introduction - multibriefs...• customer service (e.g., percentage of inquiries that are addressed...

Introduction

To stay competitive, you know how important it is to find new ways to streamline and save on your company’s operations.

Learning how leading companies handle commercial payments can give you deeper insights into where and how you can

improve. Help you understand how to run your Procure-to-Pay processes more efficiently. Enhance visibility into corporate

spend. Gain better control and compliance. And ultimately, help enable you to add more profit to your bottom line.

Visa commissioned Deloitte Consulting to conduct 90 in-depth interviews in with more than 60 global/multinational,

mid-size and large corporations as well as federal and local government agencies across the world. In 2010, Visa

commissioned Deloitte Consulting to update each of the following 28 Travel and Corporate Card Best Practices from the

comprehensive study to include current trends, updated case studies, and additional key findings. See the section entitled

“Study Methodology” for additional detail. The Visa Global Procure-to-Pay and Commercial Card Best Practices Study describes

how these organizations implement and optimize their Procure-to-Pay processes and commercial card programs. The

study gives you access to best practices for a variety of topics: Maximizing the benefits of purchasing and corporate card

programs. Streamlining travel and entertainment management. Taking advantage of the latest innovative best practices.

And automating the entire Procure-to-Pay process.

Each best practice is divided into three useful sections—a recommendation overview, a benefits outline and steps for

implementation—so you can quickly find the information you need. For more information on the Visa Global Procure-to-Pay

and Commercial Card Best Practices Study, contact your commercial banker.

Table of Contents

Establish Supplier Key Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Study Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Note: Survey results, research and practice recommendations are intended for informational purposes only and should not be relied upon for marketing,legal, technical, tax, financial or other advice. When implementing any new strategy or practice, you should consult with your legal counsel to determinewhat laws and regulations may apply to your specific circumstances. Visa is not responsible for your use of the information, including errors of any kind, orany assumptions or conclusions you might draw from its use. Much of the information contained in this document applies internationally, but a certainamount of information applies only to certain countries or regions. Although Visa tries to mark all country- and region-specific information with a countryindication, it does not warrant or represent that all information without indication applies internationally. You should check the applicability of anyinformation in this document to you or your organization.

Establish Supplier Key Performance Indicators

Leading companies monitor the performance of their suppliers to ensure adherence to

the negotiated contract terms and Service Level Agreements (SLAs). To track

performance, companies typically establish Key Performance Indicators (KPIs) based

on the terms and SLAs that are established in the contracting and negotiation process.

Common KPI categories include:

• Price (e.g., per item or per hour pricing and early payment discounts)

• Speed (e.g., time from order placement to delivery)

• Accuracy (e.g., percentage of time the order is completed and contains the

ordered goods)

• Quality (e.g., percentage or frequency of product defects)

• Billing (e.g., percentage and size of billing inaccuracies, such as incorrect pricing

or incorrect quantity invoiced)

• Customer Service (e.g., percentage of inquiries that are addressed within eight

hours)

A global communications company measured suppliers against the Service Level

Agreements (SLAs) included in the contract. For example, their office supply contract

included an SLA that any order placed by 3pm should be delivered the following day.

The company actively monitored the delivery performance to ensure the supplier was

following the terms of their agreement.

Often companies will develop a scorecard to monitor the KPIs. A scorecard provides

information on current and historical performance and allows best practice companies

to proactively respond to issues and encourage the correct behavior. The scorecard

can be used for performance reviews with the supplier as well as status updates with

senior management. The frequency of the supplier reviews and senior management

are either quarterly, semi-annually, or annually; some KPIs are measured monthly

while others are measured quarterly or semi-annually. For an example scorecard,

please refer to Visa's Vendor Scorecard.

A large U.S. manufacturing company implemented a two-way scorecard with three of

their large, strategic suppliers. The two-way scorecard evaluated the performance of

both the supplier and the company. The company used the scorecard to evaluate the

supplier's performance and hold them accountable to the contracted terms. In

addition, the suppliers were asked to evaluate the performance of the company and to

identify any problems or inefficiencies that were impacting the suppliers' ability to

meet its contracted terms. One of the suppliers indicated that the company's lack of

forecast accuracy was resulting in last-minute changes to the orders and the need for

expedited deliveries. The company found that use of a two-way scorecard resulted in a

stronger partnership with their key suppliers.

In addition to tracking supplier performance against KPIs, leading companies also

ESTABLISH SUPPLIER KEY PERFORMANCE INDICATORS

“Two-way scorecards

allow us to deliver the

greatest value to the

customer.”- VP of Procurement, U.S.

Manufacturing Company

1

evaluate suppliers on their ability to meet the company's objectives. In order to

communicate the objectives, companies hold annual supplier meetings, during which

the company describes their strategy, goals and initiatives. The annual meetings allow

the suppliers to align their practices with company objectives.

Leading companies also benchmark their supplier spend against comparable

companies in the industry, particularly air and hotel spend. Considerations for

acceptable comparisons include geographical location, industry, company size, and

travel volume. Companies often obtain benchmarking statistics and reports from their

travel agency, third-party providers, and/or industry organizations.

Deviation from benchmarked standards may signal either that the company's Travel

Management function is not performing optimally or that the company's strategic

goals and focus areas are intentionally different from competitors. For example, a

global software company benchmarks its Travel Management performance against

comparable standards but disregards moderate differences because the company's

priority is on traveler experience rather than pure cost savings.1

Options for Best Practice Adoption

Companies may choose to monitor a few select suppliers or all suppliers with which

they have a contract. This decision should be based on the number of factors including

the number contracted suppliers, the resource availability to conduct the monitoring,

and the type of relationship the company wants to create with their suppliers.


An easy starting point for

monitoring supplier

performance is to review

and measure the terms

and SLAs negotiated in

the supplier contract.

2

Option I Option II Option III

Options for Adoption Monitor KPIs and

benchmarking reports

for select suppliers

Monitor KPIs and

benchmarking reports

for all preferred

suppliers

Monitor all preferred

suppliers via a two-way

scorecard and annual

supplier meetings

Benefits• Requires limited

coordination and

management within

the Procurement

group

• Allows for

performance

monitoring of all key

suppliers in the

major spend

categories

• Provides the ability

to proactively

respond to positive

and/or negative

trends in supplier

performance

• Allows the company

to closely examine

their internal

processes and

improve any

inefficiencies

• Facilitates open

communication and

partnership with the

supplier

Key Considerations• Requires selection of

suppliers to monitor

based on strategic

importance

• Requires industry

information from

travel agency, third-

party provider,

and/or industry

organization

• May require

dedicated resource

to monitor and

measure for all

preferred suppliers

• May require

developing KPIs for

preferred suppliers

that do not currently

include SLAs in their

contracts

• Requires industry

information from

travel agency, third-

party provider,

and/or industry

organization

• Requires trust on the

part of the supplier

to provide honest

and direct feedback

to the company

• Requires a company

to acknowledge and

respond to supplier

feedback to foster

trust and partnership

Benefits

Best practice companies that monitor supplier performance report that they are better

able to effectively manage their suppliers in order to receive the expected level of

quality and service. In addition, monitoring performance helps ensure that suppliers

are in compliance with their contracted terms.


Large, sophisticated

companies have

employees dedicated to

monitoring supplier

performance and product

quality.

3

Category Benefit Obtained

Control and Compliance Implementing a scorecard monitoring system allows companies to gain

visibility into and control over the supplier performance. As suppliers

increase compliance with the negotiated terms, companies receive

improved service and product quality.

Cost Savings and Process

Efficiency

Improving supplier performance will reduce inconsistency and errors,

either in the product quality, shipments or pricing. This will reduce the

need for internal manual exception processing and expedited orders. In

addition, benchmarking at regular intervals will assist companies in

identifying possibilities for cost savings improvement.2

Supplier Management Determining supplier KPIs provides companies with metrics and criteria

to monitor supplier performance. The scorecard provides objective

criteria that companies can use when meeting with suppliers to address

issues and/or concerns. Benchmarking also helps set the standard of

what can be achievable with suppliers.

Implementation Steps

Regardless of the level of adoption, there are series of implementation steps that best

practice companies typically follow when developing and monitoring the supplier

performance.

# Description of Action Step

1 Review existing supplier list and identify preferred / key strategic suppliers based on

internal criteria (e.g., annual spend, spend type)

2 Identify stakeholders within the organization to determine the KPIs and monitor

performance (e.g., category managers in Procurement, business owners managing the

supplier relationship)

3 Review supplier contracts to identify contracted terms and key SLAs

4 Determine KPI based on existing SLAs and terms

5 Determine level of supplier performance monitoring appropriate for the company (e.g., ad

hoc KPI monitoring, mandated KPI monitoring, 2-way scorecards)

6 Determine monitoring frequency (e.g., monthly, quarterly)

7 Monitor performance and update scorecard

8 Report on supplier performance internally and communicate issues and/or concerns to

the supplier

9 Revise scorecard criteria and KPIs, as needed (e.g., stakeholder feedback, changes to

contracted terms)


4

1"Procurement Practices 2010," Business Travel News, 2010.2Deloitte Consulting Analysis, 2010.


5

Study Methodology

The objective of the Visa Procure-to-Pay and Commercial Card Best Practices Study

was to better understand the changes in the segment and to gain a comprehensive

understanding of best practices across the Procure-to-Pay process and within the

commercial card program. Visa commissioned Deloitte Consulting to conduct 90

in-depth interviews in the summer of 2007 with more than 60 global/multinational,

mid-size and large corporations as well as federal and local government agencies

across the world. In 2010, Visa commissioned Deloitte Consulting to update each of

the following 28 Travel and Corporate Card Best Practices from the comprehensive

study to include current trends, updated case studies, and additional key findings. The

evaluation of the Procure-to-Pay process included sourcing, order placement, payment

and settlement, reconciliation, control and audit, and reporting activities. For the

commercial card management process, the assessment focused on practices related

to the purchasing and corporate card program strategy, management, and reporting.

Interviewees included Regional Controllers, Chief Procurement Officers, Directors of

Strategic Sourcing, Procurement Managers, Accounts Payable Managers,

Global/Regional/Local Commercial Card Program Managers and Travel Managers.

Study participants had a range of commercial card programs in place including

purchasing card, corporate card and commercial “one” card programs with each of the

top three card providers: Visa, MasterCard and/or American Express.

STUDY METHODOLOGY

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