When multiple businesses in the same ecosystem come together to create greater efficiencies, everyone wins. In this enlightening session we will look at how billions of dollars of business can be optimized in the most unexpected of fashions. We will hear of real-world results such as:
• The effects of impacting $4 Billion in annual spend
• Keys to reducing invoice processing costs 40%
• Secrets to managing over 6 Million invoices per year
For those looking to understand the keys of a scalable ecosystem, this session will proved guidance and insights from several real-world success stories.
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The Holistic Benefit of a Networked Ecosystem – The Real-World Proof
1. The Holistic Benefit of a Networked Ecosystem –
the Real-World Proof
When multiple businesses in the same ecosystem come together to create
greater efficiencies, everyone wins. In this enlightening session we will look at
how billions of dollars of business can be optimized in the most unexpected of
fashions. We will hear of real-world results such as:
• The effects of impacting $4 Billion in annual spend
• Keys to reducing invoice processing costs 40%
• Secrets to managing over 6 Million invoices per year
For those looking to understand the keys of a scalable ecosystem, this session
will proved guidance and insights from several real-world success stories.
3. Ariba Collaborative Value Chain – Direct, Indirect, Services
Buyer’s Processes: Analyze to Pay
Supplier’s Processes: Market to Cash
The Ariba Network is the world’s largest Business Network, allowing Buyers and Sellers to
become more efficient across their Buying, Selling, and Cash Management Processes
4. Ariba Collaborative Value Chain – Direct, Indirect, Services
•Spend Data
Enrichment
•Spend
Analysis
•Contract
Collaborat
ion
•Authoring
•Repository
•Requisition
Ownership
•Catalog
Compliance
•Contract
Compliance
•Approv
al
Workflo
w
•PO
Collaborat
ion
•PO
Transmissio
n
•Goods &
Services
Receipt
•Invoice
Receipt
•Invoice
Compliance
•Invoice
Approval
•Exception
Workflow
• Awareness
Marketing
•Lead
Collaborat
ion
•Proposal
Collaborat
ion
•Bidding
Opportunit
y
•Contract
Collaborat
ion
• Contract
Repository
•Catalog
Collaborat
ion
•Catalog
Syndication
•Requisition
Collaborat
ion
•Specificati
on
Negotiation
•Order
Collaborati
on
•Order
Status
•Invoice
Delivery
•Invoice
Collaborat
ion
•Supplier Info;
Performance Mgmt;
Supplier Research
•Company Profile Mgmt
•Customer Account Management
Buyer’s Processes: Analyze to Pay
Supplier’s Processes: Market to Cash
•Payment
Collaborat
ion
•Discount
Collaborat
ion
•Payment
Collaborat
ion
•Payment
Visibility
•Working
Capital
Collaborat
ion
•Category /
Project
Mgmt
•RFI / RFP /
Auction
Collaborati
on
•Savings
Tracking &
Pipeline
5. Delivering Measurable Benefits
Value to Companies of All Sizes, Industries, Regions
Supplier ValueBuyer Value
Sourcing
Procurement
Process
AP Process
Compliance
WCM &
Discount
3-9%
Process
Savings
$3-20
Savings/
Document
1-8%
Spend
Savings
Total
Savings
Faster
Payment
AR Process
Processing
Orders
Sales &
Marketing
Increased
Revenue
15-75%
Time
Savings
15-75%
Process
Savings
5-32%
Revenue
Increase
Total
Savings
Source: Ariba customer surveys and interviews
6. What is a “Networked Ecosystem?”
Ecosystem
From Webster’s Dictionary:
“The complex of a community of organisms and
its environment functioning as an ecological unit
in nature.”
7. Today’s Discussion
• About UPS
• Strategy and Vision
• Procure-to-Pay Processes
• Lessons Learned
• Q & A
8. About the UPS “Organism”
• Founded in Seattle, WA 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 (16.3M per day)
• 2012 Total Revenue: $54.1 Billion ($45 Billion Small Package)
• Employees: 397,100 (322,100 U.S.)
• Small Package Customers: 8.8 Million Daily (1.1 million pickup customers)
• Total Facilities Worldwide: 2,915
• Total Ground Fleet: More Than 102,800 Units
─ All Business Units – Tractors, Package Cars, Motorcycles
• Aircraft: 230 UPS Aircraft and 332 Chartered
10. Desired State: “Procure-to-Pay”
• Global Process Improvement & Standardization
– Paper invoices and lengthy manual processes drive up cost, delay
payments, reduce discount opportunities, and may result in late fees.
• Increase Spend Visibility and Purchasing Compliance
• A Consolidated Contract “Warehouse” for Verification of
Pricing, Pay Terms, and Legal Compliance
• Reduce Processing Fees (paper to electronic)
• Increase Early Payment Discounts (Contracted Discounts and
Network-generated Discounts)
– Local service suppliers
– Corporately-negotiated suppliers
11. “Procure-to-Pay”
• Four Key Work Streams (“Ecological Elements”)
─Contract Management
─Catalog/Content Management
─Contract Invoicing (Services Procurement)
─Ariba Network
12. Contract Management
• Transition From Paper to Scanned Image/Database
Repository
• Identify Contracts
─Who? What? Where?
• Challenges
─Identify “Owner.” Is There Just One Owner?
─Master Agreement vs. Individual Contracts
─Capturing All Pricing Terms for Invoicing (No previous
systemic connection to invoice process)
13. Initial Scope for Supplier Enablement
Late 2010/Early 2011 Kickoff
• General Supply Catalog Suppliers
─Approximately 250 Suppliers
• I.T. Catalog Suppliers
─Approximately 150 Suppliers
• Local Services
─3,000-5,000 Suppliers
14. Supplier Enablement
• Two Primary Supplier “Types” (Supplier “Organisms”)
─Catalog Suppliers (Generally, large corporate suppliers)
─Contract Invoice Suppliers (Generally, small local service suppliers)
• Catalogs Managed Primarily “In House”
─UPS prefers up-front control over items and pricing
─Some “Punchout” catalogs when situation warrants
• Supplier Enablement Strategy
─Identification
─Notification
─Invitation
─Strong Compliance Message
15. Contract Management – Positive Impact
• Single, Online Repository of Contract Data
• Easy Access to Data and Basic Reports
• Alerts and Notifications Help Mitigate Risk
─Contract expirations
─Insurance expirations
• Creates Opportunity for More Effective Rate Analysis
and Sourcing
• Overall, Most Significant Value is in Areas of
Compliance and Risk Management
16. Content/Catalog Management – Positive Impact
• Content Management Tool streamlined catalog
approvals by Corporate Procurement
• Ariba Punchout for Item Search/Select
─Search filters are very useful
─Flexibility with “Favorites” lists
─Challenge: Punching out to Ariba environment adds “clicks”
to the ordering process
• Enhanced “Shopping” Experience Facilitates
Compliance
─Best value for “total cost of ownership”
17. Order Management – Positive Impact
• Transacting with Suppliers Over the Network
Facilitated Requirement of Key Business
Documents
─PO Acknowledgements, Advanced Shipment Notices,
etc.
─P.O. Acknowledgements helped reduce price holds
─Advanced Shipment Notices helped reduce internal
inquiries regarding order status
18. Contract Invoicing – Positive Impact
• Invoice Strategy for Services
• Systemic Validation of Rates
• Streamlined Approval Process for Invoices
─Invoice is validated against the contract
• Elimination of Paper Invoicing for Large Segment of
Suppliers
• Reduction in 3rd Party Invoice Processing Fees
• Significant Reduction in “Days to Approval”
─Streamlined approvals
─Positive impact on meeting contracted payment terms and EPO’s
19. Other Value/Benefits
• Payment Term Audits
─Reduced Discrepancies Between Terms on Contract, and Terms in
Vendor Master File
─Positive Impact on Invoice Discounts Realized
• Reduce “Leakage” on Corporate Agreements
(Rogue Spend)
─Positive Impact on Rebates for Meeting Spend Commitments
─More effective compliance to ensure designated product
specifications
20. UPS U.S. Domestic Annual Volumes
Element of the Ecosystem Ariba Network
Ariba Network
Future Targets
Active Suppliers 1,265 3,000 – 5,000
Catalogs 246 95+%
Purchase Orders
628,000 (2013
Annualized)
1.2M POs & transition
45+% to Contract Invoicing
Invoices
800,000 (2013
Annualized)
2.3 Million
Percent of e-Invoices N/A 81%
Spend
$250 Million (2013
Annualized)
$3.2 Billion
Discounts Earned
$130K (2013
Annualized)
$3.2 Million
21. Reduction in Transactional Cost Per Invoice
• Transferring invoice activity to the
Network has resulted in reducing
invoice transactional costs by a
weighted average of $0.20 per
invoice.
─ Moving paper invoices to the
Network = $0.80 savings per
invoice
• Annual savings are ~$125K, with
current invoice volume.
─ Reduced paper
─ Reduced manual handling
─ Reduced 3rd
Party key entry costs
22. Contract Compliance – Payment Term Audits
• Contract visibility enabled UPS to effectively
ensure contracted payment terms matched ERP
assignment. Audit in 2011 revealed that:
─ 60 high-spend suppliers had contracted discount
terms that weren’t assigned in Oracle.
─ Approximately 400 suppliers had their contracted
payment terms extended in ERP system.
• Result: Positive cash flow impact
23. Intangible Benefits & Benefits Not Yet Fully Realized
• Reduced Invoice Exceptions
─ Unmatched invoices
─ Price discrepancies
• Reduced Help Desk Calls for “Invoice and Payment Status.”
Suppliers on Network Now “Self-serve”
• “Days to Approve” Reduced From Average of 18 Days to 7 Days
• Reduction of Local P.O. (LPO) Process
─ LPO is Software Customization
─ Cost Reduction in LPO/Paper Invoice Transactions
24. Discount Benefits – EPO Acceptance Rate
• Network generated discounts are expected to be 0.15% of total spend
transacted over the Ariba Network.
Wave (Supplier Type) EPO Acceptance Rate
Corporate Agreements 0.01%
Automotive 0.30%
Plant Engineering 0.14%
Medical 0.96%
Overall 0.07%
25. Supplier Value
• Clear Value for Suppliers with Significant Transactions
─Visibility seems to be most useful benefit for suppliers
• Working Cash Management Flexibility
─Cash flow is typically not an issue with larger suppliers
─Small margins on pricing for corporate suppliers leaves little
room for invoice discounting. Many already have contracted
discount thresholds
─Much higher acceptance by small, local suppliers than our
Corporate suppliers
─Small, local suppliers tend to need more cash management
flexibility
27. Lessons Learned
• Higher Levels of Procurement Engagement
– Create up-front partnership between Campaign and Procurement
leadership
• Implementation
– An all encompassing approach works for some, but not all organizations
– Phasing smaller groups of spend provides the opportunity to showcase
success
• Change Management
– Everything is connected. Need to manage the entire “ecosystem”
– Large, complex organizations require frequent and multi-level coordination
– Senior management cross-functional support
– Training: New processes, policies, etc. (Internal audiences and suppliers)
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Notas del editor
Ariba’s On Demand applications and the Network generate measurable value to organizationsBuyer’s experience significant savings that fall right to the bottom lineSome savings are obvious (see above) but others less so. For example, a large Oil company was able to significantly cut inventory of replacement parts in its refineries due to the visibility into order status the network provided. This visibility not only enabled the managers to focus on the operations instead of whether a critical shipment was going to come, but also enabled them to reduce the excess inventory they needed as safety stock to ensure the refinery didn’t go downSuppliers experience savings through the automation of non-value added activities (like AR clerks having to call their customers each month to see when payments will be made)Suppliers also see top line growth from participation on the network – including net new business and increased wallet share with existing customers
What do we want our “ecology” to look like at UPS?