mapping your p2p expedition beyond process automation

© Copyright 2010 Hewlett-Packard Development Company, L.P. HP Confidential.1©2011 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice

MAPPING YOUR P2P EXPEDITION BEYOND PROCESS AUTOMATION

Jeff Fiorini Program ManagerHewlett-Packard

© Copyright 2010 Hewlett-Packard Development Company, L.P. HP Confidential.2

AGENDA– About HP

– Shared Services Journey

– Current State of Accounts Payable

– Bringing others along the journey

– Road Map Development• Principles• Steps• Value Creation• Selling• Vision• Governance

– The Destination

– Highlights Along the Way

– Report Out - Lessons Learned


HP is the largest technology company in the world—committed to using our products and services to unleash new possibilities and have a meaningful impact on business and life

– Fortune 10 – U.S.– Fortune 26 – Global– Doing business in

approximately170 countries– 320,000 employees– 145,000 sales partners – 210,000 service partners– 88,000 retail locations


OUR SHARED SERVICES JOURNEY

Decentralized

Regional SharedServices Global

Consolidationand

Adoption

Technology Enablement & Process Optimization

Business Value Add as End-to-endProcess Owner

COSTS VALUE

TIME1990 2011


CURRENT STATE OF HP’S AP PROCESS

Metric Name Category HP FY09 HPFY10

APQC Top Performer

Hackett World Class

Hackett Large

Diverse

Best in Class Status

Cost of AP per invoice processed

Cost Effectiveness < $2.38 < $2.38 $2.61 $2.38 $3.37

# of Invoices per AP FTE

Process Efficiency

9.9K 11.9K 18.9K 24.3K 14.5K

Invoice line items matched the first time 57% 61% 93% 91% 61%

% of invoice line items received electronically 72% 72% 80% 80% 48%

Challenges:•Getting IT funding approved for efficiency and process automation projects (small ROI)•Aligning objectives across various organizations impacted by the P2P process•Managing executive expectations to drive additional savings without IT investment

Situation:•Accounts Payable centric•Focused on headcount efficiencies and process automation•No strong organizational alignment between Procurement and Accounts Payable (no end-to-end P2P focus)

Solution:Develop an end-to-end Purchase to Pay Strategic Roadmap with focus on value creation


BRINGING OTHERS ALONG THE JOURNEY- A key to a successful P2P expedition is to have a cross-functional team

comprising business partners and key stakeholders- Face-to-Face interaction will allow for the following:

- Identify key enablers and dependencies between various opportunities

- Interlock on synergies and overall value – savings, compliance, controls

- Develop IT investment Business Case and P2P roadmap

- An end-to-end P2P strategy was developed that aligned on opportunities around process, technology and organizational structures (people)- Joint governance - Joint roadmap for P2P - One IT investment bundle for identified P2P opportunities (not by individual projects)- Shared end-to-end metrics- Identification of intersecting opportunities and enablement of organizational trade-offs to

optimize the end-to-end solution benefits

Our Partners and Stakeholders


GUIDING PRINCIPLES IN DEVELOPING THE ROADMAP– Optimize the process, not just the function

– Focus on customer value creation and not just headcount efficiencies

– Business cases should highlight how to achieve the perfect transaction• End-to-end Electronic• Compliant (No Maverick spend, payment according to contract)• No discrepancies / fallout (no-touch straight through processing)• Self-Service• Take advantage of discounts (to include volume discounts)• On-time payment (not early or late but according to terms)• No duplicate payments

– Simplify execution of Business Continuity Planning

– Interlock opportunities to create greater value


STEPS IN BUILDING THE ROADMAP

Generated based on business context and stakeholders

inputs

Initial checkpoint(Internal & Customer)

Second checkpoint(Internal & Customer)

Roadmapsignoff


THE FORK IN THE ROAD……TAKING THE PATH LESS TRAVELED

Efficiency Path•Centralization•Off-shoring•Process Optimization•Automation

• Electronic Invoicing• Workflow• Self Service

Effectiveness Path•Dynamic Discounting•Contract Compliance•Supplier Performance Management•Enhanced Payment Controls

8% ofRun-RateSavings

92% of Run-RateSavings


SELLING THE PROGRAM AS INTERRELATED STEPS ALONG THE JOURNEY

Enables accurate PO, RTV, on-time

payments, reduced cycle

times, end-user satisfaction

Reduced cycle time

to take advantage

of discounts

Electronic PO’s /

Invoices enable

contract compliance

Supplier profile

information

Detailed transactional information

Payments according to

contract


Maximize straight-through processing in a manner that facilitates supplier spend compliance and optimizes balance between dynamic discounting and DPO management

STICKING TO THE VISION

End-to-End Process Management(Integrated Design, Value chain partner alignment, E2E Business

Performance Measurement & Benchmarking)

ProcessImprovements and

AutomationProcess

Improvements and Automation

(e-Invoicing, Front-end Validation, IDC

Capabilities, Workflow, Negotiated rates)

Self ServiceCollaboration Portal

(Expand Self-Service Coverage & end-to-end

transaction visibility)

Contract Compliance

(Contract T&C’s, Supplier Performance Management)

Working Capital Management

(Dynamic Discounting & Enhanced Payment

Controls)


Maximize straight-through processing in a manner that facilitates supplier spend compliance and optimizes balance between dynamic discounting and DPO management

STICKING TO THE VISION

End-to-End Process Management(Integrated Design, Value chain partner alignment, E2E Business

Performance Measurement & Benchmarking)

ProcessImprovements and

Automation

Self ServiceCollaboration Portal

Contract Compliance

Working Capital Management

(e-Invoicing, Front-end Validation, IDC

Capabilities, Workflow, Negotiated rates)

(Expand Self-Service Coverage & end-to-end

transaction visibility)

(Contract T&C’s, Supplier Performance Management)

(Dynamic Discounting & Enhanced Payment

Controls)


AS WE SET OUT ON THE JOURNEY, IT IS IMPORTANT THAT WE STAY ON THE PATH

A strong governance structure ensures we don’t get off track

Regular Process Community meetings ensures open communication along the journe

IT

Fina

nce

Shar

ed S

ervi

ces

Pro

cure

men

t


DESTINATION FRAMEWORK

Current 30% 72% 61% 40%

Metric Spend Visibility Percent Electronic Invoice Items Matched First Time Percent Self-Service

Future 70% 85% 85% 72%

Current Productivity

11.2K

FutureProductivity

(Timeless Model)

15.0K


HIGHLIGHTS ALONG THE WAY DYNAMIC DISCOUNTING

Current Process

− Inability to easily take advantage of available discounts

− Long cycle times and high percentage of fall-out

− No visibility to discounts available or taken

− Extended payment terms and hangover from financial crisis putting additional pressure on suppliers

Best Practice Drivers

− Provide suppliers \ trading partners an alternate source of capital

− Provide platform to dynamically capture discounts as working capital needs dictate

− AP automation drives more predictability in processing cycle times

− Balance payment terms extension and discount opportunities (Trade-off between B/S and P&L)

New Capabilities

− Supplier portal as the access point for dynamic discounting

− Provide suppliers access to low-cost financing alternatives

− Electronic invoicing, front-end validations, and workflow streamline AP process and allow for discount capture


STANDARD TERMS VERSUS DYNAMIC DISCOUNTING

2.5%

2.0%

1.5%

1.0%

0.5%

5 10 15 20 25 30

2% 10 – Net 30

Days

“Pay-me-now” Zone

Per ContractPer Invoice

$1.5M

$0.4M

$0.1M

1st Quartile Median3rd Quartile

Early payment discounts per billion in spend


HIGHLIGHTS ALONG THE WAY CONTRACT COMPLIANCE

Current Process

− Lack of visibility into line-item spend

− No effective solution to control, monitor, and report on contract compliance

− Invoices not matched to correct PO line items making it difficult for end user to manage spend

− PO consumption status not available leading to PO overspend

Best Practice Drivers

− Verify savings as dollars are spent

− Invoice line level spend visibility

− Integrate contracts with ERP system for transactional compliance and consumption management

− Cleansed, classified master data

New Capabilities

− Ability to apply volume discounts

− Re-price purchase requisition backlogs as dollars are spent

− Match invoices not only to PO’s, but SOWs and Master Contracts

− Report on realized savings

− Leverage spend visibility to improve supplier relationships

− Leverage ability to steer demands to preferred solution


REPORT OUT – LESSONS LEARNED

– Focus needs to extend beyond headcount reductions

– “Sell” roadmap as overall program and not as piecemeal initiatives

– Obtain executive sponsorship and involvement (governance board)

– Reach across organizational boundaries to obtain buy-in and participation

– Establish benchmark targets to measure and monitor success

– Throughout the journey, keep the communication lines open with partners and stakeholders

– The journey can be challenging at times with many obstacles and roadblocks……….but never give up

mapping your p2p expedition beyond process automation

Business

hp confidential

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2011time4 copyright

p2p opportunities

value creation5 copyright

p2p roadmap

endtoend p2p strategy

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