Best Practices in Vendor Management, Strategic Sourcing, Procure to Pay and Discount Management

Best Practices in Vendor Management,
Strategic Sourcing, Procure to Pay and
Discount Management to Help Drive
Supplier Relationship Management ROI
Dan Gercak, Director, Commerce Services
Jarod Schrock, Director, Supplier Enablement Services
© 2013 Ariba, Inc. All rights reserved.

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Agenda
• Overview of Vendor Management
• Vendor Management in Ariba
• Vendor Management by Application Area
• Open Discussion
© 2013 Ariba, Inc. All rights reserved.2

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A Few Starting Points…
• For this presentation, “Supplier” equals “Vendor”.
• While most of the topics here are generic across
Ariba, there are some topics which are more
pertinent to Ariba OnDemand vs OnPremise.
• Ask any question when you want.

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Agenda
• Open Discussion

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12-month decline in B2B marketing impact: 50%
(Source: Marketing Sherpa)
Revenue leaked due to compliance issues: 5%
(Source: Aberdeen Research)
THE CORPORATE EPIDEMIC
Transactions completed manually: 80%
(Source: Celent Communications)
Cost of ineffective business collaboration:
$650 BILLION(Source: Basex Research)
Inefficient Processes Between Companies
Hinder Results
Wanted: Better Business Commerce
5

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The Opportunity Lies in Better
Collaboration… Over the past two decades, large global businesses
successfully streamlined and optimized their business processes within the four walls of the
business with ERP systems…
 Master Chart of Accounts
 Unified item master
 Centralized/Standardized HR & Payroll
 …enabling faster closing of books
 …enabling internal process streamlining
 …enabling lower inventory requirements
Your Company’s ERP
…but no company is an island on to itself…you are part of an extended supply
chain. With your house in order, you must now look to your supply chain and
your relationships with your trading partners for the next wave of savings.
-- Key ERP Efficiency Gains --

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Network-Centric Approach Conquers
Legacy Challenges
Poor User
Experience
Disconnected
Processes
Static
Company
Profiles
Missed Business
Opportunities
• Cumbersome
registration with
separate Terms
of Use
• Lack of
consolidated
dashboard to
view Buyer
activity
• Duplicate, non-
synchronized
profiles across
multiple applications,
updated individually
• Requires rekeying of
redundant
information for
each event
• Multiple
product-
specific logins
with single
roles
• Difficult
navigation
between
separate
solutions
• Inability to cross-
market to other
decision makers
• Marketing isolated
to specific
environment
(no broad
marketing
capabilities)

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• Single Login
with Linked
accounts with
multiple roles
• Single Click
navigation
between Seller
Solutions
• Consolidated and
synchronized
profiles across
Seller Solutions
• Simplified Profile
Management with
ability to link child
profiles to parent
• Increased
awareness to real
decision makers in
their market
• Key step toward
developing a
universal business
commerce
directory
• Simplified single-
page registration
with consolidated
Terms of Use
• View Seller
Sourcing events
in a single
collaboration
dashboard
Seamless User
Experience
Comprehensive
Trading Partner
Discovery
Single Company
Profiles
Unified Solution
in the Cloud
What if You Could Have…

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Typical Supplier Management Processes
and Components
Supplier
Portals
Vendor Master
Management
Risk
Management
Diversity/Green/
Corporate
Responsibility
Registration &
On-boarding
Process
Performance
Management
Supplier
Management
Supplier
Discovery
The Critical Components
• Highly usable Web-Based Portal for suppliers to register
and manage information collaboratively with customers
• Supplier Information Management that unifies platform,
process and supplier profiles across the company and
keeps it current, complete and correct.
• Supplier Performance Management capabilities
including process workflow and approvals, surveys and
scorecards, flexible role based dashboards and
customizable reports
• Supplier Risk Management and Mitigation through a
robust technology platform that seamlessly integrates in-
context supplier info such as parentage, financials,
diversity and sustainability
• A Unified Supplier Record merging data and process
flows to third party systems and data sources
Supplier Management Processes

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Agenda
• Open Discussion

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Seller Collaboration
Console is a key
element of Ariba’s
vision to enhance the
seller experience with
greater exposure,
convenience,
and control
What is Seller Collaboration Console?
A New Way for Sellers to Experience Ariba
• Centralized Administration
• Single User ID for All Ariba
Commerce Cloud Seller Solutions
• Common terms of use
• Common Ariba Cloud Profile
Profile/Doc
Repository
Seller
Sales
Order
Mgmt
Finance
Orders &
Invoices
Leads
Proposals
Contracts
Seller
Collaboration
Console

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SELLER VALUE
• Easy access and navigation
across all solutions for
all customers
• Accurate information through
a centrally managed
Ariba Cloud Profile
• Greater efficiency through
simplified registration and
user management
• Increased exposure to real
decision makers in their market
These Capabilities Deliver More Value to
Both Buyers and Sellers
BUYER VALUE
• Streamlined and unified on-
boarding process across Ariba
Commerce Cloud solutions
• Increased completeness,
accuracy and timeliness of
seller profiles
• Integration of seller
lifecycle (from identify, to bid,
to transact)
• Increased pool of qualified
suppliers with rich profile
information

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Ariba Offers Collaborative Commerce
Solutions to Help Companies Buy, Sell
and Manage Cash Better
BUY
MANAGE
CASH SELL
Sales &
Marketing
Finance
Sellers
IT
Accounts
Receivable
Buyers
Sourcing &
Procurement
Finance
IT
Accounts
Payable
Improve spend control and
performance with reduced
costs, lower risk, improved
and
enhanced compliance.
The discipline of using
collaborative solutions to
make your money work for
you and your trading
partners
Accelerate sales through
efficient processes
fostering stronger
relationships with new and
existing customers.
Collaborative
Finance
Working Capital
Management
Electronic Invoicing
Payment Automation
Matching & Compliance
Scanning & Workflow
Discount Professional
P-Card Settlement
Receivables Finance
Supply Chain Financing
Collaborative
Procurement
PO Automation
Supplier Enablement
Supplier Portal
Connectivity Services

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Collaborative Business Commerce
Addresses These Challenges for Sellers
Source Select Procure Receipts PayIdentify Contract
BUYER: DISCOVER-TO-PAY
Bid Sell Fulfill Invoice CollectMarket Contract
SELLER: MARKET-TO-CASH
Online
negotiating
E-Marketing
and exposure
Business
opportunities
Better
compliance
Automated
collaboration
Greater
visibility
Early payment
opportunities

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Ariba Solution Portfolio – Enabling Closed-Loop
Integrated Source-to-Settle Process Excellence
Using Ariba Network
Ariba Collaborative Commerce via Ariba Network
Procurement Content
Spend Visibility
Sourcing
Contract Mgmt.
SIPM
P-2-P
Services Procurement
Invoice Pro
Payment Pro
Discount Pro
Discovery
Cloud
Infrastructure
Network
Centric
2-Sided Business
Model
Engaged
Community
Open
Integration

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5) Be Invoiced
Invoice Pro
Process
Invoice
4) Buy it
Procure to Order
Request Approve Receive
Another View of the Solution Portfolio
With
close to
1 Million
suppliers
Ariba
Network
This needs to
be procured
Sourcing
Contracts
Purchase Orders
Order Confirmation
Shipping Notices
eInvoices
Invoice Status
Payment Status
Early Payments
Catalogs
2) Sign the Deal
Contract
Management
Contract
1) Find a Deal (Sourcing)
Spend Visibility Ariba Discovery Ariba Sourcing Supplier Information
& Performance Mgt
Analyze Discover Plan
Tender/
Negotiate
Track
Performance
3) Broadcast it
Procurement
Content
Broadcast
Catalog
Procure to Pay
6) Pay
Discount
Payment Mgt
Manage
Cash

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Agenda
• Open Discussion

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Overall Points to Consider
• Ariba is not meant to "remove" communication between Buyers and Suppliers; it is
meant to remove "noise" between Buyers and Suppliers
• The processes associated with the following applications represent a “closed loop”
and are meant to be repetitive
• Rationalization of the supplier identification in Ariba needs to occur initially, and be
managed throughout
• “Delegation of Authority” rules will need to be defined as these various tools are
rolled out
Who can create a Supplier record?
Who can approve?
What processes will each supplier be included in?

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Create a summary of your
need
Publish on Ariba Discovery Relevant suppliers will be
notified
Review & Select new
suppliers
Invite them to your
SOURCING project
Discovery
Post & Search to the ENTIRE network
12k lightbulbs for
week 56
Ariba Sourcing
Check it out!
http://discovery.ariba.com
Ariba Discovery
HOT
Poke the Market

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You
Online
 Weighted Triangulation
Commodity Inference
Artificial
Intelligence*
Inference Engine
Source Data Hints
Supplier Name
Supplier Address
Expense Description
GL AccountMaterial Group
Part Description
GL Cost Center
other hints
Suppliers Analysis
Database
 180 million Suppliers
 Matching & Parentage
 Enrichment:
Industry (SIC), Credit Rating,
Revenue, Diversity
Item Description
Analysis
Database
 Text Reading
 Learned Models
Your Company
Processes &
Mappings Database
 Custom Mapping
 Custom Rules (if, then)
 Manual Approval
“a judicious mix of algorithms for different types of classification issues (e.g. supplier classification, others for different
categories of goods) with a lot of experience will generally produce better results.” - Forrester, April 2008
Spend Visibility
HOT
$3 Trillions
Classified so
far…

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Sourcing: Beyond RFPs and Auctions
Connecting with a Networked Community of Sellers
• Networked Community
of Suppliers
• Proactive Ariba seller
recommendations based on
intelligent matching
• Project Mgt Workspace to
drive process compliance
and savings
• Sourcing Optimization,
Analysis and Reporting
• Global, Multi-Lingual and
Multi-Currency Capabilities
• Bundled Support Services,
EDM and Best Practice
Center support
• Savings Pipeline and Tracking

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Contracts
Solution Elements
Monitoring - Overview
Authoring/Negotiations
Internal/External Review
Publish Results
Develop Agreement
Clause Library
Repository

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SIPM
Supplier Performance and Information Management
Supplier “A”
1. Plan
2. Periodic Tracking
3. Reporting
Program Goals
Delivery On Time (ERP)
Product Quality
Supplier Collaboration
1
Quality Scorecard
ERP
DATA
SURVEYS
2
Reporting/Trends3
 SPM is the process of measuring, analyzing,
and managing supplier performance to
improve quality, reduce costs, mitigate supply
risk and drive continuous improvement in the
supply base.
 Enabled by common, consistent measurements
that focus resources, identify performance
glitches, and determine the total cost of
ownership of supply relationships, products, and
entire supply chains.

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Upstream Points to Consider
• Spend Visibility
Development of a standard “language is important across Ariba, but is critical here
This will allow for a more consistent identification of spend opportunities
• Supplier Profile Questionnaires (SPQ)
SPQs should balance how a Supplier would respond with the Buyer's requirements
Do not try to get all info at once – may only use the supplier in a Sourcing event
• Sourcing
Event templates should balance how a Supplier would respond with the
Buyer's requirements
Communication during the event is key, including the Award and the
"Dear John" memos
Flow of the events (RFI to RFP/Q to Auction) should continue to become more focused,
do not repeat questions already asked

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Procurement Content
The simplest of all types of integrations
NO CHANGES
Your Systems
(Create PO)
Your processes
(Sending PO)
XML
Search in the Catalogs and Return Results to ERP

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Ordering
SuppliersBuyers
Optimization: Ordering
P2O
MATCH
eInvoice creation
and conversion
Purchase & change
orders
Purchase Order
Change Order
Goods Receipts
Order Acknowledgement
Advanced Shipment
Notices
Quick Secure delivery and no more fax
• No more “lost orders” (about 2% of all orders are lost)
• Online and on-time status, cancellations and responses
• 2 days gain in lead times on average

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Invoicing
Suppliers Buyers
Optimization: Invoicing
MATCH
eInvoice creation
and conversion
Purchase & change
orders
Make sure the whole process stays “electronic”
• Invoices are created from a Purchase Order
• They are automatically matched
• No invoices without PO
• 100% paperless and can be legally archived
• Remittance Advice is the single most important benefit
for the supplier of your p2p initiative
Remittance Advice
Invoice
Support credit and
debit adjustmentsInvoice Status

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Invoice Business Rule Filters
Suppliers
AS2
EDI
HTML
Paper
cXML
Email
CSV
RULES
Your
Ariba 98%+
Auto Post
Supplier Name
/ ID
Bill To / Ship
To
VAT / GST ID’s
Invoice
Number
Non-PO
Contact
PO
Number
Remit Access
Currency
Price Variance
Unit Of
Measure
PO Line
Reference
Receipt
Consumption
Variance
Total Amount
Sub Total
Amount
Contract
Compliance
Tax Code
Compliance
Line & Header
Tax
Invoice
Exception
Exception
Exception
Exception
Goal : TOUCHLESS processing
• Faster Cycle Times
• Lower Risk

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Discount & Payment Management
Timing & Discounts
Exceptions
& Approvals
Payment &
Reconcile
Timing &
Discounts
Receipt &
Capture
Too Little Return
on Cash
Too Few
Early Pay Terms
Too Little Savings
on Early Pay
36%
1% .25%
% APR Earned
BIC LAGAVG
20%
3-5%
1%
% Suppliers w/
Discount terms
BIC LAGAVG
€ Million saved per
€1 Billion
BIC LAGAVG
€3
€0.5
€0.25
Timing &
Discounts
Too Many Missed
Discounts
50%
10%
% potential
discounts captured
BIC LAGAVG
95+%
• Payment status and cash flow portal gives suppliers visibility into
the opportunity to accelerate payment, and the Capability to do so
on demand.
• Automatic & Ad-Hoc Dynamic Discounts offer flexibility and
increase adoption
• Collaborate with suppliers to earn 16%-24% APR and earn €2-3
Million per €1 Billion targeted spend.

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Downstream Points to Consider
• Flight Plan
The approach and plan for Supplier management has to be defined, agreed to and
executed against.
This can be by spend area, category, geography, and / or some combination
A compliance strategy must defined as well to drive conversations and potential
conflicts with suppliers.
• Models / Templates
Standard business and technical processes should be the going in position.
This includes PO and Invoice specs and transaction models such as Requisition to
Invoice and Payment, Requisition to Pcard charge, Invoicing Against Contracts
• Catalogs / Contracts
Where possible, catalogs should be made available and promoted.
This assumes that an agreement (contract) has been established with the Supplier.

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Downstream Points to Consider
• Invoicing / Payments
Invoice / invoice exception rules should balance Buyer accounting policies (tolerances)
with efficiency to payment.
Payment terms need to be rationalized and managed throughout
• Reporting
Using Spend Visibility, key metrics such as spend per supplier, commodity spend, and
catalog / contract compliance reporting needs to be performed on a regular basis

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We’ve Been Building this for over a Decade
Ariba Network Growth 1999 - 2011

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© 2010 Ariba, Inc. All rights reserved.© 2013 Ariba, Inc. All rights reserved.33
Accelerate Time to Value with Ariba
33
TECHNOLOGY
• Broadest and most widely used strategic
sourcing solution with SaaS architecture
resulting in faster time to value, lower
TCO, and more-frequent innovation
• Seamless integration of Technology with
a broad portfolio of sourcing
transformation services and global supply
market expertise
• Integrated Supplier Discovery
• Security: WebTrust and SaaS 70 Type
II Certified, PCI Compliant
• Performance: SLA guaranteed uptime
of 99.5 percent
COMMUNITY
• Improve collaboration with the world’s largest trading community – the Ariba Network
for efficient and effective supplier discovery, qualification, risk assessment and
competitive negotiations
• Share best practices, ideas, and innovation within Ariba’s open community – Ariba
Exchange
CAPABILITIES
• Supplement in-context category and supply market expertise, best practices, and
benchmarking to maximize savings and organizational performance – all with flexible
delivery options from full-service consulting to web-based delivery
• Leverage Ariba enablement services including deployment, training, and adoption
• Enable shift of internal resource to focus on more strategic objectives

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ProcurementInvoiceCatalogSupplier Collaboration Options
Standardized Approach
PO
Change Order
Cancel Order
Order Confirmation
Adv. Shipment Not.
Spot Buys
Catalog Upload
Catalog Change
Buyer Approval
Invoices
Invoice Status
Remittance Adv.
•Need Help? Call us or
email us
•Here’s the tool to
manage everything
•Here is your
comprehensive pricing
One single solution
For several of his clients

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Proven Results - Buyers and Suppliers sign up
and stay on the Ariba Network
350K
suppliers currently
participate
99%
retention rate of suppliers
transacting on the Network
100%
of suppliers with 3 or more
customers renew their
annual membership
99%
retention rate of buyers
transacting on the Network
No other provider has more suppliers, more reach, more experience or more people
focused on supplier enablement

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Proven Value Delivered

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Agenda
• Open Discussion

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Open Discussion
• Jarod Schrock – jschrock@ariba.com
• Dan Gercak – dgercak@ariba.com

Best Practices in Vendor Management, Strategic Sourcing, Procure to Pay and Discount Management

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