what your p2p vital signs are telling you - pasa home · what your p2p vital signs are telling you...

What Your P2P Vital

Signs Are Telling You Amy Fong | P2P Program Leader, The Hackett

Group

18th November, 2015

iSave

iPerform

iSupplier iContract Repository

iContract Authoring

iSource

AutoClass

iAnalyze

iCost

eInvoicing

Procure-to- Pay

Supplier Management Contract

Management

eSourcing

Spend Analysis Financial Savings

Management

One View

Zycus Source-to-Pay Suite

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

3 © 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Presenter

Amy Fong

Senior Procurement Advisor and P2P Program Leader

Ms. Fong is a Senior Advisor for The Hackett Group’s Procurement

Executive Advisory program and Program Leader for the Purchase to Pay

Advisory Program. She has 20 years of experience in both industry and

consulting with a focus on procurement, supply chain and organizational

effectiveness. She has considerable experience in P2P Process

improvement, managing complex global supply chain partnerships,

sourcing, supplier performance & relationship management, outsourcing

evaluation and implementation and cost improvement for the North

American, Asian, and South Pacific markets. Ms. Fong holds an MBA

from Vanderbilt University and a BS from Syracuse University.


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

▪ Unlimited inquiry access for members to Hackett experts for transformation steering

▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett

Certified Best Practices through the Best Practice Intelligence Center

▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events

▪ Enterprise, functional and process-based performance studies & value accelerators

▪ “Gold Standard” Benchmark – over 8,500 conducted, the empirical backbone for your

transformation at the SG&A Enterprise, Functional, and Process level.

▪ World-Class, Peer, and Custom Peer comparative metrics and best practices

▪ Ability to provide multiyear World-Class Program view of performance over time

▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP

Finance

Human Resources

Information Technology

Procurement

Supply Chain and Operations

Membership

Advisory &

Research (Provides insights into World

Class Performance)

Benchmarking (Defines World Class

Performance) Hackett Perspective on World-Class Finance – Accelerating GBS | 9

Peer Group World Class

The World-Class Advantage – FinanceWorld-Class organizations always find a way to get there

IT Cost (per end user Equivalent)

Procurement Cost (% of spend)


23%

$1.7K$2.2K

HR Cost (per employee)


19%

0.59%0.73%$6.0K

22%

2014 Cost of Finance by Process Category (as a % of revenue)

Finance Cost (% of revenue)


1.12% 46%

-59%-46%

-23%

0.60%$7.7K

0.39%

0.21% 0.23%

0.16%0.11%

0.17%

Transacting Control & Risk Planning & Strategy

Practice or

Outcome

Process

Taxonomy

Vision

Dimension

SDM

Component

Capability /

Enabler 1 - Lagging 2 - Achieving 3 - Exceeding 4 - Leading

Current

State

Assessment

PriorityFuture State

TargetAverage Gap

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which a

sourcing strategy

exists

Sourcing strategy is ad hoc or

nonexistent.

Sourcing strategies reflect and are

aligned with overall business

strategy and objectives, including

high level risk requirements.

Historical spend analyses are

regularly and routinely conducted

by market and across markets -

i.e. by specific commodity, service,

location and business.

Commodity management and

sourcing strategies define

appropriate purchasing and

payment processes and tools.

Contract terms, lengths, and

conditions are defined to drive

optimal benefits to the enterprise;

in terms of total life-cycle cost,

service, and quality.

Sourcing strategy is reviewed and

updated annually (or more

frequently) to reflect direct linkage

to the company's strategic growth

plans, market changes and

product innovations, production

plans and business

M&A/ventures.

2 - Achieving 2 - Medium 3 - Exceeding 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Breadth of supplier

universe

Supplier selection is based on

historical or personal

relationships; suppliers often

selected prior to Procurement’s

involvement in a project.

Projects are initiated to limit the

total number of suppliers and

bundle the spend volume.

Procurement is involved in the

supplier selection process.

Suppliers are often considered on

a regional or compartmentalized

basis.

Supplier universe is considered

by major commodity or service

area rather than in aggregate.

Suppliers are considered for

bundled and/or extended services

that may extend to multiple areas

of competency.

Supply universe is global and not

limited to traditional commodity

suppliers.

1 - Lagging 2 - Medium 2 - Achieving 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which

supplier risk is

measured and

managed within the

sourcing process

Risk not considered as part of

sourcing decisions or supplier

management.

Supply risk is considered as part

of category-specific sourcing

efforts and supplier performance

management processes.

Supply base risk is explicitly

factored into broader business

continuity objectives. Supplier

risk is considered beyond the

specific good or service being

sourced.

Procurement works with other risk

management staff, ensuring

alignment between internal

risk/return preferences, business

objectives, and both general and

specific supply market risks.

3 - Exceeding 3 - High 4 - Leading 0.90

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

contingency

planning performed

to assure supply

No supply contingency planning

exists.

Contingency plan exists in case of

supply shortage; alternate

suppliers and alternate locations

identified.

Alternative supply sources are

developed in conjunction with

current suppliers for key

purchases.

Back-up suppliers are required for

critical or strategic categories and

items, including formalized

contingency plans to ensure

seamless supplier transition and

application of penalties and

liabilities with supplier(s) at fault.

3 - Exceeding 2 - Medium 3 - Exceeding -0.55

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of supplier

qualification in

place

No formal supplier qualification

process.

Simple processes in place to

register suppliers and inspect

supplier qualifications at time of

registration or category review.

Established supplier training

program on enablement

strategies and buyer’s

technologies. Formal program

exists to identify key qualification

metrics with stratification based

on category criticality and supply

alternatives.

Annual review of at risk suppliers

and suppliers of key categories.2 - Achieving 2 - Medium 2 - Achieving 0.37

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

effectiveness and

efficiency of price

refresh process

Quoting and price refresh process

is undefined and performed

manually and on an ad hoc basis.

Quoting and price refresh process

is defined and audited manually.

Quoting and price refresh

processes are structured to

minimize enterprise financial

impact to all parties.

Quoting and price refresh

processes are automated, nearly

error-proof,, with appropriate

controls in place..

2 - Achieving 2 - Medium 2 - Achieving 0.46

Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Level of

rationalization of

supply base size

Large number of suppliers due to

short-term, “one-off” relationships.

Organization has identified the

need to rationalize the number of

suppliers in order to create

leverage.

Supply base rationalization is

complete. Few new suppliers are

needed and an added supplier

typically results in a removed

supplier (equilibrium). Strong

relationships developed with

current suppliers focusing on JPI

in critical or large dollar spend

areas.

Structured process is in place that

benchmarks the marketplace and

ensures continual supply base

assessment.


Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Maturity of use of

supply market

intelligence

Supply market knowledge is ad

hoc and incomplete.

Process, tools, and sources

established to gather and

organize data on most categories.

Supply market intelligence /

knowledge captured to identify

when a supply strategy needs to

be re-visited.

Supply market intelligence /

knowledge captured, modeled,

and utilized for pro-forma

simulations done during strategic

planning, design, sales, etc.


Business

Transformation (Transforms Performance into

World Class)

Service

Delivery

Components

Information

Service

Placement /

Scope

Process

Sourcing /

Location

Strategy

Process

Design

Enabling

Technology

Skills &

Talent

Governance

&Organization

Enterprise Performance Management

Shared Services, Global Business Services & Outsourcing

Merger Integration

Working Capital Management

Oracle EPM (Platinum Partner)

SAP ERP (Gold Partner)

Hyperion

Kronos

Workforce Management

Application Managed Services

Source to Pay Solutions

Assessment

Selection

Implementation

Change Management

Best Practice

Technology

Enablement (Implements Technology to

enable World Class)

In

-h

ou

se

Co

mp

le

te

O

utso

urc

in

g

Colo

catio

n

CustomerResponsibility

ProviderResponsibility

Sa

aS

A

pp

lic

atio

ns


How far are you from World Class?

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2015 Purchase-to-Pay Study

The Hackett Group’s industry leading Purchase-to-Pay study is still open to Zycus

contacts at no charge. This longstanding study measures key efficiency and

effectiveness performance as well as best practice adoption across Purchasing

Operations and Accounts Payable.

Participate in this study to

Learn how top-performing organizations are leveraging best practices to reduce costs, better

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process

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Pinpoint the cost drivers in purchasing operations and accounts payable and identify potential

savings

Know how - and how well - your organization leverages proven best practices

Build the business case for improving purchasing operations and accounts payable performance

Receive a customized report showing how your organization’s performance compares to Purchase-

to-Pay Top Performers

Contact Zycus for a participation link


The Hackett Value Grid™ defines P2P Top Performers based on overall efficiency and effectiveness

Hackett Purchase to Pay Value Grid™

Example 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 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


How does a World Class P2P Process support enterprise goals? Four Enterprise Themes in 2015

Enterprise Theme P2P Top Performance

Characteristics

Customer centricity Internal Stakeholder Centricity

Business Agility Process Automation

Big Data for Performance

Management

Digitalization of Information

Protecting the Business from

Risk

Balancing Risk and Control with

Efficiency


Purchase-to-Pay is an end-to-end process and an enabler to effective sourcing and supplier management

Supplier

Master Mgmt

Verification

and Approval

Invoice

Pre-Processing

Invoice

Processing

Discrepancy

Resolution

Supplier

Payment

Customer

Inquiry and

Response

File, Store, &

Retrieve

Reconciliation,

Accrual and

Compliance

Purchasing Operations

Accounts Payable

End-to-End Purchase to Pay Process

Requisition &

PO Processing

Supplier

Scheduling

Receipt

Processing

Item Master/

Content Mgmt Catalog Mgmt

Contract Master

Mgmt

Pcard

Management

Strong alignment is key: Designated "purchase-to-pay" owner is accountable for "end-

to-end" process (e.g. single accountability for the end-to-end process) or “high-level” of

coordination between Purchasing and AP

Peer

Top Performer 60% 44%


Top Performers are faster at placing orders and at processing invoices

Order Cycle Time

Peer

Top

Performer

Source: 2015 Hackett P2P Performance Study

Invoice Cycle Time

5 hours 6 days

15 hours 11 days

72%

60%

PO-Based

Invoices


While purchasing costs continue to go down, AP costs for Top Performers have flattened as the focus has moved to effectiveness and value delivery

Source: 2015 Hackett P2P Performance Study &

Procurement Benchmark

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

2011 2013 2015

Process Cost per Order

Process Cost per Invoice

Process Costs for Top Performers

(Labor + Outsourcing)


Internal Stakeholder Centricity

Guiding and supporting

requisitioners

Streamlining policies

Enabling self service

P2P Best Practice Tactics Customer Experience Management

Identify

Customers

Improving the

Customer

Experience

Measure

Success

Analyze

Results

Take

Action


Top Performers guide requestors to preferred sources of supply using e-Procurement tools Then they monitor channel compliance to drive improvement

Indirect Line Items Ordered

through an E-catalog

20%

43%

Peer Top Performer

Indirect Requisitions

Supported by Catalog

Content vs Free Text


54% 38%

Purchasing teams that

are effective at driving

requisitioners to

preferred buy/pay

channels with the right

supplier/right price/right

buy method

Top

Performer 85%

61%

Organizations

managing P2P

compliance by

monitoring the use of

proper buying

channels

Peer

Top

Performer 83%

44%

Peer


Tracking invoice inquiry response times drives the right behaviors by creating a strong stakeholder focus

29%

47%

10%

17%

21%

13%

29%

13%

12%

11%

TopPerformer

Peer


Inquiry Response Time Not Tracked

(no case management system in place)


Process Automation

Enhancing process

efficiency

Optimizing processes

Defining payment

strategy

P2P Best Practice Tactics Enterprise-Level Business Agility Enablers


Top Performers leverage electronic transactions far more than Peers, with the greatest gap in e-invoice receipt

Electronic Invoices Electronic Payments

19%

70% 69%

80%

Peer Top Performer

42%

68%

No Touch Orders


Invoice Receipt Supplier Payment PO Processing


Top Performers are leading the transition to more advanced and web-based solutions for AP connectivity But only by a small margin

Primary Invoice Connectivity Strategies

Peer

Top Performer

Advanced (40%) Basic/Manual (60%)

Advanced (52%) Basic/Manual (48%)

Direct

Portals

3rd Party

Networks EDI Email Fax Paper


Digitalization of Information

Driving visibility with

analytics

Predicting spending

patterns

Anticipating requisitioner

needs

Having dynamic scorecards

Rationalizing supplier data

Identifying internal policy

non-compliance

P2P Best Practice Tactics Big Data for Enterprise Performance Management

Value Drivers

• Uncover customer

behavior patterns

• Understand and

model risk

• Understand and

model business

scenarios

• Precise & real-time

operational

knowledge


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

Spend Visibility at the Supplier, Category and

Line Item Level

38%

73%


Peer

Top

Performer


Top Performers have the benefit of a more concentrated supply base and a cleaner supplier master file

Total Active Suppliers/$Billion of Spend

Percent of Suppliers

That Make Up 80% of

Invoice Volume

10,838

2,403

Peer

Top Performer


4.5%

8%


The P2P process should enable savings capture The savings you negotiated are leaking from the current process

5.28%

5.00%

5.00%

5.00%

5.00%

6.00%

7.25%

5.00%

5.63%

7.50%

Direct Purchased Finished Goods

Direct Materials

Direct Services

IT & Telecommunications

Human Resource Services

Administrative & Business Services

Capital Equipment & Facilities…

General Equipment & Supplies

Sales & Marketing Support

Travel

Contracted Savings Lost due to Non-Compliant Purchasing


Balancing Risk and Control with Efficiency

Establishing S2P channel

strategies

Monitoring supplier

contract compliance

Customizing supplier

onboarding

Streamlining information

gathering

Identifying fraud

P2P Best Practice Tactics Top-10 Supply Risks Cited by Procurement

# Risk Event (ranked by highest exposure)

1 Fiscal crises in key economies

2 Unexpected regulatory changes

3 Large-scale cyber-attacks

4 Environmental disasters

5 Supplier competitive events

6 Purchase price escalation effects

7 Price and supply volatility

8 Unfavorable currency movements

9 Loss/theft of sensitive/private data

10 Data loss/theft

Source: 2014 Hackett Supply Risk Management Study


Top Performers use a blended channel strategy based on commodity risk, balancing spend control with efficiency

Top Performers process 35% of transactions through Optimal Channels


Optimal Efficiency

Optimal Efficiency

Optimal Efficiency

Optimal Control

Optimal Control

Optimal Efficiency

Optimal Control

Optimal Control

Minimize

Travel, Pcard, Debit/Pay Cards

Evaluated Receipt Settlement

(ERS) 2-Way Match

Recurring Payment

2-Way Match

Invoice Only

Assumed Receipt

2-Way Match

3-Way Match

Contract/

PO

Contract/

PO

Contract/

PO

Contract/

PO Invoice

Invoice

Invoice

Receipt

Receipt

Invoice

Credit

Card

Top Performers control 74% of spend on a Purchase Order / Contract


The supplier onboarding process should leverage a custom checklist of controls and validation points


Traditional

Vendor Master File

Focused primarily on ERP fields

needed to place POs, pay

invoices, and analyze spend

Supplier Lifecycle Management

Customized data gathering based on

category and supplier profiling

Organizing and managing all key supplier

information more efficiently and effectively

Tying information into knowledge,

intelligence, and analytics

Supplier Lifecycle Management (SIM) solutions are helping to integrate onboarding

validation with broader risk and supplier management goals


Additional Purchase to Pay performance drivers and trends

Focus on end to end process standardization, especially globally

Technology enablement and consolidation is important

E-Invoicing implementation is a still top technology priority; self service is

next

Know your organizations broader business goals – is Working Capital a

focus? Should you be pushing for early payment discounts?

While most companies have opportunity to improve efficiency it shouldn’t

be the only goal – effectiveness drives more value for the business


How does a World Class P2P Process support enterprise goals?

Enterprise Theme P2P Top Performance

Characteristics

Best Practice Tactics

Customer centricity Internal Stakeholder Centricity • Guiding and supporting requisitioners

• Enabling self service

• Streamlining policies

Business Agility

Process Automation • Enhancing process efficiency

• Optimizing processes

• Defining payment strategy

Big Data for

Performance

Management

Digitalization of Information • Driving visibility with analytics

• Predicting spending patterns

• Anticipating requisitioner needs

• Creating dynamic scorecards

• Rationalizing supplier data

Protecting the

Business from Risk

Balancing Risk and Control

with Efficiency

• Establishing S2P channel strategies

• Monitoring supplier contract compliance

• Customizing supplier onboarding

• Streamlining information gathering

• Identifying fraud

• Addressing internal policy non-compliance


Statement of Confidentiality and Usage Restrictions

This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the

reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.

www.thehackettgroup.com

Thank You

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