SAP ASUG Case Study External Services Management

Contractor Management
Solutions ]
[ CHRISTINA CRONE
ASUG INSTALLATION MEMBER
ASUG Chapter Meeting
[
MEMBER SINCE: 1999

NY-Upstate/PA-Upstate
June 3, 2011

Jenny Wampler
Advanced Contractor
[ MIKE STOKO
[
Cost Management, Inc.
ASUG INSTALLATION MEMBER
MEMBER SINCE: 2003

[ BOB GAUTHIER
ASUG ASSOCIATE MEMBER
MEMBER SINCE:1998

[ Contractor Management Solutions
Case Study: Add-On Software Web-Enables
SAP External Services Management
 Agenda
 External Services Management
 Case Study Background
 TOP® (The Owners Perspective) Software
 Case Study Implementation
 Q&A

Real Experience. Real Advantage. 2

[ Services vs Materials


[ External Services Management
 Standard SAP Functionality (MM-SRV)

 Services comprise 50% of Company Spend
 Indirect Procurement accounts for 50% of spend in mfg, 60% in
non-mfg, and 90% in financial sectors. (A.T. Kearney)
 Critical Services represent from 30% to 50% of all indirect
spending. (AberdeenGroup)
 Outsourcing Trends (IT, Maintenance, AP, …)

 80/20 rule : 80% of your spend can be traced to 20% of your
external service providers


[ Service Purchase Order (ME23N)

 Services = Planned
 Limits = Unplanned


[ Service Entry Sheet (ML81N)

 PO History shows SES


[ Contractor Management – Common Issues
 Lack of a Consistent Business Process
 No Accountability for Contractor Management Lifecycle
 Purchase Order & Service Entry Sheet Workarounds
 Manual Invoice Routing
 Invoice Mismatches and Price Variances
 Incomplete Records of Contractor Activities
 Excessive Administration to Manage Contractors
 Unable to Validate Actuals against Negotiated Contract
 Can’t Recognize Cost Real-Time
 Failing Financial Controls and Audits


[ Case Study:

Rapid implementation of TOP® Software with existing SAP
functionality provides immediate Contractor Management
benefits for a Regional Gas Utility Company – FortisBC


[ FortisBC
 FortisBC www.fortisbc.com (formerly Terasen Gas Inc.)
 Subsidiary of Fortis Inc. www.fortisinc.com
 Deliver energy to 940,000 customers in more than 125 BC
communities (96% of British Columbia’s natural gas customers)
 Employees = 1400+
 Average Annual Spend = $260M
 76% Services (~ 400 vendors)
 24% Materials

Real Experience. Real Advantage.

[ Case Study: Challenges
 2 distinct business processes w/ their own systems, databases,
and invoice payments
 2 separate approval processes: manual paper driven and on-line
 Dedicated Resources required to resolve issues
 Mismatched invoices
 Price variances
 Insufficient funds on PO
 Lacked historical services data to negotiate future pricing
 Failed to comply with financial and contract management
controls


[ Case Study: Desired Solution
 Apply standard methodology for managing contractor costs
and activities
 Provide a single point of data entry
 Common transparent platform to manage work
 Eliminate AP manual invoice processing
 Financial & Contract compliance to match approved work with
invoices
 Leverage purchasing power to drive prices down and improve
usage analysis
 Go Green


[ Case Study: Evaluation Criteria
 BTOPP:
 Business – Technology - Organization - Process – People

 Requirements:
IT User
Software Reliability Self-service Portal
Long-term Reliability Ability to Upload Files
Usability Workflow Engine
Functionality Security Model
Technical Support Attach Documents
Documentation Compliance with Financial, Contractual, and SOX
Training Usage Reporting
Installation Performance

[ Case Study: Explored Options
 Enhance existing Contract Processing System (CPS) web-
application
 Re-introduce and enhance SAP MM-External Services
Management functionality
 Implement 3rd Party Solution that utilizes SAP MM-SRV but
includes required enhancements
 AccM – TOP® Software


[ Case Study: Solution of Choice - TOP®
 Web-enabled Add-On Software that utilizes SAP Standard
Functionality
 Best Business Practices
 Compliance to Financial, Contractual and SOX Requirements
 Implementation in Weeks, not Months


[

The Owners Perspective


[ TOP® Basics
 SAP Add-On Software
 Access via SAP Portal, user ID required
 Workflows trigger action
 Work detail submitted daily by Contractor
 Cost data validated against SAP Purchase Order
 Owner approval generates Service Entry Sheet in SAP
 Replace Invoices with on-line Vendor Payment Requests
 Contractor is only paid for approved work at contracted price
 Owners and Contractors use same real-time data and attached
documentation to manage costs


TOP® Business Process
[


[ Contract (ME33K)


[ Service Purchase Order (ME23N)

 Services = Planned
 Limits = Unplanned


[ TOP® Process – Vendor Entry Sheet - Highlight


[ TOP® Process – Vendor Entry Sheet - Zoom


[ TOP® Vendor Entry Sheet Details


[ TOP® Vendor Entry Sheet Cost


[ TOP® VES Summary
 Completed by the Contractor
 Contains work performed and a detailed breakdown of the
cost, time, and resources.
 All costs are validated against service lines in the related
Purchase Order or Contract Outline Agreement.
 Electronic documentation of the work performed including
attachments.
 Submitted VES triggers workflow to Owner for approval.
 Approved VES auto-generates Service Entry Sheet in SAP.


[ TOP® Process – Vendor Payment Request - Highlight


[ TOP® Process – Vendor Payment Request - Zoom


[ TOP® Vendor Payment Request Details


[ TOP® VPR Summary
 Completed by the Contractor
 VPR can only use approved VES(s)
 Eliminates Invoice Price Mismatches
 Approved VPR releases SES for payment
 Fulfills three way match criteria between MM and FI
 Evaluated Receipt Settlement (ERS)
 Manual Invoice Entry (VPR Print)
 Contractor paid only for approved work & at the contracted
price


TOP® Business Process
[


[ AccM Workplace

 Assigned tasks
 PO Warning

 Tab Access
 VES
 VPR
 Reports
 Admin


TOP® Standard Reporting
[
 Purchase Order Status
 High level view of active purchase orders, including forecast costs.
 Vendor Entry Summary
 Detailed information at the purchase order item level.
 Vendor Entry Sheet Status
 Approval or rejected status of each VES entered, plus costs and
responsible party.
 Vendor Payment Request Status
 Approval and payment status and links to VPRs.
 Vendor Performance
 Displays past performance records.

 PLUS – All data is in SAP tables for limitless reporting.


[ TOP® Standard Reporting


[ TOP® Vendor Performance Report


[ Case Study: Implementation Plan
 Phase Approach
 Preparation > Blueprint > Realization > Go-Live
 Initial Roll-out = Major Contractor
 Schedule
 Overall Project = 3 months
 TOP Implementation = 3 weeks
 Business process
 Design & Configuration
 Cutover & Training
 Go Live = Sept 27, 2010


[ Case Study: Project Team Structure
 AccM Team (3 F/T, 2 P/T)
 Contractor (3 F/T, 3 P/T)
 FortisBC
 Business (Finance, Procurement, Closing, Distribution)
 26 in total ( 4 F/T, 22 P/T)
 IT (2 ½ F/T, 4 P/T)
 TELUS – SAP Infrastructure (2 P/T)

 Expertise
 MM, Basis, Portal, Workflow, External Web


[ Case Study: SAP Functionality
 Service Master Record
 Vendor Master Record - ERS indicator
 Contract / Outline Agreement
 Service Purchase Order - Item Category “D”
 Service Entry Sheet (SES)
 Evaluated Receipt Settlement (ERS)
 Reporting – Additional Queries


[ Case Study: ROI - Project Results 1
 Achieved a Common Business Process
 Eliminated data entry to multiple systems
 Retired CPS application
 Improved productivity
 Accessed accurate Procurement records
 Eliminated GRIR reconciliation with ERS
 Reduced invoice volume and error handling costs
 Increased visibility of supporting documents during the invoice
approval process


[ Case Study: ROI - Project Results 2
 Improved data for vendor analysis, evaluation and contract
management
 Improved internal controls to reassure auditors
 Real-time data interaction
 Total transparency
 24x7 access for both Contractor & Owner to check status
 Green


[ Case Study: Key Learning Points
 Engaging with SAP Partner to enhance External Services
Management provides real benefits and immediate savings.
 5-10% estimated savings on annual Service Spend
 Real-time detailed service receiving process enhances cost
management and audit details.
 Achieve visibility and controls while reducing administration
costs.


[ Services Process with TOP®


[ Key Points to Take Back to Work
1. Challenge the External Services Management process
A. Define Business Process & Accountability
B. Eliminate Blanket POs
C. Implement Service POs and Service Entry Sheets
D. Analyze Services Spend
1. Categorize & Prioritize
2. Identify Suppliers (~20%) that comprise 80% spend
3. Compare Negotiated Contract to Actual Invoice Payments

2. Collaborate with your Contractors
A. Identify Payment & Performance Pain Points
B. Investigate Solutions – ERS, TOP®

[ Contact Information
Advanced Contractor Cost Management, Inc. (AccM)
 www.accminc.com
 SAP EcoHub
 Twitter @AccMJenny, @AccMinc
 LinkedIn
 Facebook AccM, TOP Software

 Jenny Wampler jenny.wampler@accminc.com


[ AccM Website www.accminc.com


[ Questions?


SAP ASUG Case Study External Services Management

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SAP ASUG Case Study External Services Management