tradeshift, hackett group & sharedserviceslink - p2p webinar

Presenting your speakers

Susie WestFounder and CEO

sharedserviceslink

Chris Jablonski

Director of Content & Communications

Tradeshift

Amy FongPurchase-To-Pay Program

Leader and Senior Procurement AdvisorThe Hackett Group

Questions

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Agenda

•Context•Introduction to Tradeshift and The Hackett Group•Best practices and metrics for next generation P2P•Questions

Context

• The value of a high performing P2P department

• Lower barriers to entry are changing the use of P2P technology

• Understanding what top performance looks like

Poll question

• Do you invoice electronically?

- Yes we have e-invoicing and are happy with our program

- We have e-invoicing but are looking to improve or expand

- We are looking to roll out e-invoicing in the next 18 months

- We use scanning / OCR and email PDFs, but not e-invoicing

- We are highly manual

All Your Suppliers. All in One Place.Streamline your supplier interactions with a platform built for business-to-business collaboration.

Vishal Patel

[email protected] all set

Tradeshift is a supplier collaboration platform that connects buyers, suppliers, and all their processes in one global network.

We help businesses transform the way they work with suppliers today – and adapt to whatever the future brings.

All Your SuppliersOnboard fast & collaborate in

real time with your entire network.

Powerful PlatformRespond to your growing

business needs with apps on our flexible, open platform.

Direct + IndirectManage more of your spend

(including services) than ever before.

May 19th, 2015

Amy FongP2P Program Leader

Best practices and metrics for next generation P2P

Sponsored By

11© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Agenda

Hackett Group Introduction

Top Performance Defined

Key Capability Enablers

Summary


The Hackett Group – IntroductionLifecycle support bringing intellectual capital and seasoned practitioners to yield sustainable benefits We are the global leader in operations

improvement strategies, implementation know-how, and G&A agility

We address both efficiency and effectiveness improvements to enable strategic business objectives

Our insights are fact based, from over 7,500 performance improvement consulting engagements

Our Best Practices Intelligence Center™ is a significant differentiator and enabler. It contains:– 20,000+ performance metrics updated annually– 1,500+ best practices across 95 business processes– 1,000+ best practice-based process maps,

requirements and configuration guides– 1,000+ case studies, implementation examples and

research

We deliver results through a global team of senior practitioners using a consistent methodology and best practice-based toolset

Hackett Value Grid™

We help companies establish and implement

business performance improvements.


Enabling World-Class: Hackett’s Solution PortfolioBenchmarking, Advisory, Business Transformation

Membership AdvisoryInsight into World-Class Performance

BenchmarkingAssess World-Class Performance

Business Transformation ConsultingTransforms Performance

Deliverables Peer & world-class comparison

performance metrics Detailed analysis Stakeholder survey Executive presentation

Benefits Objective comparison to peer

group and world-class performers Quantify performance gaps Uncover hidden costs Prioritization of improvement

initiatives

Deliverables Strategic direction Detailed business case Initiative plans & detailed

designs Implementation of best practices

Benefits Reduced cost Working capital optimization Enhanced service delivery Business insight Sustainable benefits Speed of solution delivery Merger integration Risk mitigation

Deliverables Best practice research Advisor access Best Practice Intelligence Center Peer interaction World-Class Progress Report

Benefits Identify the strategies and

practices employed by Leaders Validation of current initiatives Determining what’s possible

(World-Class Performance Metrics)

Process implementation support Continuous best practice

adoption


Agenda




Summary


The Purchase to Pay Process is often under appreciated as a source of business value by both Finance and Procurement

Hackett Purchase to Pay Value Grid™Example of Effectiveness Drivers First Pass Match Rate On Time Payment Rate Level of Spend Visibility Streamlined Transaction

Strategy Level of Centralization Training Investment Compliance to Preferred

Suppliers Guided Buying Effectiveness Supply Base Consolidation

Example of Efficiency Drivers Cost per Transaction Transactions per FTE Span of Control Order Cycle Time Invoice Processing Cycle

Time Percent of Electronic

Transactions Level of Automation

SupplierMaster Mgmt

Verificationand Approval

InvoicePre-Processing

InvoiceProcessing

Discrepancy Resolution

SupplierPayment

Customer Inquiry and Response

File, Store, & Retrieve

Reconciliation, Accrual and Compliance

Purchasing OperationsAccounts Payable

End-to-End Purchase to Pay Process

Requisition & PO Processing

Supplier Scheduling

ReceiptProcessing

Item Master/ Content Mgmt Catalog Mgmt Contract

Master Mgmt

Pcard Management


AP Top Performers have 62% lower costs per invoice, and are significantly more productive in processing invoices

$3.85

$1.46

$1.20

$0.35

$0.49

$0.24

Total Cost ($) per Invoice

OtherTechnologyProcess Costs*

$ 5.54

$ 2.06

Peer Top Performer

*Process Costs include Labor and Outsourcing Costs

Cycle time for PO Invoices(from receipt to approval)

7

5

Peer Top Performer

*Cycle time for Non-PO invoices is 10 days for Peers and 7 days for Top Performers

Source: Hackett P2P Study


Invoice pre-processing

Verification and approval

Invoice processing

Discrepancy resolution

Supplier payment

File, store & retrieve

Customerinquiry &response

Automaticallysort paperdocuments,eliminatingthe need forbatchingof invoices

AutomateApproval steps and accountingcode verification

Auto-matchingof PO-basedinvoices and“touch-less”processing ofnon-PO invoices

Increase first-pass match rates; reduce need fordiscrepancyresolution viaInvoice validationagainst PO and MDM system

Greater visibility intoinvoice statushelps prioritizepayments tocapitalize onearly payment discounts

Reducephysicalshipping andstorage costswith digitalInvoicing

Self-serviceallowssuppliers andinternal partiesto look upstatus quickly

Source: The Hackett Group

Technology is a key differentiator: AP automation opportunities

Characteristics of a highly automated AP organization include Receive at least 60% of invoice line items electronically. Invoice approval is tracked through an automated system with automatic follow-up on

outstanding verifications and approvals. Exceptions that occur between invoices, purchase orders and receiving information are reconciled within the tool.

Documents imaged through optical character recognition (OCR) are imported to enable online approval/verification through workflow management, not just imaged later in the process for retention and storage purposes.

Employee and supplier inquiries are responded to primarily via an automated self-service solution.

AP managers access business intelligence and analytics tools to view metrics on invoice capture and AP automation in near real-time.


Technology Drives Efficiency: Among organizations with the highest level of AP technology implementation, transaction costs are lower and cycle times are faster

AP Automation Users Non-Automated AP Organizations

$4.95

$8.12

Cost per Invoice by Level of AP Automation

PO InvoicesNon-PO Invoices

9.9 11.2

12.5 13.3

Invoice Cycle Time from Invoice Receipt Through Approval for Payment

(Average Business Days)

AP Automation UsersNon-Automated AP Organizations

- 40%



Value drivers for Purchase-to-Pay

Drive greater adoption to preferred supplier contracts Reduce supplier non-compliance process errors Improve focus on demand management Improve strategic sourcing effectiveness through greater spend visibility Support working capital objectives through DPO optimization Achieve greater early payment discounts Drive greater rebates from purchasing card usage Improve P2P process efficiency


Which capabilities

differentiate Top Performers?

Guiding Requisitioners Process Automation Spend Visibility Supplier Information

Management

Guiding

Requisitioners


Buy-channel design emphasizes guiding the requisitioner to use the correct channel upfront

P2P key process steps

Guided buying

Buying approach Buying channels

Requisitioning & PO requirements drive

buy-channel selection

Requisition Ordercreation

Transmitorder Receive Invoice Pay

Requisition approval

Trusted source review

Invoice approvals

Self-managed buyingP-card E-shopping cart

Manual request Pull from supply

Procurement-assisted buying Tactical Strategic

Requests for goods or services managed by requisitioner through predefined set of buying channels

Procurement intervenes based on buying rules or requisitioner’s need for assistance


High adaptors of order automation drive greater activity through electronic catalogues and achieve lower processing costs as a result

Automated Orders: Orders that require no (or minimal) intervention from a buyer (e.g. system generated, e-catalog)

Process Cost = Requisitioning & PO Processing (Labor + Outsourcing)



Leveraging order automation also drives higher levels of spend visibility, first-pass yield, and contract compliance

57%

Automated Orders: Orders that require no (or minimal) intervention from a buyer (e.g. system generated, e-catalog)

Source: Hackett P2P Study and 2014 Procurement Benchmark


Increased catalog use depends heavily on interface

Develop Easy to Use Interface– Use friendly means easy to create and submit requisitions in just a few clicks

Self-guiding search offers targeted results for self-service users– Advanced search for attribute specific criteria– Control catalogue access to users based on needs and usage

Enable productivity enhancement tools to minimize data entry– Shopping lists (Favorite and Public)– Saved shopping carts

Vendor-agnostic search– Free text searches that cross multiple vendor catalogs are easiest for users


Top Performers establish a Source to Settle Channel Strategy then take action to guide requisitioners to preferred suppliers

Non Top performer

Top Performer

28% 8% 56%

67%

8%

33%

No standard buy/pay channels established Not Effective Mostly Effective with gaps Very Effective

How effective are you at driving requisitioners to preferred buy/pay channels with the right supplier/right price/right buy method?



Four required capabilities for enabling guided buying

Source: The Hackett Group

1. Enable self-service buying Predefined channels that put buying in the hands of the requisitioner Comprehensive company “marketplace” to guide the buying experience Procurement-enabled buying capabilities

2. Deploy easy-to-use tools Single point of entry to initiate self-managed requisitioning Standard, common “shopping cart” experience that streamlines and automates buying Decision support tools that guide buying requirements by spend type

3. Build a base of approved, trusted suppliers Predefined trusted suppliers for recurring purchases of goods and services Automated selection of the right supplier Compliant buying enabled and negotiated savings realized

4. Provide professional buyer help when needed Easy link to professional buyer via company buying desk Automated assistance based on system-managed buying rules Automated compliance triggers to help buyer make the correct choice

Invoice Automation


Poll: What are your primary methods of receiving invoices from suppliers? (select all used regularly)

Paper Fax Email (ex. PDF attachment) EDI (Electronic Data Interchange) through a VAN (Value Added

Network) Direct connect through internet: Supplier upload to a company portal Third party network through internet (EIPP)


Invoice Automation

Advanced Invoice Processing

Electronic Invoicing

Supplier Portal

Third-Party Network

EDI (via VAN)

File Upload / Self Entry

PO Flip

Invoice Capture

Scan-based

Fax-based

Email-based

Invoice Elimination

Evaluated Receipt Settlement (ERS)

Purchasing Card(P-card)

"Invoice automation" can refer to any solution that is designed to mitigate the inefficiency of traditional paper invoice processing.

Invoice is received in an electronic format from the supplier enabling automated data entry

Invoice is not received from the supplier

Invoice is received in a non-electronic

format and/or requires manual intervention

for data entry

In practice, nearly 60% of all invoice line-items are still received on paper

The latest generation of imaging technology is sometimes referred to as intelligent data capture (IDC), advanced recognition (AR) or intelligent document recognition (IDR) in Hackett research and elsewhere.

Invoice capture includes imaging of a physical document (transmitted via mail, fax, email), enhanced recognition of the image, extraction and validation of digital information, and workflow connectivity with downstream systems


Direct connect through Internet (supplier portal solution)

Email-based solution

Value Added Network through non-Internet (EDI through VAN)

Third-Party Network through Internet (EIPP)

Fax-based solution

Primarily paper based - No electronic strategy exists

27%

50%

44%

33%

23%

25%

70%

60%

60%

40%

30%

20%

Top Performer Peer

EDI is no longer the dominant connectivity strategy, Top Performers are leading the transition to web-based solutions

Primary Vendor Connectivity Strategies(Percent of all Participants)


?


Organizations benefit significantly from e-Invoicing - in efficiency and effectiveness

Invoice per Accounts Payable FTE

1 Based on organizations with high percentage of transactions through dominate strategy

E-invoicing Invoice Capture and Imaging & Workflow

Paper

20,314

9,484

7,459

Difficulty of Enablement



Top Performers leverage electronic transactions for invoicing and payment far more than Peers

Percent of Electronic Invoices and Invoice-less Transactions*

25%

64%

Peer Top Performer

*Invoiceless transactions includes Evaluated Receipt SettlementSource: Hackett P2P Study

Spend Visibility


Poll: For what percent of spend do you have complete visibility to supplier, spend category and line item level detail

0-20% 21-40% 41-60% 61-80% 81-100%


Top Performers have higher levels of visibility to spend at the line item level, a key contributing factor to spend management effectiveness

Percent of Spend Visibility with Supplier, Category and Line Item Level

54%

64%

Peer Top Performer


Fully automating spend analysis has major benefits

Today, only 19% of companies describe their spend analysis process as fully automated.

33% report having a completely manual spend analysis process.

Companies who have highly (versus partially) automated spend analysis solutions experience: • 258% greater improvements in the time it takes to complete analysis.• 155% greater increase in the amount of spend being analyzed• 109% greater improvement in spend reporting accuracy.

Spend analysis is the process of aggregating, cleansing, and analyzing corporate spending data for the purposes of reducing costs and improving operational performance.

Spend analysis can be an important competitive advantage for companies that use it, especially in highly competitive industries. It enables companies to out-think and out-execute their competitors by helping them lower costs and leverage supplier relationships.

Spend analysis (and the visibility it enables) provides the necessary foundation for procurement organizations to make better, more informed sourcing decisions.

Definition


Requisition1

Order2

Receive3

Complete purchase order form (either paper or electronic) based on approved Requisition

Route PO to appropriate management authority for approval (Requestor should be different from individual ordering)

Route order to supplier (either electronically via EDI or via fax)

Confirm receipt of PO with supplier

Process received goods or acknowledge completion of services

Communicate receipt of goods or services to AP for processing

Complete requisition form (either paper or electronic)

Route requisition form to appropriate management level for approval

Route requisition to Procurement for processing

Pay

4

Receive invoice from supplier

Check invoice for accuracy

Perform match (either two-way or three-way)

Take discount Send payment to

suppliers either electronically or via paper check

Manage

5

Conduct spend analysis to check contract compliance and continuous sourcing

Review supplier performance

Manage discounts and rebates

Assess overall contract compliance

Spend Visibility Benefits to the Procure to Pay Process

Effective spend analysis creates improvements at almost every stage of the procure-to-pay process:

Introduction

Results in list of approved vendors which streamlines requisition process

Identify and reduce non-compliant or “maverick” spend

Reduces financial savings leakage by driving compliance to negotiated contracts

Increased visibility into enterprise-wide spend and improvements in reporting capabilities

Visibility into spend enables the management of expenditures and ongoing spend efficiencies

Benefits of spend analysis


Benefits achieved through automated spend visibility are significant

Benefit Type Actually Achieved

Reduced the amount of time required to complete spend analysis by: 33.33%

Increased the % of total spend being analyzed and reported on by: 33.67%

Increased the accuracy of spend reporting by: 38.33%

Identified and reduced non-compliant or “maverick” spend by: 18.17%

Identified cost savings opportunities leading to additional strategic sourcing savings of (on average): 15.17%

Identified opportunities and was able to consolidate the supply base by: 8.00%

Source: The Hackett Group’s Spend Analysis Poll, February 2015


Outsourcing spend analysis also drives greater benefits

40

% reduction in the time required to complete analysis

% increase in the total spend being analyzed % increase in spend reporting accuracy0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

35%31%

36%

44% 43% 44%

88%

53%

73%

The Benefits of Implementing a Spend Analysis Tool

Only internal staff are used Partially outsourced Completely outsourced

Key takeaways

Companies who completely outsource data collection (versus use internal staff) experience:• 151% greater improvements in the

time it takes to complete analysis.• 71% greater increase in the

amount of spend being analyzed• 103% greater improvement in

spend reporting accuracy.

Source: The Hackett Group’s Spend Analysis Poll, February 2015

Supplier Information Management


Poll: Which of the following supplier facing activities does your current technology infrastructure support?

Setup of supplier payment data Setup of supplier terms and conditions Supplier financial screenings Tracking of supply chain locations Automated checks against third party databases (ex. FCPA, OFAC) Pre-qualification of new suppliers Performance management Risk management


Supplier master data is directly tied to sourcing and supplier management; procurement must be involved to establish data structure

Sourcing & Supply Base Analysis

Invoice & Payment

ProcessingPO and Requisition Processing

Supplier Scheduling

Supply Data Management

Receipt Processing Accounts Payable

Sourcing Execution Supplier Management & Development

Customer / Demand Management(e.g., NPDI)

ProcurementFunction

Management

Compliance & Risk Mgmt

P2P(Purchase-to-Pay)

Pay (Finance)Purchase

Source Manage

Plan, Support, Transform

Protect

Discovery

Spend / Performance

Evaluation

Onb

oard

ing

Self-service

Qualification

VM

F S

etup

Certify / AuditSimplify

Source: The Hackett Group Procurement Process Taxonomy


Leaders are Evolving their SIM Capabilities

Vendor Master File

Focused primarily on ERP/e-Procurement fields needed to place POs, pay invoices, and analyze spend

Supplier Information Management (SIM)

Organizing and managing all key supplier information more efficiently and effectively.

Supplier Lifecycle Management (SIM

2.0)

Tying information into knowledge, intelligence, and analytics

AP and Purchasing Ops biased

Data governance (who can do what to which fields)

Data integration (e.g., across multiple VMFs)

Data quality for spend analysis

“Virtual Supplier Master” Starts earlier in lifecycle

(e.g., pre-registration via supplier portal)

Focus on hosted supplier self-service

Inclusion of document-based and/or external content

SIM application vendors: “SIM Platform”

Increasing level of bi-directional MDM integration

Workflows driven by custom supplier attributes and other rules (process, regulatory) to support: Supplier Performance

Measurement Regulatory Compliance Supply Risk Management

Intelligence from “Supplier Network”

Integrating supplier data to analytics (e.g., supply base segmentation analysis)


Supply Information Mgmt is foundational to Supply Analytics & Intelligence, a core Procurement capability


Agenda




Summary


Summary of Leading P2P Capabilities

Master Data Management

P2P process captures a level of spend visibility useful for spend analytics and compliance Supplier validation and onboarding process is formalized and standardized Formal supplier master file maintenance program with well defined accountability One time suppliers are set up using one-time vendor functionality within the ERP

Governance and Talent Single End-to-end P2P process accountability at an enterprise level Skill levels of resources are consistently high Resources and budget more focused on planning and strategy than transaction processing

Service Delivery Strategy Activity is centralized across the enterprise Appropriate use of Center of Excellence and Shared Service models Processes have been segmented, transformed, and appropriately outsourced and offshored

Enabling Technology Easy to use, cross searchable catalogs for goods and services Automated invoice routing and approval workflow Self-service solutions for supplier data updates, inquiries, and dynamic discounting Imaging technology for storage and retrieval of invoices and related documents

Process Design Invoice receipt is centralized Optimized supplier payment strategy Refined P2P Chanel Strategy supported by clear requisitioner guidance Channel strategy leverages 2 way match where feasible Utilize automated solutions to settle payments with third party suppliers.

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tradeshift, hackett group & sharedserviceslink - p2p webinar

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