Automating the Procure-to-Pay Process
PolyOne Best Practice Case Study
Automating Procure-to-Pay at PolyOne | Page 2
Automating Procure-to-Pay Process
Ray KlingIT Manager – Commercial Applications, PolyOne
Mike GerraschDirector – Process Industries, webMethods
This presentation was originally developed for and delivered at the 2006 webMethods user conference
Automating Procure-to-Pay at PolyOne | Page 3
Agenda
¬ Complexity of Procure-to-Pay Process
¬ Today’s Procure-to-Pay Pain Points
¬ Compliance and Procure-to-Pay
¬ PolyOne Case Study
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Complexity of Procure-to-Pay Process
¬ Corporate wide¬ Facilities¬ Company Credit Cards¬ Multiple Sites¬ Global Distribution¬ Outsourced Manufacturing¬ Contract Manufacturers
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Procure-to-Pay Pain Points
1
2
Inefficient, error-prone purchasing process
Delays in payment processing4
5 Ineffective SLA management with trading partners
Minimal visibility of PO status
Submit Purchase
OrderReceive &
Verify Goods
1
Procure to Pay Process
Monitor SLAs / Outsourcing
Authorize Payment
5
3Receive PO
Acknowledgements
2 4
3 Suppliers don’t deliver the “perfect order”
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Example of Procurement Control Points
Control Service
26, 089.00
App AmountPayer
26,089.00
Req Amount
28,000.00
Paid Amount
JBertelsenJBertelsenPO213094
VendorProcurerApproverRequestorTrans-UID
If the “Approver” is the same as the “Requestor,” a violation has
occurred (segregation of duties)
If the “Paid Amount” is greater thanthe “Approved Amount,” a violation has
occurred (financial control)
RequestRequest ApprovalApproval ProcureProcure ReceiveReceive PayPay
PO213094Jbertelsen26,089.00
Throughout the process, criticalControl Information is captured
to verify compliance
PO213094Jbertelsen26,089.00
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Example of Procurement Control Points
Control Service
26, 089.00
App AmountPayer
26,089.00
Req Amount
28,000.00
Paid Amount
JBertelsenJBertelsenPO213094
VendorProcurerApproverRequestorTrans-UID
RequestRequest ApprovalApproval ProcureProcure ReceiveReceive PayPay
PO213094Jbertelsen26,089.00
Throughout the process, criticalControl Information is captured
to verify compliance
PO213094Jbertelsen26,089.00
Compliance Requirements:
¬ Real-time notification of non-compliance (inaccuracies, rule violations)
¬ Continuous monitoring for accurate sampling
¬ Validation that financial controls put in place are actually working
¬ Auditable records for compliance verification (humans make mistakes)
Business Objectives:
¬ Reduce costs of compliance¬ Eliminate “human element” and
associated audit error (auditors need to be smarter than the violators)
¬ Leverage existing IT systemsand workflows to guarantee
compliance
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CASE STUDY: PolyOne
¬ Introduction to PolyOne
¬ Early B2B/Procure-to-Pay Automation
¬ Procure-to-Pay in 2006
¬ The Future
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Introduction - PolyOne At A Glance
$2.5 billion international polymer services company* $2.5 billion international polymer services company* Vinyl CompoundsVinyl Compounds
Color & Additive Master BatchColor & Additive Master Batch
DistributionDistribution
Polymer Coating SystemsPolymer Coating Systems
More than 35,000 specialty and commodity productsMore than 35,000 specialty and commodity products
51 manufacturing facilities & 13 warehouses in 20 51 manufacturing facilities & 13 warehouses in 20 countriescountries
More than 10,000 customers in 35 countriesMore than 10,000 customers in 35 countries
* Total PolyOne revenues of $2.5 billion includes inter* Total PolyOne revenues of $2.5 billion includes inter--company transfers which are excluded from individual business uncompany transfers which are excluded from individual business unit it resultsresults
Engineered MaterialsEngineered Materials
Specialty ResinsSpecialty Resins
Producer ServicesProducer Services
Vinyl Polymer & Vinyl Polymer & ChlorChlor--Alkali Equity InvestmentsAlkali Equity Investments
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Sales by Geographic RegionSales by Geographic Region2005 Sales Revenues2005 Sales RevenuesDollars in MillionsDollars in Millions
Introduction to PolyOne
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PolyOne History
19221922Hanna is Hanna is
incorporated incorporated ––1927 becomes a 1927 becomes a public companypublic company
20002000Hanna Hanna
completes completes 2626thth polymer polymer acquisitionacquisition
19271927BFGoodrich BFGoodrich
scientist scientist Waldo Waldo SemonSemonproduces first produces first usable vinyl usable vinyl
polymerpolymer
19481948BFG creates BFG creates vinyl plastic vinyl plastic
divisiondivision
19581958BFG creates BFG creates
first compounds first compounds for piping for piping
applicationsapplications
19931993BFG spins BFG spins Geon out Geon out
through an through an IPOIPO
M. A. Hanna Company
The Geon Company
19861986Hanna purchases Hanna purchases
first polymer first polymer company company
Begins to shed its Begins to shed its historic shipping historic shipping
and mining and mining businessesbusinesses
1930 1940 1950 1960 1970 1980 1990 20001850
19591959Hanna exits coal Hanna exits coal mining to focus mining to focus
on iron oreon iron ore
EarlyEarly19701970’’ss
Hanna becomes Hanna becomes worldworld’’s seconds second--largest producer largest producer
of iron oreof iron ore
19821982BFG develops BFG develops
rigid vinyl rigid vinyl injectioninjectionmolding molding
technologytechnology
19991999Geon spins out Geon spins out its commodityits commodityPVC resins PVC resins
business into a business into a joint venture with joint venture with
OxyChemOxyChemGeon completesGeon completes88th th compoundingcompounding
acquisitionacquisition
18851885M. A. Hanna M. A. Hanna is formed as is formed as privately held privately held
companycompany
2000
is formed
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PolyOne Business Model
Designers,Designers,Assemblers,Assemblers,ProcessorsProcessors
Large Large Chemical Chemical ProducersProducers
Proprietary Compounding
►► Vinyl CompoundsVinyl Compounds
►► Engineered MaterialsEngineered Materials
►► Color & Additives Color & Additives MasterbatchesMasterbatches
►► Polymer Coatings SystemsPolymer Coatings Systems
►► GeonGeon®® Specialty ResinsSpecialty Resins
Distribution
Custom Compounding
►► Producer ServicesProducer Services
How We Serve CustomersHow We Serve Customers - PolyOne is the essential link between:- PolyOne is the essential link between:
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Early Procure-to-Pay Automation
Geon 1999: The Challenge:¬ Take two vertically integrated business units on a common ERP
platform and split them on to separate systems.
¬ Integrate them back together as if they were on one system.
¬ Leverage the technology with other key suppliers.
Not just purchase orders, but true supply chain integration
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Early Procure-to-Pay Automation
¬ A Strategic Business-driven eCommerce initiative¬ A “High Value Interactive” Solution¬ Targeted for a select group of Strategic Partners
¬ Business Process and Technical platform that:¬ Provides seamless integration between trading partners¬ Enables Business-to-Business (machine to machine) eCommerce with
customers and suppliers¬ Leverages PolyOne’s investment in SAP
¬ Business initiative to make PolyOne’s activities simpler and more efficient
What is PolyOne B2B?
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Integration Components
R/3 Integration M
odule
Flow Services
System Services
HTT
P R
ES
PON
DE
R
Flow Services
System Services
HTT
P R
ES
PON
DE
R
Internet
BAPI SO
Create
BAPI SO
Create
Vendor SAP
Read PO
Integration Modules
R/3
Inte
grat
ion
Mod
ule
Create SalesOrder
Integration Modules
PolyOne SAP
PODocument
PODocument
Sales OrderDocument
Sales OrderDocument
ConfirmSO# BAPI SO
Confirm
BAPI SO
Confirm
CreateOrderConf.
SalesOrder Data
ReadOrderConf.
BAPI Order Conf.
Read
BAPI Order Conf.
Read
BAPI Trigger
BAPI PO
Read
BAPI PO
Read
webMethods Product Suite
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Procure-to-Pay Overview
PlannedRequirements
Demand Plan IndependentRequirements
PolyOne Supplier
Ship Notice SupplierShipment
InvoiceCustomerInvoice Entry
SupplierInvoice
PurchaseOrder
Sales Order
Order Create
Order Response
Order Change
Delivery Notice
Payment BankEFT
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webMethods Modeler Example: Outbound Order
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Procure-to-Pay Overview
Mantra for success: “Simplify, Integrate, Automate”
Simplify¬ Before starting Procure-to-Pay Automation you must drive complexity out of
your processes and business relationships.Integrate
¬ Link processes together so that information flows seamlessly.Automate
¬ Remove manual steps that slow process and add cost not value.
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Procure-to-Pay Overview
Questions to ask: What is the scope and how will it translate into value?
¬ Demand Forecast¬ Orders¬ Confirmations¬ Ship Notice¬ Invoice or ERS¬ Check or EFT¬ Which products & locations
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Procure-to-Pay Overview
Questions to ask: What is an Order?¬ How many items, dates, locations per order¬ Quantity limits¬ Pricing policy¬ Cancellation policy¬ Text instructions¬ Split or partial confirmations¬ Lead time ¬ Logistics instructions¬ Blanket orders¬ Consignment¬ Credit or other blocks¬ Returns
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Procure-to-Pay Overview
Questions to ask:
How is a material defined?¬ 1-to-1 definition between supplier and customer¬ Package size¬ Test specifications¬ Labels
How to handle support after go-live?¬ Contacts¬ Error handling¬ New products or locations¬ Upgrades
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Benefits in the First Year
¬ $300 Million annual extensible electronic channel created¬ 8 week implementation - minimal system changes¬ Focus on Business Process Simplification
¬ 7X24 “Lights out” procurement/inventory mgmt process¬ Increased Data integrity - Timeliness/Accuracy¬ Increased Productivity - Simplification
¬ Reduced number of steps in the procurement process ¬ Eliminated 3-4 FTE’s - Corporate, .5 Manufacturing
¬ Cost Reduction¬ Decreased Working Capital PVC by 12%, Non-resin by 3%¬ Reduced inventory in pipeline¬ Transaction costs - $45,000/month¬ Reduced Storage Cost - Demurrage and Warehouse
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Intangible B2B Benefits
¬ People directed away from repetitive, minimal “business”impact tasks
¬ Order generators to process managers¬ Data verification to decision makers¬ Exception based management
¬ Increase productivity¬ ability to take on a much wider scope of responsibilities
¬ Operational Excellence in Supply Chain¬ Develop the “ultimate schedule”¬ Increase manufacturing efficiency and utilization¬ Continuous improvement
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Innovation Earns Patent
United States Patent 6,675,178 European Patent WO0239355A method for enhancing a commercial transaction via a communications network
includes maintaining synchronized updates to databases at different business entities to facilitate accurate transactions between the business entities. A change in configuration data stored in a first configuration database is detected in accordance with a real-time detection procedure. Revision data is transmitted to a second configuration database within a maximum time interval after detection of the change in the configuration data. A second configuration database is updated in accordance with the revision data, such that the configuration data of the first configuration database mirrors configuration data of the second configuration database with respect to at least one commercial transaction.
Inventors: Chinchar; Robert S., Francis; Kirk, Grimm; Doug, Huffman; Arnold Z., Kling; Ray, Krahn; Richard R. , Miller; Kirk A., Schwarzinger; Todd D., Smiach; Barry, Sweeney; Michael S.
Also 6,684,222 and 6,687,700
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Procure-to-Pay in 2006
webMethods powered: upgrade & consolidationwebMethods powered: upgrade & consolidation
01234567
2004 2005 2006 Today Q32007
Number of EDI/B2B Systems
wMNon-wMPC systems
01234567
2004 2005 2006 Today Q32007
Number of EDI/B2B Systems
wMNon-wMPC systems
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Procure-to-Pay in 2006
¬ Breath of Supply Chain¬ Beyond large partners¬ Beyond suppliers
¬ Multiple industry standards¬ ChemXML-CIDX: Chemicals¬ EDI: Automotive/Appliances/Packaging
¬ webMethods Product Suite helps bring them together
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PolyOne B2B Integrations
Enterprise Can Communicate in Multiple Ways
PolyOneB2B
SAP
VMI
XML
JDE
Standard SAP Format
Standard JDE Format
Hub
VMI
Procure-to-Pay in 2006
CIDX
EDI
PCDM
Legend
Suppliers
Customers
Logistics Partner
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PolyOne Integrations
Vendors
Customers
VMI
Schneider
Regardless of the connection type (Hub / P2P)
Standardize by Format/Version (not partner)
Translator(standard processes)
webMethods B2B
CIDX
V2.0
V2.01
V2.02
V3.0
EDI Versioncontrolled
PCDM Varies by partner
•Recognize Partner and inbound format
•Map into PolyOne format
Standard JDE
Format JDETables
Standard SAP
Format
SAPBAPI / RFC
IDOC
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Outbound PO: Order-to-Canonical
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Outbound PO: Canonical-to-CIDX
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Outbound PO: Canonical-to-EDI
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PolyOne eCommerce Connection Strategy
B2B P2P CIDXB2B P2P CIDX
ManualManual
Automated
Manual
B2B P2P ProprietaryB2B P2P Proprietary EDI Standard PlusEDI Standard Plus
Web Based IntegrationWeb Based Integration
B2B Hub ProprietaryB2B Hub Proprietary EDI CustomEDI Custom
B2B HUB CIDXB2B HUB CIDX EDI StandardEDI Standard
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The Future of Procure-to-Pay
¬ New partners: 8 days not 8 weeks
¬ Leverage more functionality & volume through existing connections
¬ Share new types of information
¬ New types of partners
Thank You
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