1. IDC ExpertROI® SPOTLIGHT
Irish Dairy Board Cuts Admin Costs and
Optimizes Order-to-Cash Processes with
IBM Sterling e-Invoicing Solution
March 2011
Sponsored by Sterling Commerce, an IBM Company
Overview
The Irish Dairy Board (IDB) is a commercial cooperative and the major international exporter
of Kerrygold and other Irish dairy products worldwide,
with annual revenue of €1.8 billion ($2.4 billion). Business Value Highlights
Established in 1961, IDB markets and exports the Irish Organization: Irish Dairy Board
dairy products produced by its member manufacturing Location: Ireland
cooperatives and dairy companies.
Challenge: To speed receivables
IDB had previously deployed the Sterling Commerce collection with customers across the
European Union
flagship B2B integration platform, IBM Sterling B2B
Integrator, to streamline its supply chain. In 2010, IDB Solution: Sterling e-Invoicing solution tied
into Sterling B2B Integrator B2B
deployed the IBM Sterling e-Invoicing solution for integration platform
customers in 14 of the 27 European Union (EU) countries
Cumulative benefits:
to speed receivables collection, reduce administrative • €322K for 3-year period
costs, and improve order-to-cash processes. • ROI of 349%
• Payback in 5.4 months
IDB realized not only the cost savings but also the
compliance benefits of automation that come from Specific annual benefits:
implementing a cross-border e-invoicing solution. • Annual cost reduction of €15,860
Businesses that trade internationally must deal with • Revenue gain of €79,545 and
• Lower administrative costs
regional variations in tax and financial regulation, and the enhanced account management
cost of noncompliance can be high. The solution provides
up-to-date compliance data from local law firms and tax authorities as well as documentation of
compliance processes and legal requirements. IDB can archive and revalidate any invoice at any
time and provides summary reports when required by auditors for compliance checking.
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2. Sterling Commerce (continued)
Implementation
Installation of the Sterling e-Invoicing solution began in September 2009. "We had a Sterling
Commerce consultant onsite for three days to set up the server and perform the basic
installation," said Sean Flynn, IDB business analyst. "Two of us helped with the setup and
received the basic training, which was pretty self-explanatory because of the interface."
Independent auditors were brought in to make sure the solution met all the criteria of the EU
directive covering e-invoicing. "We wanted to make sure we were operating at the very highest
standards," said Flynn. The Sterling e-Invoicing solution went live in March 2010.
The rollout proceeded in stages. "We started with a batch of customers, testing at each stage
before going live with the next group," Flynn said. IDB also conducted a review of its
transaction processing from beginning to end. "Two components, e-invoices and e-statements,
were very important to us."
Before selecting the Sterling e-Invoicing solution, IDB evaluated competitive products but
found them lacking. "We needed to provide both PDF signature authentication and EDI invoice
processing to allow businesses of all sizes and IT sophistication to trade easily with us," Flynn
explained. "A lot of companies could provide an EDI solution, but not the PDF capability.
Sterling Commerce gave us both, and its archiving solution was more user-friendly."
Having Sterling B2B Integrator for customer orders, supplier invoices, and stock movements
was also a factor in the selection. "The IBM Sterling ERP system integration was definitely an
advantage in going with the company's e-Invoicing solution," added Flynn. "The ERP system
provides the raw data for e-invoices and e-statements, and we couldn't have done the same thing
with the other solutions. Also, the support we received from Sterling Commerce was first class,
so we knew we were in good hands."
Benefits
By enabling the earlier detection of customer issues with invoices, the Sterling e-Invoicing
solution has increased customer satisfaction and IDB's cash flow. Having more timely and
reliable information has also helped to improve account management and reduce administrative
costs. Additionally, the Sterling e-Invoicing solution has allowed IDB to project the
professional image it wanted.
For IDB, the quantifiable benefits from implementing the Sterling e-Invoicing solution included
savings from increased staff productivity, reduced operating costs, and business benefits from
faster collection of receivables and improved customer satisfaction. Figure 1 shows the
breakdown of savings, which total an average of €107,406 annually.
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3. Sterling Commerce (continued)
Figure 1.
Average Annual Savings
Total = €107,406
Cost
reduction
€15,860
User
productivity
€12,001
Revenue
impact
€79,545
Source: IDC, 2011
User Productivity Increase
Replacing the manual processing of invoices with the Sterling e-Invoicing solution has saved
IDB two hours a day of staff time, freeing employees to perform other critical tasks. Archiving
is also simpler and more efficient. Additionally, invoices are easier to trace when queries arise,
allowing faster response to customers.
IDB sends e-statements twice monthly, giving customers regular visibility into their accounts.
This added visibility has more than halved the number of queries IDB receives and has reduced
the time required to resolve them by about five minutes per query. The savings from increased
staff productivity average €12,001 a year.
Cost Reduction
By deploying the Sterling e-Invoicing solution with the companion Sterling B2B Integrator
platform, IDB was able to speed installation and initial setup and further streamline the
invoicing process. "The feed from the ERP system is totally automatic, eliminating the manual
printing of invoices for dispatch to the customer," David O'Rourke, IDB trade finance
executive, stated. "The time and cost savings are substantial. We want to make it as easy as
possible for partners and customers to do business with us, and the feedback has already been
very positive."
Selection of the Sterling e-Invoicing solution realized a one-off savings of €16,500 compared
with the alternative approach considered by IDB. In addition, the savings in paper and postage
from eliminating mailed invoices and statements have averaged €10,360 annually. Over three
years, the cost reductions are projected to average €15,860 a year.
Revenue Impact: Significant Improvements in Order to Cash
The early detection of invoicing issues and the prompt resolution of such issues have helped to
speed the collection of receivables. Before IDB implemented the Sterling e-Invoicing solution,
customers often disputed an invoice at payment time, delaying the payment by a business week.
By automatically e-mailing invoices and statements on a more frequent basis, IDB has given
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4. Sterling Commerce (continued)
customers increased visibility into their accounts and payments coming due and encouraged
more timely payments. As a result, it has reduced disputed and late payments by two-thirds,
leading to quicker recognition of revenue. "We set targets for reducing the time it takes to be
paid, and we've met them," Flynn said.
Having more timely and reliable information has also helped to improve account management.
"When our salespeople talk with customers, they can now look at their account to answer
queries and provide them with any statements or correspondence they need," Flynn explained.
"Our salespeople find it very beneficial."
Does the Sterling e-Invoicing solution give IDB a competitive advantage? "Absolutely," said
Flynn. "It presents a very professional image to our customers. We deal with a range of
companies, including those in the top tier who have already moved to e-invoicing. We are now
able to meet their requirements."
In total, the business benefits from more timely revenue collection and improved account
management and customer satisfaction are projected to average €79,545 a year.
Return on Investment
IDC projects that IDB will realize a three-year return on investment (ROI) of 349% from its use
of the Sterling e-Invoicing solution. Payback on the investment occurred within 5.4 months of
the deployment (see Table 1).
Table 1.
Three-Year ROI Analysis
Benefit (discounted) €259,495
Investment (discounted) €57,745
NPV €201,750
ROI 349%
Payback 5.36 months
Discount rate 12%
Source: IDC, 2011
IDC conducted an interview with the Irish Dairy Board to quantify the benefits and the
investment associated with its deployment of the Sterling e-Invoicing solution and created an
ROI analysis from the results.
IDC calculates the ROI and payback period in a three-step process:
1. Measure the savings from increased staff productivity, cost reduction, and other business
benefits since deployment.
2. Ascertain the total investment.
3. Project the investment and benefit over three years and calculate the ROI and payback
period. The ROI is the three-year net present value of the benefit divided by the discounted
investment. To account for the time value of money, IDC bases the ROI and payback
period calculations on a 12% discounted cash flow.
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5. Sterling Commerce (continued)
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