procure-to-pay and commercial card program optimization and commercial card program optimization...

Procure-to-Pay and Commercial Card

Program Optimization

Presented by: Randy Qualle - TransAlta Shaun East - Scotiabank

September 2007

Conducting an AP Analysis

Agenda

TransAlta Corporate ProfileCommercial Card Program ScopeInfrastructure & KPIsAP Tool Process DefinitionTransAlta’s use of the AP ToolOverview of Results / OpportunityNext StepsHow to participateQuestions

TransAlta- Corporate Profile

Almost 100 years in the Power Business50 Power Plants / 9000 Megawatts-sufficient for nearly 4 million homesCore business is generation and energy marketingInternational player in power generation marketplaceSeveral industry awards

Generation

8468 MW of capacity54561 GWh - avg plant avail of 90%50 facilities – Canada, USA, Mexico, Australia3 surface coal minesMix of coal 58%, gas 29%,hydro 9%18.6 million tonnes of coal mined100.4 million GJ of gas consumed

Energy Marketing

115,682 GWh of electricity, 413.8 million GJ of gas tradedFocus on enhancing returns of generation assets, disciplined approachArranging transmission, capacity, and scheduling of movementFocus is long term contracts, new products, strategic growth opportunities

TransAlta- Commercial Card Program

Scotiabank since 1999Approx 1200 CardsApproaching 50000 Annual TransactionsAnnual Spend approaching $12MMBar Codes used for Expense Report reconciliation / Pathway NetSAP / Document Imaging System

TransAlta’s Infrastructure

Card Usage Statistics

Card Usage Ratio 50%Monthly Card Spending $1M(CAD)Monthly Spending Per Card .8KSpending Per Transaction .3K

Central Purchasing function that manages the processes for acquiring goods and services.

Competitive bidding NegotiatingContractsPurchasingInventory and warehouse managementParts data management

TransAlta’s Infrastructure

TransAlta’s Infrastructure

Payment and Processing Centralized invoice processing Canada, USA and MexicoSAP ERP 2005 Purchase Order DrivenKPI based on on-time performance; cost per invoice; payment settlement performance

TransAlta Infrastructure

KPI Annual Volumes 120,00075% Purchase Order 95% $$ settled electronically (still issue to many cheques)87% on time payment (net 30 days)Processing cost/invoice $8.0065% of invoices are less than $1K

The VISA AP Tool Analysis

Scotiabank / Visa AP Tool Analysis- what is it?

Vital tool for improving efficiency and reducing costsScotia expertise & resourcesDiscover opportunities for improvementAchieves fast, measurable results

The analysis process consists of five steps involving TransAlta, Scotiabank, and VCA

VCA performs analysis

TransAlta provides data

• Data includes A/P data and, optionally, card transaction data• Analysis requires all 10 data elements (see template)

Step Description

1

Scotiabank obtains data and submits to VCA

• Scotiabank assists TransAlta in collecting and verifying all required data elements• Scotiabank electronically submits data to VCA in an encrypted format via a secure

connection to VIM (Visa Information Management)2

Scotiabank receives reports

• VCA notifies Scotiabank by email once analysis is complete• Scotiabank downloads reports through VIM and determines recommendations to make

to TransAlta based on Scotiabank’s understanding of client’s needs

3• VCA cleanses and formats data as needed• VCA processes A/P data to match suppliers against VCA’s Merchant Profile Database

(Supplier Matching Service)• VCA applies data to the A/P Tool to generate reports

Scotiabank presents findings to TransAlta

• Scotiabank delivers customized findings and recommendations for card program expansion to TransAlta5

4

The analysis is performed in three phases: Data cleansing, supplier matching, and A/P tool analysis

Data Cleansing Supplier Matching(SMS) A/P Tool Analysis

Data tables are reformatted as needed

A unique list of supplier names is generated from data tables

Multiple payments against a single invoice are consolidated

Suppliers are matched against VCA’s Merchant Profile Database to identify which suppliers accept Visa cards as a form of payment

Transaction data is grouped by supplier and sorted by transaction volume

Transaction data is grouped by spend category and/or business unit and sorted by transaction volume

Cardable transactions are identified and summed by supplier, spend category and business unit, based on data about card-accepting suppliers

A/P processing cost savings are computed

Reports are generated

The A/P Tool produces reports on card value, migration targets and metrics

The three types of reports generated by the A/P Tool provide a number of views into an organization’s spend in order to identify opportunities for cost savings.The reports answer the following questions regarding card program expansion:

Quantifying Card Program Value

Identifying Migration Targets

• Which suppliers accept cards but are currently paid by other forms of payment?• Which spend categories have the most transactions that could be paid by card?• Which business units & cost centers make frequent cardable transactions and what are

the gains of migrating those transactions to commercial cards?

• What are the operational savings offered by commercial cards?• What are the rebate opportunities offered by commercial cards?

Report Category Questions Answered

Setting Migration Metrics and Benchmarks

• What is the cash flow and ROI for an expanded commercial card program over the next three years?

• What should the program include at each phase of expansion?

Scotia & TransAlta to work together to execute findings

True working partnershipLow dollar transactions eliminatedNew spend categories identified and new purchasing efficiencies realizedIncreased knowledge of Company spending

TransAlta’s use of the AP Tool

Recognition that the card program could be under-utilizedAP Analysis to serve as foundation for business case to key stakeholdersSCM, Audit, Finance will have to get onboard to execute recommendations from analysisDevelopment of a project plan for execution / Scotia to partner

Suspected there were opportunities to

Target non PO spendEliminate multiple payment methods for individual suppliersThrough revising RFP requirementsTo rationalize vendor tableTo reduce TransAlta process costsTo maximize program rebate potential

Results- How large is the opportunity?

* $565MM in spend with VISA vendors

* 32% of all company spend

Results- Lost Opportunities- Accept VISA but paid via other methods

Over 61,000 transactions available on top 75 Visa Accepting Suppliers

Nearly 51,000 transactions / $18MMin cardable transactions <$2500

Additional opportunity through targeted approach to non-accepting vendors

AP Analysis confirmed strong possibilities for success & program optimization

Significant spend with Visa-accepting vendors Lost opportunities- Visa Vendors paid by other methodsHuge opportunity to eliminate transaction process costs- especially at transactions <$2500Opportunity to target non-accepting vendors where metrics attractive to do so

Turning the findings into actions- making it happen

Formal presentation of results to stakeholders by Scotiabank / VisaBusiness Case for execution of recommendations developedObtain required approvals / sponsorsMutually develop project plan in line with Company goals

The process is not complete yet…there are other benefits to be realized

Ongoing plans to strengthen relationshipContinue increasing card useImprove supplier participation & data flowsReduction in paper based transactionsLeverage SAP infrastructurePosture for possible acquisitions

What can the VISA AP Tool Analysis do for your Company / Program ?

Contact your Scotiabank Relationship ManagerNo charge for this serviceTake your program to the next levelDrive tangible process savingsDemonstrate the strategic value of this payment toolDraw attention to the value of the program and your role

Questions / Discussion

Thank you

Randy QualleTransAlta Corporationrandy_qualle@transalta.com