Benefits from Optimizing the Purchase-to-Pay Channel Strategy Go Well Beyond Process Cost Reduction

The Hackett Group Procurement Advisory Program| 1© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
OPTIMIZING THE PURCHASE-
TO-PAY CHANNEL STRATEGY
Associate Principal, Procurement Advisory
March18, 2014
Kurt Albertson

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 I really like this and think it’s super close. Just a few minor thoughts:
 Should we be clear around how Services and other highly collaborative spend falls within
this (I love slide 31, but I’m not clear where this spend falls).
 Should the concept of collaboration be incorporated a bit more around some spend types?
 Maybe we can start off at the very beginning with a concept statement such as: By
optimizing spend to the process and risk elements, rather than what the product is used
for, companies can generate greater levels of synergy and cost savings… or something
like that?
 I’m not sure your sound track on this. I think it’s a great, deep piece, but we may need to
give a “simple” sound track for an audience who has been in Vegas and may have had a
few drinks the night before. What do you think?

Agenda
 Introduction
 Defining P2P Channel Strategy
 Benefits of Optimizing the P2P Channel Strategy
 P2P Channel Strategy Program Approach
 Conclusion

Kurt Albertson
Phone: + 1 770.225.7570
kalbertson@thehackettgroup.com
Kurt Albertson has responsibility for The Hackett Group’s North
American Procurement Advisory program focusing on client
relationships, business development, research and program
delivery. Mr. Albertson works with over a hundred Global 1000
companies leveraging research and thought leadership to provide
strategic direction and best practice business advice within
Procurement and Finance. Prior to joining the Hackett Group Mr.
Albertson spent six years as a management consultant in Sourcing
and Procurement during which he worked with executives from
dozens of large corporations on sourcing, business and technical
strategies, organizational and business process design, and cultural
change. Mr. Albertson also has five years of automotive experience
working in manufacturing, quality, and operations. In this role he
designed and implemented global manufacturing processes and
supervised production operations. Mr. Albertson has been quoted in
the Wall Street Journal and other major publications, has been the
key note speaker at many national events, and travels globally to
support client objectives.

The Hackett Group Procurement Advisory Program | 6© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The Hackett Group
A leader in organizational effectiveness and best practice insight
Mission
 Hackett is an IP-based Global Advisory and Consulting firm helping clients implement and sustain
world-class business performance across General and Administrative Services
Hackett’s Value:
 We formulate strategies based on our proprietary repository of Certified Hackett best practices and
competitive insights
 We design and implement sustainable performance improvement solutions
Results
 Our efforts have delivered 20%-40% in sustainable cost savings and over $25 billion of improved cash flow
for clients across the globe
Hackett Group Solutions:
 Finance
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 Procurement & Sourcing
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 Operations, Strategy, and Marketing
Performance
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 Global Business Services/
Outsourcing
 Workforce Solutions
 Technology Implementation
Oracle, SAP, Hyperion,
Kronos, and Business
Objects
97%
of the Dow
Jones
Industrials
73%
of the
Fortune 100
88%
of the Dow
Jones Global
Titans
73%
of the DAX 30
45%
of the FTSE
100
35%
of the CAC 40

And Benchmarks Organizations across P2P including Plotting on the
Hackett Value GridTM against Top Performers
 Each organization is evaluated on overall efficiency and effectiveness and compared against others performance
based on percentile rank
 A formula combining these efficiency and effectiveness rankings is then used to calculate an overall ranking for each
individual organization
 Organizations that are high performers for both efficiency and effectiveness are identified as Top Performers
 Median Top Performer and Non-Top Performer (Peer) comparisons are made throughout this presentation
 Quartiles are shared on metrics where usage is strategy-dependent
 Some metrics leverage data from related Hackett studies and benchmarks for greater sample size
Hackett Purchase to Pay Value Grid™
Example of Effectiveness Drivers
• First Pass Match Rate
• On Time Payment Rate
• Level of Spend Visibility
• Streamlined Transaction
Strategy
• Level of Centralization
• Training Investment
• Compliance to Preferred
Suppliers
• Guided Buying Effectiveness
• Supply Base Consolidation
Example of Efficiency Drivers
• Cost per Transaction
• Transactions per FTE
• Span of Control
• Order Cycle Time
• Invoice Processing Cycle
Time
• Percent of Electronic
Transactions
• Level of Automation

The Hackett Group Procurement Advisory Program | 8© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Agenda
 Introduction
 Conclusion

By considering how spend is committed with respect to process and risk
elements organizations can generate greater levels of overall value
Some of the problems addressed by Optimizing the P2P Channel Strategy
 Alignment of Strategic Spend Management and Transactional Management
 Lack of standardization and commonality of buy/pay processes
 Overly complicated spend control requirements (or lack thereof)
 Management of transactional and supply risks
 End to end process integrity and data quality
 Failing to leverage enabling technologies/tools
 Realized total cost savings through compliance and spend visibility
 Optimization of working capital including discounts/rebates

Source-to-Pay Channel Strategy Defined
 The Channel Strategy defines an end to end approach for executing sourcing and buying
activities with an emphasis on:
– Integrating strategic buying activities with tactical/transaction processes
– Reducing the variation in how we buy and pay for needed goods and services
– Matching the right process with the right technology tools to manage spend and execute
sourcing and buying processes
– Balancing risk mitigation with process efficiency and ease of use
Channel
Strategy will…
Auto-PO
E-catalogue
Goods Receipt
E-invoice
Wire Transfer
PayRequisitioning Buy Receipt Invoice
Leverage Enabling
Technologies
...to realize scale and global
footprint
Standardize end-to-end
processes and globalize best
practices
Eliminate complexity and
inefficient processes
Option 1
Requisition Buy Receive Invoice PayTransmit
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Manage Supplier Risk

Optimization of the P2P Channel Strategy Follows a Level of Maturity
1 - Lagging 2 - Achieving 3 - Exceeding 4 - Leading
No clearly defined
approach for
balancing P2P
transactional
requirements with
the degree of risk
across different
spend categories.
No controls across
enterprise on the
number of ways
purchases can be
transacted.
Beginning to
align/balance predefined
spend categories with
Pcard, Non PO, 2-Way
and 3-Way matching
transactional strategies.
Leveraging
eProcurement system to
manage compliance
Preferred transactional
channels (Pcard, Non
PO, Assumed Receipt,
ERS, 3-Way Match, etc)
are assigned for each of
the major
spend/commodity
categories to manage
associated control
requirements. Preferred
channels are clearly
communicated and
compliance monitoring
programs are in place.
Formalized end-to-end
channel strategy with
nearly all spend covered
by contract or PO.
Automated 3-way
matching when required
for highly controlled and
risky commodities.
Aggressive use of
assumed receipt,
evaluated receipt
settlement, and the
automation of recurring
payments for certain
commodities. Thresholds
for “no” and “negative”
verification/approval are
optimized. P-Card
program is fully
implemented.

Optimizing the P2P Channel Strategy is about Aligning Category Spend
to its Optimal Channel through an Analysis of Risk and Control
2
1
3
4

Risk Factors are Many and Need to be Considered in the Context of the
Category being Purchased
Let’s not over
control our buys
• Assurance of Delivery
• Expenditure Approval
• Item or Service Pricing
• Item Tracking
• Granularity and/or
Allocation of
Expenditure
• Budget Management
CONTROL Factors
RISK Factors
• No Spend Detail
• Limited Account Detail
• Inappropriate
Allocations
• Stock Out
• Price Variance
• “Unearned” Payment
• Unapproved
Commitments
• Liability

The Channel Strategy Must be Aligned with the Strategic Sourcing
Process to Insure Alignment with Supplier Selection and Requirements
Buy Pay
(AP)
Receive
Strategic Sourcing, Business
Procurement & Contracting
Requisition to
Pay
• Sourcing & Business
Procurement
Strategies
• Supplier Negotiation
• Supplier Selection
(Supply Strategy & Sourcing – Strategic Procurement)
(Buy/Pay Process – Transactional Procurement)
Key Inputs to Buy/Pay Process
• Contract Development
and Management
• Supplier Relationship
Management
Supplier
Master
File
• Procurement Policy
• Preferred Supply Base
• Accurate Pricing
• Catalogs
• Channel Design & Management
• Self Managed Buy
• Automated Buy
• Professionally Facilitated
Buy
• Match Processing
• Supplier Payments
• Delivery Verification
• Inventory Updates
Spend
Data
Improved Financial Controls, Buying Compliance, Savings Realization

Agenda
 Introduction
 Conclusion

42%
47%
47%
51%
51%
53%
57%
62%
70%
71%
74%
89%
Redesigning global supply chain
Creating a more variable cost structure
Entering new regional markets
Establishing end-to-end process ownership
Seeking strategic mergers and acquisitions
Reducing cost of goods sold
Changing organizational structure
Optimizing vendor base
Upgrading talent
Reducing SG&A cost
Enhancing data management, BI and analytics
Investing in technology/automation
Examining Areas of Focus at the Enterprise Level We See that the
Purchase-to-Pay Process is Impacted by Multiple Themes
Enterprise areas of focus to achieve business strategy
(Percent of companies stating as Critical/Moderate)

For 2014 Procurement Executives Identify P2P as one of their Top
Priorities and it’s a Key Enabler of Many Others
Source: 2014 Enterprise Key Issues Study
10%
18%
34%
41%
45%
48%
50%
52%
59%
69%
76%
Preparing for a return to recession via scenario planning
Growth enablement beyond innovation
Environmental sustainability
Obtain more value from purchase-to-pay process
Reduce cost of Procurement
Reduce supply risk
Free up cash
Reduce and avoid purchased costs
Drive value beyond sourcing for complex indrect categories
Innovation and product/service support
Expand influence across categories and new value drivers
Procurement’s Top Priorities
(Percent of companies stating as Critical/High)

Process Cost Reduction
• Transactional Purchasing Process Cost Reductions
• Accounts Payable Process Cost Reductions
An Optimized P2P Channel Strategy Drives Many of the Key P2P Value
Elements and Opportunities beyond Process Efficiency
Value Elements Opportunity
CPG Example
Opportunity
$4.4M
Opportunity
$52.2M
Total*: $56.6 million
Current process baseline cost
~$26 million
14x difference!
Strategic Business Enablement
• Improved/protected customer service, revenue, profit
• Brand protection: compliance risk; supply/supplier risk
• Opportunity cost of management time
Service Level Excellence
• Maverick Spending Reduction
• Supplier Non-Compliance to contract
• Demand Mgmt (Consumption Reduction)
• Demand Mgmt (Spend Influence)
• Sourcing Savings via better spend viz from P2P
• Cost of Capital from DPO improvement
• Early Payment Discounts
• Rebates from Purchasing Cards
• Reduced Cost of P2P Errors for Purchased
Finished Goods and Raw Materials
• Reduced Supplier Late Payments Penalties
Hackett has developed a model which
supports development of the P2P Value
Opportunity based on specific inputs

Top Performers have been bringing down Purchasing costs while Peers
have stayed flat over time
Source: 2013 Hackett Procurement Benchmark
$16.71
$10.04
$15.98
$6.45
$18.00
$4.80
Process Cost ($) per Order
Peer Top Performer
2009 2011 2013

However in Accounts Payable Costs have flattened all companies with a
substantial gap between Top Performers and Peers
$3.90
$1.14
$3.68
$1.29
$3.85
$1.46
Total Cost ($) per Invoice
2009 2011 2013
Peer Top Performer Peer Top Performer Peer Top Performer

The Greatest Benefit from a Monetary Perspective is the Driving the
Requestors to Preferred Suppliers and Contracts
1%
1%
1%
6%
3%
7%
7%
7%
6%
7%
4%
2%
6%
6%
5%
10%
8%
16%
6%
16%
Purchased Finished…
Raw…
Direct Services
Capital…
IT & Telecommunications
Sales & Marketing Support
General Equipment &…
Travel & Entertainment
Human Resource Services
Administrative &…
Percent of targeted / negotiated cost reductions lost due to maverick buying and
contract / blanket order non-compliance
Non-WC
World Class
Hackett Group Procurement Benchmark, 2011
Category level analysis identifies the areas of greatest opportunity for trusted sources and
established contracts to be further leveraged

Benefits Specific to each of the Key Stakeholder Groups
Benefits
Strategic
Sourcing
Manager
PR
Manager
and Buyer
Requestor/
Business
Unit
Budget
Owner and
Finance
Quality data for supplier intelligence and spend analytics X X
Compliance to buying policies and use of the right suppliers X
Realization of targeted sourcing strategy savings goals X
Less intervention in requester initiated purch. transactions X
Improved methods and tools to support operations needs X
Free up time to focus on more value add strategic activities X
Standardized buy methods/processes to support requestors X
More item via Catalogs and system Contracts X
Self manage purchasing of needed goods and services X
Improved business review/approval capabilities X
Risk management through appropriate transactional controls X
Reductions in operating costs X
Data integrity to reduce backend payment processing errors X

Agenda
 Introduction
 Conclusion

There Are Six Key P2P Process Steps That Are Evaluated When
Developing A Channel Strategy
Requisition
Creation
Order
Creation
Receive
Invoice
Pay
Transmit
Order
Purchase-to-Pay Process
Payments to suppliers for all validated and approved
payment requests
Conversion of approved requisitions to a
supplier specific order for goods or services and
related concurrence processes
Identification, communication, and approval to
buy needed goods or services
Communication to the supplier identifying and
authorizing purchase of goods or services
Validation of goods delivery or service
fulfillment
Processing of supplier or external 3rd party
requests for payment
The process of communicating requirements, managing
buy/pay controls, and processing payment requests.
Process Step OPTIONS Defined
Process
Step 1
Option 1
Option 2
Option 4
Option 3
Options represent the unique
methods available to execute a
defined Process Step. Option
characteristics include:
• System, eTool, or manual
enablement
• Having a identifiable cost
factor that encumbers or
benefits the process step

The P2P Channel Strategy Technology Roadmap Should Ensure That
These Basic Capabilities Are Enabled
Requisition
Request and approve the
purchase of goods &
services
Buy
Purchase goods &
services from third-party
suppliers
Receive
Acknowledge & record
receipt of goods &
services
Invoice
Receive and process
third-party invoices for
payment
Pay
Schedule and issue
payments to third-party
suppliers
Self Managed
Requisitioning toolset
Contract Compliance tools (P2P)
Payables toolsetCatalog & Materialized Items
Internal & Supplier Self-Service Portals
eInvoicing Electronic Pay
Automated Requisitioning/Buying
Master Data: Supplier, Item, Catalog
Review/Approval Workflow
Purchasing Cards

How Do You Begin To Identify The Preferred P2P Channel Options and
Permutations (5 high level steps)?
1. Identify all current state “options” for each
Channel Process Step
2. Conduct high level analysis of spend and
transaction volume running through each current
state requisitioning option and payment matching
permutation (estimate execution costs as required)
3. Based on strategic and process efficiency
objectives, eliminate non value add process step
options and identify option improvements
4. Rationalize permutations to reduce variability
(reduce the number of supported permutations and
payment matching requirements)
5. Define with spend categories move through which
Requisitioning channel and supporting control and
payment matching requirement.
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##

Permutations?
1. Identify all current state “options” for each Channel
Process Step
transaction volume running through each
current state requisitioning option and
payment matching permutation (estimate
execution costs as required)
Matching Analysis
MRP – Direct Materials
Spend Reqs.
Total $ 2.84B 201K
MRP – IndirectMaterials
Spend Reqs.
Total $ 278.59M 379K
Shopping Cart Services
Spend Reqs.
Total $ 2.89B 75K
Shopping CartCatalog
Spend Reqs.
Total $ 3.42M 8K
T&E Card
Spend Reqs.
Total $ 94.57M -
P-Card
Spend Reqs.
Total $ 20.61M -
Requisitioning Analysis

Lets Not Forget The Impact That Supplier Volumes Have On Channel
Strategy Development
3% (250 suppliers) of
supply base accounts
for 80% of spend
80% of Suppliers
Submit 12 Invoices or
Less Per Year

Permutations?
Process Step
2. Conduct high level analysis of spend and transaction
volume running through each current state
requisitioning option and payment matching
objectives, eliminate non value add
process step options and identify option
improvements
4. Rationalize permutations to reduce variability (reduce
the number of supported permutations and payment
matching requirements)
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##
Option 1
Option ##

Permutations?
Process Step
4. Rationalize permutations to reduce
variability (reduce the number of
supported permutations and payment
matching requirements)
Option 1
Option 1 Option 1 Option 1 Option 1 Option 1
10 to 25 ChannelOption Permutations,not100 to 1,000
Purchase Order
Invoice Only
Invoice
No PO
Pcard Buy
Purchase Order System Receipt
Purchase Order InvoiceSystem Receipt
Pcard Pay
Payment
Buy Verify Bill/Verify Pay
No Match
Invoice Only
2-Way Match
ERS
3-Way Match
10 to 25 Channel Option Permutations, not 100 to 1,000

A Well Developed Channel Strategy Will Simplify Execution Options
System
Receipt
Entry
Automated
Inventory/
MRP
Pcard or
Travel
Card
Requisition
Requisition to Transmit
No
System
Req
Invoice
Approval
(Workflow)
Order Transmit Order Receive
No PO
(Invoice
Only)
Receive
Invoice
Invoice to Pay
Charge
Card
eInvoice
Pay
1
2
3
4
5
Catalog
(Internal and
External)
Non Catalog
(Text Based)
Charge Card
Non PO
Automated
Requisition
(Inventory)
Channel
Automated
(no touch)
Automated
(no touch)
Shop Cart
(text
based)
Electronic
Payment
No System
Receipt
Work
Order
System
SRM
Sourcing
Cockpit
7
Manual
ERS (no
invoice)
Maintenance
& Repair
Non-
System
Ordering
Shopping
Cart
Auto
Ordering
SAP ME21N
Requisition
Process
Pull From
Stock
On Hand
Goods
Done
Shop Cart
(Catalog)
6
Recurring
Payments
Supplier
Managed
Third Party
Managed
8

Staff Augmentation Example
System
Receipt
Entry
Automated
Inventory/
MRP
Pcard or
Travel
Card
Requisition
No
System
Req
Invoice
Approval
(Workflow)
No PO
(Invoice
Only)
Receive
Invoice
Invoice to Pay
Charge
Card
eInvoice
Pay
1
2
3
4
5
Catalog
(Internal and
External)
Non Catalog
(Text Based)
Charge Card
Non PO
Automated
Requisition
(Inventory)
Channel
Automated
(no touch)
Automated
(no touch)
Shop Cart
(text
based)
Electronic
Payment
No System
Receipt
Work
Order
System
SRM
Sourcing
Cockpit
7
Manual
ERS (no
invoice)
Maintenance
& Repair
Non-
System
Ordering
Shopping
Cart
Auto
Ordering
SAP ME21N
Requisition
Process
Pull From
Stock
On Hand
Goods
Done
Shop Cart
(Catalog)
6
Recurring
Payments
Supplier
Managed
Third Party
Managed
8

Professional Services Example
System
Receipt
Entry
Automated
Inventory/
MRP
Pcard or
Travel
Card
Requisition
No
System
Req
Invoice
Approval
(Workflow)
No PO
(Invoice
Only)
Receive
Invoice
Invoice to Pay
Charge
Card
eInvoice
Pay
1
2
3
4
5
Catalog
(Internal and
External)
Non Catalog
(Text Based)
Charge Card
Non PO
Automated
Requisition
(Inventory)
Channel
Automated
(no touch)
Automated
(no touch)
Shop Cart
(text
based)
Electronic
Payment
No System
Receipt
Work
Order
System
SRM
Sourcing
Cockpit
7
Manual
ERS (no
invoice)
Maintenance
& Repair
Non-
System
Ordering
Shopping
Cart
Auto
Ordering
SAP ME21N
Requisition
Process
Pull From
Stock
On Hand
Goods
Done
Shop Cart
(Catalog)
6
Recurring
Payments
Supplier
Managed
Third Party
Managed
8

Permutations?
Process Step
5. Define which spend categories move
through which Requisitioning channel
and supporting control and payment
matching requirement.
Overlaying commodity categories and P2P channels provides an optimal transactionalstrategy
Compliance Risk Factors
 Inadequate spend detail
 Limited account detail due to granularity of accounting
 Inappropriate allocations
 Price variances
 “Unearned” payments to suppliers
 Occurrence of liability
 Lost supplier performance information
 Unapproved commitments
 Loss of item tracking (e.g., capital)
 Inadequate budget management
 Nonstandard payment terms
 Lost demand aggregation opportunity
 Loss of product standardization
P = Preferred
A = Alternate
N = Not Allowed
1st Node: Category
2nd Node: Group C
o
3rd node: SubGroup
Pcard
Travel
Card
Fleet
Card
Catalog
or
M aster
Item
Text
Based
Order
Work
Order
Non
System
Request
(manual)
Pull
From
Strock
1: Manufacturing Materials
2. Supplies
3: Equipment & Spare parts
6: Services
1: industrial services P A P
2: Financial/Legal
Services
P P A
3: Business Support
Services
P A P
4: Marketing Services P A A A P
Supplier
M anaged
ACH
Settlement
Pcard,
Travel
or
Fleet
Card
Invoice
Only
(non PO)
PO &
Invoice
PO &
Receipt
(ERS)
PO
Receipt
Invoice
(3-Way)
Recurring
Payment
C o mmercial C ards
SR M (Shopping Cart)/ SA P
B ased R equest
M anual R equest
Automate
d M RP
Self Managed Buy Automated Buy Supporting RTP
Transaction Options
8 Preferred BUYINGChannel Options and Tools
(Making buys with approved suppliers)
P2P Transactions
(Preferred transactions to support the buy)

Top Performers Establish a Source to Settle Channel Strategy then Take
Action to Guide Requisitioners to Preferred Suppliers
28% 8% 56%
67%
8%
33%
Non Top
performer
Top Performer
No standard buy/pay channels established Not Effective Mostly Effective with gaps Very Effective
Effectiveness at driving requisitioners to preferred buy/pay channels
P = Preferred
A = Alternate
N = Not Allowed
1st Node: Category
2nd Node: Group C
o
3rd node: SubGroup
Pcard
Travel
Card
Fleet
Card
Catalog
or
M aster
Item
Text
Based
Order
Work
Order
Non
System
Request
(manual)
Pull
From
Strock
1: Manufacturing Materials
2. Supplies
3: Equipment & Spare parts
6: Services
1: industrial services P A P
2: Financial/Legal
Services
P P A
3: Business Support
Services
P A P
4: Marketing Services P A A A P
Supplier
M anaged
ACH
Settlement
Pcard,
Travel
or
Fleet
Card
Invoice
Only
(non PO)
PO &
Invoice
PO &
Receipt
(ERS)
PO
Receipt
Invoice
(3-Way)
Recurring
Payment
C o mmercial C ards
SR M (Shopping Cart)/ SA P
B ased R equest
M anual R equest
Automate
d M RP
Self Managed Buy Automated Buy Supporting RTP
Transaction Options
8 Preferred BUYINGChannel Options and Tools
(Making buys with approved suppliers)
P2P Transactions
(Preferred transactions to support the buy)

49%
3%
9%
2%
11%
26%
55%
12% 11%
0%
3%
20%
3-Way Match Evaluated Receipt
Settlement
Assumed Receipt Recurring Invoice P-Card (and other) Non-PO
44%
5%
9%
0.4%
11%
31%
48%
11%
17%
0.2%
8%
15%
3-Way Match Evaluated Receipt
Settlement
Assumed Receipt Recurring Invoice P-Card (and other) Non-PO
Peer Top Performer
And We that P2P Top Performers Have a Higher Percentage of Transactions through
Optimal Channels with More Spend through PO/Contract-based Channels
Transactional Strategy
(Percent of Transactions)
Transactional Strategy
(Percent of Spend)
TP = 37% on Optimal Channels
Non-TP = 25% on Optimal Channels
TP = 78% on PO/Contract
Non-TP = 63% on PO/Contract

There are a wide variety of risks that can be incurred during the
purchasing of a category
Risk Element Overall Impact (1-5) Weight
Limited Spend Detail Captured
Limited Account Detail Captured
Inappropriate Allocations to Budget, etc.
Stock Out of Critical Component
Price Variance versus Contracted Price
“Unearned” Payment by Supplier
Unapproved Commitments
Liability Assumed by Company
Risk associated with Unapproved Suppliers
IP Protection
Regulatory Non-Compliance
Sales & Use Tax
Non-Conformity to Standards
Product Health and Safety Concerns
Warranty Issues
Total Weighted Score =
What is the impact of this risk for
this commodity based on
probability, transactional
volume, spend, etc.? Should attempt
to quantify.
Does the organization weight various
risks higher than others?
Low Risk: <2.4; Medium Risk: 2.4 to 3.6; High Risk: >3.6

Sample Commodity Category & Buy Method Optimized Process
Mappings
Default Commodity Category Assignments To Optimized Transaction Strategy Flow Paths
Procurement Card
Invoice Only 2 – Way Match
Recurring
Invoice
Supplier
Submitted Invoice
PO + Invoice
(Assumed Receipt)
PO + Receipt (ERS)
Non-Catalog Indirect
goods/services under
$500/$1000. For example:
Non-Catalog Office &
Special Lab Supplies
Emergency Repairs
Short Term Rentals
Package Carriers (UPS,
FedX)
Leased Equipment
Long Term Rentals
Fixed Rate Services
Legal
Telecom (voice)
Utilities (Energy)
Insurance
Transportation
Professional Services
Business Services
IT Maintenance
Contracts
Engineering Services
All “inventoried” items
Supply Chain Materials
(Direct & Packaging)
Telecom Equipment
IT Hardware/Software
MRO Inventory
Catalog Items (Office, MRO, Lab)
Direct Materials Non Inventory
Professional/Temporary Services
Capital Projects
Description Based Buy X X X
External Catalog (Hosted
or Direct Connect
X X
Store Room or Office
Supply Cabinet
X X
Specialty Services X X
Internal Profiled Items
(Manual or Auto Ordered
X X
Buy Method
Commodity
Category
Optimized
Process

4 Stages of Channel Training & Deployment
Prepare for
Source to Pay
Channel
Deployment and
Training
Sessions
Division/Location
Training Delivery
Preparations Conduct Source
to Pay Channel
Location Training
Go Live, monitor,
and support
deployed
locations
• Channel launch review
with Ops Management
• Confirm Training Dates &
send invites
• Introduce Channel
Strategy during
Procurement Division
Kaizen event
• Identify training
participants
• Validate/setup spend level
& approval flow
• Validate/setup SRM user
access
• Conduct Division
Procurement Staff
training
• Conduct SRM
Requester training
• Conduct SRM
Approval training
• Provide post training
support
• Provide access to training
materials and “Uperform”
tutorials
• Monitor and collect metrics
on channel usage
• Communicate progress
• Make improvements based
on deployment learning's
Repeat for each Division/Location training event

Agenda
 Introduction
 Conclusion

Top Keys to Optimizing Your Transactional Channel Strategy
Decide on scope…Do we pilot the approach within a regions or facility or
rollout globally?
Engage stakeholders…Do we decide on a template channel strategy and
get buy-in or go directly to stakeholders to develop?
Decide on approach…Do we start with one channel strategy or optimize
the entire approach?
Global vs. regional…Do we need to have a global channel template or do
we customize by region?
Business Case…What are the advantages of developing a business case
versus just rolling it out?

Contact Information
The Hackett Group
Suite N500
1117 Perimeter Center West
Atlanta, GA 30338
Phone: +1 770 225 3600
Martin House
5 Martin Lane
London EC4R 0DP
Phone: +44 207 398 9100
Torhaus Westhafen
Speicherstrasse 59
60327 Frankfurt am Main, Germany
Phone: +49 69 900217 0
8, rue de Port Mahon
75002 Paris, France
Phone: +33 1 53 43 0400
Strawinskylaan 3051G, 1077 ZX
Amsterdam, The Netherlands
Phone: +31 20 301 2210
Kurt Albertson
Phone: + 770.225.7570
kalbertson@thehackettgroup.com
1-888-8HACKETT
advisor@thehackettgroup.com
www.thehackettgroup.com

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Benefits from Optimizing the Purchase-to-Pay Channel Strategy Go Well Beyond Process Cost Reduction

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Benefits from Optimizing the Purchase-to-Pay Channel Strategy Go Well Beyond Process Cost Reduction

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