Ingredients for Successful Source to Pay … for Successful Source to Pay Transformation ... Richard...

The S2P Secret Sauce:Ingredients for Successful

Source to Pay Transformation

Presented by:

Today’s Presenters

Richard Waugh, VP Corporate Development, Zycus Inc.

Richard has an extensive background in B2B E-Commerce. He

helped launch GE's Trading Process Network (TPN), the first on-

line Marketplace for Sourcing and Procurement. He was also Co-

Founder of B2eMarkets, one of the first SaaS (Software as a

Service) Sourcing Suite providers and later covered the Supply

Management market as an Industry Analyst for the Aberdeen

Group.

Ben comes with over fifteen years+ experience gained in multiple

industries, having worked in Australia, United States and throughout

Asia. A proven track record of being able to deliver results locally,

regionally and globally both on the procurement and sales fronts. He

leads a team of 90+ people to maximize group-wide procurement

and supply chain efficiency with the primary objective of delivering

sustained year on year improved cost, quality, delivery and

technological benefits to the business.

Ben Briggs, Group GM - Procurement and Supply at Crown

Resorts Limited

About Zycus

Agenda

Initiating Project - Catalysts for

Change

Benchmarking Current State

Performance

Building the Business Case –

Identify Value Levers

Implementing – Adoption Best

Practices

Catalysts for Change – Market Pressures

Catalysts for Change – Business Pressures

Business Pressures for Technology Adoption

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Press coverage about the value of EPTs

Colleagues using EPTs for their work

Management directive

Encouragement by senior leadership

Better integration and visibility externally

Revamping of outdated legacy systems

Enhanced contract compliance

Conviction about the value of EPTs

Common information repository & dashboard

Achievement of savings targets

Identification of opportunities

Better integration and visibility internally

5 - strongly agree

4

3 - neutral

2

1 - strongly disagree

Catalysts for Change – Peer Pressures

Mimetic pressure

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

The competitiveness of our competitors has increaseddue to their use of procurement technologies

Competitors that have adopted procurementtechnologies for supply management have benefited

greatly

Best-in-class companies use procurementtechnologies

5 - strongly agree

4

3 - neutral

2

1 - strongly disagree

Poll Question #1

Which of the following has been or is likely to be the

most significant catalyst for transforming your

procurement organization?

a. Market pressures (e.g. price change, regulatory,

industry restructuring, disruptive technology)

b. Business pressures (e.g. savings/efficiency goals,

visibility & integration, management directives)

c. Peer pressures (e.g. best-in-class or competitors)

d. None of the above – no impetus for change currently


Change


Performance




Practices

Benchmarking – Organizational Performance

Define Value and Assess Performance Understand Current and Future Capabilities

Analyse Gaps and Prioritise Impact,

Determine Improvement Opportunities, and

Consider Internal and External Constraints

Develop an Improvement

Roadmap and Benefits Case

Source: Hackett Group

Benchmarking – Start by Defining Value

Value Proposition of

Procurement ServicesRole of Procurement

Right goods /services at the right time & place

Right goods and services

AND at the right price

Shift from lowest price to Total

Cost of Ownership

Reduce demand activity,

complexity and variability

Increase business value

derived from spend

Supply Assurance Buyer / Planner

Negotiator

Supply expert (SCM, SPM, etc.),

team leader, project manager

Spend/ budget consultant &

relationship manager

Trusted business advisor

and change agent

Price

Total Cost of Ownership

DemandManagement

Value Mgmt.

VA

LU

E

+


Poll Question #2

Which of the following best describes the

current value proposition for your procurement

organization?

a. Supply Assurance

b. Price

c. Total Cost of Ownership

d. Demand Management

e. Value Management

Benchmarking – Assessing Performance

Selected Industry Benchmarks – Strategic Procurement

Source: 2014 CAPS Research Cross-Industry Benchmarks

MetricAerospace

& Defense

Financial

Services

Industrial

Mfg.Petroleum Utilities

% SUM 93.8% 76.2% 89.0% 92.2% 74.8%

Cost Reduction Savings as % SUM 3.8% 5.3% 2.5% 2.8% 2.2%

Cost Avoidance Savings as % SUM 1.6% 1.8% 1.3% 1.6% 1.4%

SM Operating Expense as % Spend 1.6% 0.4% 1.2% 0.9% 0.7%

SM ROI% 318.5% 1397.6% 410.7% 483.4% 425.4%

% Active Suppliers Account for 80% Total

Spend6.5% 8.5% 7.0% 3.5% 4.5%

Benchmarking – Assessing Performance

Performance Area Peer Group World- Class

% of Indirect on E-Catalog (Spend)**

% Indirect on E-Catalog (Transactions)

5%

25%

22%

45%

Order Cycle- Catalog (days)**

Order Cycle- Ad-hoc (days)**

4

19

1

16

POs per FTE** 3,738 12,620

Cost per Invoice** $5.54 $2.06

Invoices per FTE** 9,091 25,047

Source: Hackett Group Procurement Benchmark 2014*, Hackett Group P2P Performance Study 2013**,

Spend Under Management* 66% 85%

Cost per PO** $18 $4.80

Cost Savings as % of Spend* 2.97% 5.34%

Invoice Cycle – PO (days)**

Invoice Cycle – Non- PO (days)**

7

10

5

7

Early Payment Discount Taken as % of Spend** .002% 0.16%

Cross-Industry Benchmarks – Operational Procurement

Poll Question #3

Relative to strategic and operational

procurement benchmarks, which level best

approximates your current performance?

a. World Class/Best-in-Class

b. Average/Peer Group

c. Below Average/Laggard

d. No Idea


Change


Performance




Practices

Source-to-Pay Value Levers

Increase SUM – Discover

Savings Opportunities

Higher Sourcing

Throughput & Savings ID

Rationalize Supply

Base – Increase Spend

w/Preferred

Visibility & Compliance

to Preferred AgreementsReduce/Eliminate

Maverick Purchases

Capture Prompt Pay

Discounts/

P-Card Rebates

Reduce Transaction

Process Costs

Track Finance-

Approved Savings

Business Case Justification

`

Pro-Forma Business Case

Total Sourceable Spend $600,000,000 Esitmated Spend Not Under Management (%) 40%Estimated Spend Under Management (SUM - %) 60% Targeted SUM (%) 85%Current Realized Savings on SUM (%) 2.97% Targeted Realized Savings on SUM 5.34%# Total Active Suppliers 2,500 % Annual Supply Management Time Savings 20%# Supplier Management FTEs 25.42 Target Potential Supply Risk as % Spend 0.15%$ Annual Supplier Management FTE Cost $120,756 Supply Risk % Probalitity Mititgation 50%% Current Total Addressable Spend wth Strategic Suppliers 10% Taregt # Days Supplier On-boarding Cycle 10% Current Potential Supply Risk (as % Spend) 0.3% Target Contract Compliance % 88%Contract Compliance % 43% Target Contract Savings Leakage % 4%Contract Savings Leakage % 17% Target # Days Supplier Scorecard Cycle 10# Days Current Supplier On-boarding Cycle 30 Target # Days Contract (Creation to Approval) Cycle 33# Days Current Supplier Scorecard Cycle 45# Days Contract (Creation to Approval) Cycle 40

ComponentCurrent Incremental

Improvement

Target Performance Incremental Savings

Sourcing Savings on Incremental SUM($) 60% 25% 85% $8,010,000Incremental Sourcing Savings on Current SUM ($) 2.97% 2.37% 5.34% $8,532,000 Subtotal Incremental Sourcing Savings $16,542,000Incremental Contract Compliance 43% 105% 88%

Reduction in Contract Savings Leakage 17% -13% 4% (661,680)$

Supplier Management Productivity Savings 0% 20% 20% $614,014

Supply Risk Mitigation 0.3% 0.1500% 0.15% $900,000

Total Savings $17,394,334

Business Metrics

Business Value

Poll Question #4

How important is a business case in getting

budget approval for a procurement

transformation initiative in your organization?

a. Critical – formal business case review

required to obtain funding

b. Considered – business case a part of the

process but no formal review

c. Casual – may or may not be required

d. N/A – does not apply


Change


Performance




Practices

Best Practice Technology Sequencing

Spend analysis E-Sourcing SBM

Map external spendNegotiate Strategic

AgreementsManage compliance

Manage Supplier

Relationships

Key Success Factors• Identify and use data from

relevant transaction systems

• Deduplicate and classify

• Assign ownership of spend

categories

Key Success Factors• Promote a culture of control

and responsibility

• Involve stakeholders in

category plans, work flow and

templates

Key Success Factors• Build a pipeline of cost reduction

opportunities

• Create a center of excellence

• Make use of e-sourcing

mandatory

Key Success Factors• Segment supplier base to

rightsize management

• Deploy solutions that support

supplier collaboration

CLM

VMSP2P

Source: Gartner “Best Practices for Sequencing Procurement Solution Investments” December 2014

Step 1: Start With Spend

Spend Analysis Refresh Frequency


Spend Under Management 66% 85%

Source: Hackett Group Procurement Benchmark 2014

Spend with Line Item Visibility

Top performers according to Gartner, report more than 95% of spend is

accurately classified at line item level and refresh spend analysis at least

quarterly

Step 2: Drive Sourcing Savings

65%

23%

12%

RFQ/RFP RFI Auction Average Savings 12%

Average Cycle Time

Reduced 17%

Source: Zycus eSourcing Usage Statistics

Deploy eSourcing Tools


Cost Savings as % of Spend 2.97% 5.34%

Source: Hackett Group Procurement Benchmark 2014

Step 3: Sustain Savings

Deploy Compliance Tools

Contract Management

Procure-to-Pay

Supplier Management

Set Performance Targets

Performance AreaPeer

GroupWorld- Class

Cost per PO $18 $4.80

Cost per Invoice $5.54 $2.06

Contract Compliance 43% 88%

Contract Savings Leakage 17% 4%

Suppliers per $1B Spend 5,806 1,959

Revenue from Supplier

Innovation (as % of Total)3.5% 7.4%


P2P Performance Study

2013

Source: Aberdeen

Group Contract

Benchmarks


Procurement

Benchmark 2014

Step 4: Track Savings

Source: Aberdeen Group Benchmarks

Set Performance Targets

Deploy Financial Savings Management Process and Tools

2/3 of Best-in-Class track Procurement’s impact

to Financial Statements - well below 50% for

all other

.

Finance Collaboration 4.35

out of 5 for Best-in-Class

• Most Organizations Tracking with

Spreadsheets/Home-grown Tools

• Lack Finance Collaboration and

Approval Workflow

• Standardized Savings

Calculations and Life-Cycle

Tracking a Challenge

Source: Gartner/Rutgers s University Survey, 2013

Case Study: Advanced Micro Devices

Spend Analysis

SourcingSupplier Mgmt.

Create a “Single Version of the

Truth” for Spend Analytics to

identify supplier rationalization and

sourcing opportunities and

standardize payment terms on Net

60

Deployed easy-to-use, intuitive e

Sourcing platform to power all RFX

activities driving 15% higher

adoption over previous toolset,

increasing sourcing throughput

and savings achievement

Standardized Supplier

Performance Measurement with

100% adoption of tool and

methodology for tracking and

reporting supplier KPIs

Transformation Solution:• Drive cost reduction and gross

margin improvement during a

period of intense market

pressures due to slowing demand

in traditional PC Market

• Mitigating supplier & financial risk

by rationalizing the supply base

and preventing supply chain

disruptions which had marred the

Semiconductor Industry over the

past five years

• Increase productivity – despite

head count below industry

benchmarks, mandate to reduce

procurement headcount in the

wake of recession and corporate

restructuring

Savings Per FTE Up 26%

Procurement Labor Reduced 23%

Supply Base Cut 30%

Business Challenges:

Contact Information

Thank You for attending this Web Seminar!

For more information, please contact:

Richard Waugh,

VP Corporate Development

Zycus Inc.

[email protected]

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