Contract invoicing – Gaining Control of non-PO Invoices
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Processing invoices without purchase orders presents challenges for all organization. In this session, you will learn how you and your suppliers can create contract invoices with the Ariba Network off of approved contracts and catalogs. Join this session to see a demo of Ariba's latest contract invoicing features and to hear how a world-class organization manages compliance performance to drive millions of dollars in contract leakage savings from rogue and errant spend.
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Contract invoicing – Gaining Control of non-PO Invoices
- 1. Contract Invoicing Gaining Control of Non-PO Invoices Moderator: James Tucker, Ariba Guest Speakers: Jeff Phillips, UPS Ashley Miller, SunTrust © 2013 Ariba, Inc. All rights reserved.
- 2. There are people who see the world differently. They see things in new ways. They invent, create, imagine. We make tools for these kinds of people. Because while some might see them as the crazy ones, we see genius.
- 3. #AribaLIVE The Strategic Weapon: Business Network Leading the Networked Economy Transformation “ Networked enterprises are 50% more likely to be a market leader. ”
- 4. © 2013 Ariba, Inc. All rights reserved.
- 5. #AribaLIVE Process Efficiency Drives Contract Invoice Savings of $4M / $1B © 2013 Ariba, Inc. All rights reserved.5 Lost Savings per $ Billion of Indirect Spend due to Contract Non-Compliance Compliance to Indirect Preferred Supplier Contract Increasing compliance rates by 10% can drive $5 million in savings per $ billion in contract spend Source: The Hackett Group
- 6. Jeff Phillips, UPS © 2013 Ariba, Inc. All rights reserved.
- 7. #AribaLIVE UPS – Overview • Founded in 1907 • Corporate Headquarters: Atlanta, GA • Primary Business Units: Small Package, Supply Chain Solutions and UPS Freight • 2012 Delivery Volume: 4.1 Billion packages/documents • 2012 Total Revenue: $54.1 Billion • Employees: 397,100 • 2,915 Operating Facilities Worldwide © 2013 Ariba, Inc. All rights reserved.7
- 8. #AribaLIVE P2P Scope • $18Billion spend annually • 12M invoices annually • AP staff of 31 • 60% of suppliers are contract suppliers • 80% of spend is contract spend © 2013 Ariba, Inc. All rights reserved.8
- 9. #AribaLIVE Challenges • No Centralized Repository • Elimination of Local Purchase Order (LPO) process and ERP customization to this process • Change Management • Manually reviewing Invoicing to ensure negotiated rates are billed • Chasing Paper • Lack of Visibility – lost contract savings © 2013 Ariba, Inc. All rights reserved.9
- 10. #AribaLIVE Solutions • Ariba Contract Management System • Ariba Contract Invoicing • Ariba Procurement Content • Ariba customizes approval and invoice exception controls • UPS designed Transaction Compliance Application • Oracle R12 E-Business Suite
- 11. #AribaLIVE Transactional Compliance © 2013 Ariba, Inc. All rights reserved.11
- 12. #AribaLIVE Benefits • Visibility of all UPS contracts in one system • Platform to provide electronic invoicing with limits to items billed • Lock down of billable items by supplier contract • Invoice rules more flexible & customization than existing ERP • Validation of contract pricing with approval rules • Collaboration between UPS & supplier
- 13. #AribaLIVE Compliance – Multiple Layers • Transactional Compliance Transaction Sets – PO / PO Confirmation – Advanced Shipping Notice – Invoice / Invoice Status Supplier invoicing matches our Contracts – Cannot exceed our Pricing Terms set on Contract 0% Tolerance on PO Match Invoices We utilize over 12 Invoice Groups in the Ariba Network to manage multiple types of Invoice Compliance Rules Custom Transaction Compliance Application © 2013 Ariba, Inc. All rights reserved.13
- 14. #AribaLIVE Next Steps • Supplier Rationalization • Supplier Segmentation • Update Contract Clauses to include Ariba processes • Gather/Load all existing contracts in Ariba • Build Contract Terms to support contract invoicing • E-Enable (i.e. EDI, XML, CSV, Supplier Portal) Suppliers to Ariba Network
- 15. Ashley Miller Group Vice President, Strategic Supply Management SunTrust Bank
- 16. #AribaLIVE SunTrust Bank At A Glance © 2013 Ariba, Inc. All rights reserved.16 • The most direct corporate ancestor, the Trust Company of Georgia, was founded in 1891, and merged with SunBanks, Inc of Florida in 1985 to form SunTrust Banks, Inc • Having total assets of $173.4 billion it is one of the nation's largest and strongest financial holding companies • Employs approximately 30,000 teammates Diversified Business and Product Mix Retail & Commercial Corporate & Investment Banking Household Lending Wealth & Investment Management SunTrust Footprint More than 1,600 Branches 2,900 ATMs 800+ Relationship Managers National Full line of investment banking products and services National Residential mortgages, c ommercial lending Mortgage servicing portfolio of $163B National Full array of private wealth management and institutional solutions including personal and institutional investment management
- 17. #AribaLIVE SSM Layout Strategic Supply Management Sourcing Sourcing Projects Contract Negotiation Procurement and Supplier Performance Management Contract Compliance PR/PO Processing Supplier Governance Risk Mitigation Optimization Tools Process Improvement Change Management Sox Compliance Reporting © 2013 Ariba, Inc. All rights reserved.17 Accounts PayableLegal Information Security Business Continuity Business Partners
- 18. #AribaLIVE Business Challenges Circa 2009 • Lack of Robust Spend Visibility Limited Product / Line Item Visibility Imperfect Visibility into What Was Being Purchased and at What Price • No Formal Means for Spend / Contract Compliance Contracts were Negotiated, but Limited Ability to Match Invoices to Contract Terms No Automation to Match Compliance • No Centralized Contract Repository Contracts were All Over the Bank, and No Visibility into How Many There were and What they were for • No Place to Store Sourcing Project Documents and Deliverables Documents were Not Retained - Contract, Supplier and Commodity Strategies were Lost © 2013 Ariba, Inc. All rights reserved.18
- 19. #AribaLIVE Spend Profile for a Financial Services Organization • $2.1 Billion of procurable spend with over 13,000 suppliers • 80% of spend concentrated with 400 suppliers • Critical suppliers account for approximately 40% of total spend © 2013 Ariba, Inc. All rights reserved.19
- 20. #AribaLIVE Goals of a Successful Spend Management Program • Contract Compliance Ensures financial stewardship & expense management of Supplier Spend Invoices are matched to negotiated Contract Rates with preferred suppliers • Increase Spend Visibility Implement processes and reporting that ensures detailed information on our Spend (What was bought, How much was paid, How many received, Who consumed, Supplier utilized) © 2013 Ariba, Inc. All rights reserved.20 • The Path To Success Identify and Solution Commodities Enable Suppliers Electronically Transact Electronically via Ariba Implement Continuous Improvements Procurable Spend Under Management 0 500 1000 1500 2000 2009 2010 2011 2012 20% 45% 80% 87%
- 21. #AribaLIVE How Did We Get Started with Invoice to Contract • As part of our Commodity Onboarding effort, we assembled team who would be responsible for determining method of Procurement (Catalog, Non-Catalog, Contract Compliance, Services Procurement) and team implemented designs on how to get the contract and spend into Ariba © 2013 Ariba, Inc. All rights reserved.21 • Majority of our spend is services • Services does not always work well with PO solution so Contract Compliance or Invoice to Contract solution is the solution for the bulk of our contracts and spend
- 22. #AribaLIVE Procure-to-Pay Overview SUNTRUST SUPPLIER SSM Client Identifies Need Order Fulfillment and Invoicing Outbound POs / Contracts Inbound eInvoices Invoices electronically “matched” to PO/Contract Validated for price, quantity, etc. Requisition PO Contract Request Contract Invoice matching and approval routing (where applicable) Accounts Payable Oracle Supplier Master Approved Invoices Daily Export Benefits • Controls: Supplier Information, Financial Controls • Management: Supply Base • Visibility: Suppliers and transactions Supplier Data Daily Import SuppliersAriba Procure-to-Pay “SunMart”
- 23. #AribaLIVE Best Practices & Key Learnings • Have Senior Leadership involved and supportive of a spend management strategy • Create a No PO or No Contract, No Pay policy to let suppliers know you will not pay them without a PO# or Contract # in advance • Create a Category Onboarding plan • Cease accepting paper invoices for suppliers where you have an Ariba relationship • Understand what commodities work best with each Procurement solution (Catalog, Non-Catalog, Contract Compliance, Services Procurement) • Important to create a strong collaborative relationship between Sourcing, Procurement, Accounts Payable, a dedicated Ariba Team on our side • Realize P2P strategies for services likely requires a phased approach with a solution that matures in cycles of process improvement • Realize…the VIEW IS WORTH THE CLIMB! 23
- 24. #AribaLIVE Next Steps for SunTrust Bank • Continue to strive to achieve more spend under management We are currently at 85% spend under management but we want more • Continuous Improvement, Continuous Improvement, Continuous Improvement Work on continuing to tweak Ariba to make it work better for us so that we can be more efficient and effective Never be satisfied © 2013 Ariba, Inc. All rights reserved.24
- 25. #AribaLIVE Questions? © 2013 Ariba, Inc. All rights reserved.25
- 26. #AribaLIVE Please Complete Session Survey Go to Surveys © 2013 Ariba, Inc. All rights reserved.26 Select Session Click Choose one Rate Session Thank you for joining us
Notes de l'éditeur
- Processing invoices without purchase orders presents challenges for any organization. In this session, you will learn how contract invoicing with Ariba allows you to build invoices off contracts to improve compliance and prevent tens of millions of dollars in contract leakage from rogue spend.
- According to a recent survey 59% of finance leaders think that the AP function could become more strategic, and that an improved AP performance can have a positive impact on profitability. There is a clear need for automation of the P2Pfunction. But we must think different. In 2005 Apple launched an ad campaign called “Think Different”. It’s commercial played a pivotal role in helping Apple achieve one of the greatest corporate turnarounds in business history.
- The supplier creates contract invoices on the Ariba Network so the invoices are subject to the buyer’s rules and can be electronically signed.Supplier users punch into the buyer’s procurement system to create an invoice from selected contract line items.Buyer rules will be enforced also for contract invoicesContract invoices can be digitally signed so the Ariba Contract Invoicing solution can be used in EuropeThe new architecture made it possible to address many customer enhancement requests on the Ariba Contract Invoicing solution
- We discussed the innovative tools Ariba offers for optimizing working capital; ; another area that can help move the Net Income needle in the right direction is by capturing the savings of spend under contract. This Hackett Group study reveals the potential significant savings that will directly impact profitability by reducing spend by over $9 million per $ billion in spend under contract by increasing compliance rates by just 10%!!
- Add info to quantify scope of AP$18Billion spend annually12M invoices annuallyAP staff of 30
- Quantify the cost estimates? All LPO’s Local PO’s without pricing terms required manual matching – estimated volume? Number of FTE’s? Over 100,000 invoices per month – OutsourcedAdd bullet “Lack of Visibility – lost contract savings, etc.”LPO – local PO processDifficult to maintain in OracleChange Management – agree that this is difficult; getting stakeholders engaged; silo’d mentality (automative, ); do their job b/c told to, but don’t often think about better ways to do it. People do NOT like change. Users in the field get e-Invoice will not pay them until get the paper. We could use Workbooks from Ariba Implementation team – primary focus is to get up and running quickly. They fire questions at us that we hadn’t fully thought through.
- One centralized repositorySupply Chain solutions have some SAP for logistics – so customer focused and fast paced. PO’s issued, get approved. But with some suppliers they may get a call from UPS logistics customer that needs something NOW! They call someone on the phone and get it delivered. So to resolve this, UPS is invoicing against contract.Financials is all OracleAriba solutions and Network layer on top of OracleIn the process of adding Automotive Warehouse (IDC) loading PO’s for invoicing matching. Pushed across the Network. Supplier may use PO-Flip. Huge spend. Large suppliers. May use EDI, cXML, CSV or PO-Flip. Today it is manual, so many will be e-enabled.The primary focus on local PO customization on ERP. Looking to replace this. Spend manually keyed. With contracts in system, we can do invoice against contract so spend logged against contract and we get the correct rates.Example: logistics group using the LTO process. Transitioning to invoice against contract. Segmented supply base. Divided into facilities, automotive, and other spend categories – housekeeping; towing; etc.Identified large suppliers in a specific geographical area.A large portion of users now exposed to the process.Opening up to commodity rather than regionally specificGets easier as managers get more experience and more volume.As we add suppliers to users that already have suppliers on makes it easier.We’re passed the “nobody has heard of Ariba” scenario. Suppliers are experienced. Some small suppliers that have Quickbook, no easy way to get their invoice into the Ariba system to match.Get very little help from Ariba to help these suppliers. Suppliers can pay for higher level SMP program to get support, but many of these suppliers do not have enough spend/volume to justify (eg. $100K per year). The top service level of $2500 - $7499. The mechanic is NOT going to do this.I don’t see a $500K business wanting to pay this price for one customer.How map Ariba contract terms (item# and description) to Quickbooks. No supplier doing this today. We have many suppliers that want to do it. G&K does uniform cleaning services. Prior to Ariba enablement, G&K sent invoices around the country using the LPO process. UPS built a catalog of their products, cleaning mechanics uniforms; and provide towels, mats, etc. G&K shows up weekly, without orders, and takes care of business. Then sends invoices through the Network.The amount of AR outstanding prior to moving to Ariba. Today have $1K waiting for resolution locally because invoice rejected by UPS. Using EDI to get invoices to Network. 700 invoices per week. Have their own IT guy, Mark Reinich, who worked on the integration. The integration was NOT easy. Ariba said one thing, yet system worked another way. Huge challenge getting through it. Became “easier” with other because the format is stable now. All suppliers still have challenges meeting the format (eg. taxes); special rules; UPS resale certificate; Had to wait for a lot of customizations from Ariba to get this to work.
- Quantify # of invoices? Avg invoice amount. Spend under contract?# of exceptions found? Leads to estimated savingsSupplier training to ensure not surprised by cost and complexity.Many don’t participate b/c: don’t think they have to, don’t wait to, don’t know about it.If attend the training does it help? Yes. But not dealing with supplier enablement. [have meeting later with this person as part of preparation for Ariba LIVE].Target is 6000 suppliers for contract invoicing. Overall target for Ariba Network is about 10K US. So 60% of suppliers is contract invoicing.At 1000. 2013 will target suppliers with higher volumes (ex. 900 invoices per week).Chevron, Shell, Exxon – lubricants and oils for fleet.Local service suppliers – 98% of suppliersCorporate suppliers – (require much more on integration, setup,) – 2%2K buildings in the US.Roofing, paving, builders200K vehicles in fleet; towing, tires, repairs, body work, 60% of suppliers are contract suppliers80% of spend is contract spendOnce exception hits our ERP it becomes very costly to manageFull visibility in our supply chain from a compliance stand pointNow can see PO confirmation, shipment notices, calculate time for suppliers to fulfill ordersI know what’s on backorderI can be proactive to supplier problems where I was reactive before.
- Procurable Spend Under Management Implementation 2009: Achieved 20%Implemented Catalogs and PO solutions (low hanging fruit)Set Up Procurement team2010: Achieved 45%Deeper Integration of New Sourcing Projects into Procurement to ensure Ariba Set Up for all New DealsDeeper Integration of Finance and having shared goals for the Spend Management strategyGreater buy-in from LOB on Commodity Implementations and timelinesStronger Compliance Reporting & User/Supplier Adoption Processes2011: Achieved 80%Procurement Processes Improved – greater understanding of methods of procurementDeeper Awareness & Campaigning of the Ariba tool being the Financial System of Record for Spend ManagementAP Processes Enhanced to Standardize all Suppliers on Ariba processes
- Controls: Houses Supplier Information that Supports Financial Controls related to transactions with the Supply BaseManagement: Provides Management Information that is Fundamental to Managing the Supply BaseSupplier Visibility: Electronic Linkage to Suppliers through the Ariba Network ensures efficient and effective transactional relationship among buyers and sellers
- The ultimate goal of enabling a spend management tool is to strengthen the position of the organization through the process of:Reducing Maverick SpendLeveraging Spend DataOptimizing Cash FlowHowever, depending on an organizations culture and where they are in the spend management maturity lifecycle, the organization may face several challenges to this goalHave Senior Leadership involved and supportive of a spend management strategyNo ensure no one thinks there is an opt-out optionEnsure you have Executive Buy-in to your company’s P2P policyCreate a No PO or C, No Pay policy to let suppliers know you will not pay them without a PO# or C# in advanceCreate a Category onboarding planTo create direction with a plan with milestones and results oriented. Review often. Set achievable spend optimization target (companies that have no direction randomly enable spend)Cease accepting paper invoices for suppliers where you have an Ariba relationshipCreate a stop gap for suppliers you know are set up to process invoices in Ariba to prevent them from circumventing the system and your processUnderstand what commodities work best with each Procurement solution (Catalog, Non-Catalog, Contract Compliance, Services Procurement)Important to create a strong connection/line of communication between sourcing, procurement, APIntegrate P2P solutions into contract strategies Establish an exception handling process for times invoices don’t match contractsDeeper integration of new sourcing projects into procurement to ensure Ariba set up for all new deals (in RFxs and Contract language)Realize P2P strategies for services likely requires a phased approach with a solution that matures in cycles of process improvement Realize…the VIEW IS WORTH THE CLIMB! It may not feel like it while you are climbing