270%:

- 40% due to people efficiency - 230% due to increased automation

Productivity increases beyond 2011 are due

- 90% to increasing automation [mostly driven by e-Invoicing]- 10% to people efficiency

Key Success Factors

Ensure regulatory compliance of your solution and deployment approach

Mandate where possible and desired

‒ Applied “negative confirmation”

‒ “Invited” critical suppliers to use e-Invoicing

Proper Change Management

‒ Properly inform all parties involved and provide guidance

Governance

‒ Accountability at right place

‒ Target setting create internal competition

Persistence – it’s a journey not a project

Increasing Cash Discounts

Cash Discounts upfront agreed in Payment Terms

• E-invoicing drove further automation, which resulted in more Cash Discounts taken

[+45% over 3 years]

Dynamic Discounting

• In house solution

• Very successful in US

• Modest uptake in EMEA

Initial offering limited to 7 countries – no campaign

Not a part of the business culture [yet]

• Complexity in EMEA where is most countries in this case a Credit Note is required to adjust the taxable basis and VAT

Payback of development cost <1 year

Expand the Service Portfolio Upstream

Tactical Buying

Analytics & Reporting

Tail Spend Management

Contracting Center of Excellence

Move into the Procurement space servicing the integrated end-to-end Source to Settle process

−R2P

−Sourcing

−Contracting

Making P2P a Powerhouse - Conclusions

Make P2P a service adding value to the corporation

1.Increase automation levels to drive further cost reduction

• Extend Automation routines hand-in-hand with e-Invoicing focus

2.Bring value to EVERY party involved in Req2Pay

• Understand their CTQs and deliver against them

• Invest in Self Service tools

3.Drive further Cash Discounts benefits

• Capture upfront agreed Cash Discounts in Payment Terms

• Additionally with Dynamic Discounting

4.Expand services to upstream process steps & services

• Integrated Source to Settle service

QUESTIONS

DMANSFELD@ITS.JNJ.COM

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