Winning Supplier Enablement Strategies

MC
Winning Supplier
Enablement
Strategies
Chris Rauen, Ariba
Mike Meiring, UPS
Sean McDermott, GlaxoSmithKline
Gerald Clarke, IBM

Supplier Collaboration: Controlling
a Rogue Invoice
Mary in AP receives
Ron from a a call from Ron about John
marketing Invoice Ron calls him
a missing payment. The There’s no PO # works in asking for a
company invoice never arrived, so on the invoice, marketing.
submits an Invoice purchase
Ron must send the so Mary must order.
invoice. invoice again. contact Rob . Mary said “no PO,
no pay”.

Sept 5th Nov 20th Nov 25th Nov 28th
Ron finally receives The invoice Unhappy, Ron
Back from vacation arrives with prints and sends the
the payment after John finally no GR. Mary invoice again, this time
more than 4 completes the contacts John correctly with
months! He GR. the PO #.
is not happy. for the missing info.

Jan 15th Jan 3rd Dec 5th Dec 1st

So...
• Ron (supplier) is feeling irritated and hassled...he will not forget this easily
• John (requestor) is annoyed by „the bureaucracy‟ and disappointed that a promising relationship has
been damaged
• Mary (AP clerk) has to spend a lot of time sorting things out for Ron

Supplier Participation Is Key to
Successful Automation Initiatives
Value Drives Supplier Participation
Top Reasons Suppliers Participate*

Increased customer
KEY FINDINGS* satisfaction

Increased visibility
via collaboration
 Suppliers value top-line
benefits over costs Increased revenues

Decreased costs
 55% recognize the value
of process visibility Improved product /
service quality

Accelerated cash
flows
Competitive response

*SOURCE: Ariba survey of 582 0% 20% 40% 60%
suppliers; 50% Ariba and 50%
non-Ariba suppliers

3 © 2012 Ariba, Inc. All rights reserved.

Leading Technology
The right tools for you and all your suppliers

Supplier Analysis
• Supplier data enrichment
$100M -
<$1B
<$1B+ • Supplier matching
• Value segmentation
APAC
10% $10M -
<$100M

EMEA <$1M
27% $1M-
North
America
63%
<$10M
Buyer Tools
Geographies Annual Spend
• Self-service framework
• Available services and tools
10.0%
• Monitor and manage the process
5.0%

Supplier Tools
0.0%

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• Real-time transaction status
• Discovery for sales acceleration

4

Expertise

Global Community
Expert Team Devoted to Your Success

Services and Experienced team of dedicated program managers that
Support
Resources onboard track and educate suppliers

Supplier Dedicated team of account, product and service managers
Solutions
Team focused exclusively on supplier satisfaction

Operations Experienced operational team focused on adhering to
Personnel a global SLA of 99.999% uptime

Product Product managers and engineers deliver new
Managers capabilities with valued input from supplier council

24x7 Global Experienced support team with ability to support
Support suppliers in local language

Bottom Line Savings
“Simple” • “Self-Explanatory” • “More valuable than anything”

“In addition to improvements in
cycle time and the percentage of 71% lower processing costs
transactions conducted
electronically, best-in-class 47% lower transaction costs
enterprises also realize
significantly lower costs.”
50% of suppliers enabled
Aberdeen, “Supplier Enablement: Connecting with
Suppliers to Build Lasting Relationships”

CFOZone.com
Smooth sailing for suppliers

Cory Becker, CEO, Proforma Quicksilver
Joy Stoelting, Finance Manager, Big Giant
The enablement process is
Ariba Supplier Enablement was simple and simple, managing electronic transactions
self explanatory. Now, shortly after an
with our customers is far superior to
invoice is approved I get an email that tells
me the scheduled payment date. That is managing paper, and we can increase our
almost more valuable than anything. exposure to other customers on the Ariba
Network.
The Hackett Group Procurement and Accounts Payable Benchmarks 2009

MC
Winning Supplier
Enablement
Strategies
Mike Meiring
P2P Project Manager
UPS

About UPS

• Founded in Seattle, WA in 1907
• Corporate Headquarters: Atlanta, GA
• Primary Business Units:
Small Package
Supply Chain Solutions (Logistics/Warehouse/Forwarding)
UPS Freight
• 2011 Delivery Volume: 4 billion packages/documents
• 2011 Total Revenue: $53.1 billion ($44 billion
small package)


Drivers of Supplier Collaboration
• More Efficient Catalog Management
• Incorporate Useful Data into ERP System
PO Acknowledgements
Advanced Shipping Notices
• Contract Management Tool
Single repository of contract data
Link to invoicing process
• Reduce or Eliminate Standard Paper Invoicing
Quicker processing via electronic methods
Significant reduction in costs related to Local
PO/Invoice transactions


Supplier Enablement

• Three Primary Categories of Suppliers
Catalog Suppliers: Large Corporate suppliers for
common commodities
Local Service Suppliers: Small to medium-sized
companies that provide local maintenance and
repair services
Large Corporate Service Suppliers: Corporately
managed service commodities such as
Consulting, Advertising, Sponsorships, Temporary
Employment Services, etc.


Supplier Enablement Strategy

• Target Catalog Suppliers Early
High-Transactional Volume and Largest Spend
• Target Local Services That Fit “Contract Invoice” Model
Landscaping, Pest Control, Fire Equipment
Inspections, Vehicle Towing, Car Wash
Services, Specific Auto Repairs, etc.
Initially Grouped Suppliers Geographically Due to
Internal Training Requirements


Supplier Enablement Strategy

• Target Larger Service Categories Later to Test
Contract Invoice Process
Corporate Advertising
Corporate Sponsorships
Medical Services (D.O.T. Physicals and Drug Testing)
Corporate Janitorial and Uniform Cleaning Suppliers
• In All Scenarios, Target Largest Spend or High
Transaction Suppliers First


Current Status of Project

• Contract Management Fully Implemented
• Primary Solution for Local Services Is
Contract Invoicing
• More than 2,500 Suppliers Have Been Invited to
Join the Network
• 12 Percent of Local Service Suppliers Have Accepted
Early Payment Offers


Positive Supplier Feedback

• Visibility Into the Invoice Process Is Perhaps the Most
Significant Benefit
Status of invoices and payments
Fewer inquiries to UPS regarding payment
• Suppliers Appreciate Cash Management Flexibility via
the Network
• Ariba‟s Flexibility to Accommodate Virtually Any
Processing Platform


Lessons Learned

• Engage With Your I.T. Function Early and Often
• Cleanse Vendor File Before Initiating the
Enablement Process
• Identify “Out of Scope” Suppliers Early in the Process
Develop a plan for exceptions before you start
• Procurement Must Engage and Drive the Process
UPS began the process as a system enhancement (F&A)
Grew to a strategy-driven project later (Procurement)
• NEVER Underestimate the Value of Communications
Leadership Buy-in is essential…compliance message must
filter DOWN


Building on Our Success

• Processes in Place to Transition “Non-compliant Suppliers”
Enlisting the support of local “owners”
• Supplier Enablement Self-service Tool (AN49 Release)
Facilitates Supplier Tracking and Status
More effective management of the enablement process
Looking forward to future releases for enhanced reporting


Building on Our Success

• Broadening Scope of Available Commodities for Supplier
Transitioning to the Network
Corporate Services
Capital Expenditure Project Suppliers
3rd-Party Transportation Suppliers
Automotive Parts
• 2012 Goal: Transacting with More than 3,000 Suppliers
by Year End


MC
Winning Supplier
Enablement
Strategies
Sean McDermott
Manager, North America Accounts
Payable GlaxoSmithKline

Who Are we?
• World-leading research-based pharmaceutical and
healthcare companies
• Leading the way in Consumer Healthcare for our
OTC, oral care and nutritionals products
• 2010 total company sales £28.4bn
• Emerging Markets: 24% of total GSK turnover
• One of the largest development pipelines in the industry
with approximately 30 late-stage assets*

Our Mission
* As of March 2011

To improve the quality of human life
domore
feelbetter
livelonger

The Problem
• Challenge: Invoice mix was consisted of half paper and half electronic.
Processing cost of paper significantly more expensive. Expansion of existing
electronic solution not cost effective. BPO solution required document
conversion of paper to electronic image.

• Solution: Automate invoice processing and increase PO usage

• Why Ariba:
♦ 60% Match on Suppliers that made up 80% of existing paper volumes

♦ GSK already using Ariba Buyer module for Purchase Orders

♦ Integration with JDE (E1) System (one pipeline forward)

♦ Flexibility of submission option for suppliers (PO flip, EDI/CXML and CSV)


Vendor Enablement
Ariba

GSK supplier network size 11,366
(vendors)
Supplier network overlap with 2,763 vendors (~60% invoice match)
Ariba
Vendors targeted for enablement 1,500 vendors
75% spend
85% transactions

Match among Targeted vendors 815 vendors (~60% match)

Enablement timeline 1,500 vendors in 9 months; 85% e-invoice
penetration by May 1st


Success to Date
Paper vs Ariba Inflows Total e-invoicing Penetration
20,000 100%
18,000 90%
16,000 80%
14,000 70%
12,000 60%
10,000 50%
Paper EDI %
8,000 40%
Ariba e-Invoices Total e-Invoices
6,000 30%
4,000 20%
2,000 10%
0 0%

1,500+ suppliers enrolled in 9 months; Net Ariba inflows outstrip paper inflows in May‟ 11


Targeted Supplier Group

• Communicate early (Internal and External)
It‟s GSK‟s way of working
Benefits
• Strong Compliance Message (Internal and External)
Signoff was from the executive leaders (CFO & CPO)
• Existing suppliers difficult to change
Cycle time is 60-90 days


Existing Supplier On-boarding Process
• Identify target supplier base for period bulk ramp
• 7 waves with approximately 300 suppliers per wave.
• Send communication (AP and Procurement sign-off)
• Include strong message on supplier compliance
Pre-work • Ariba match with existing customers
• Conduct supplier training sessions

• Supplier sign-up and account creation
• GSK trading relationship initiated
• Supplier notified of week grace period for paper
• Open purchase orders loaded
Go-Live • New purchase orders sent

• Start paper rejection process
Post-Live • Educate supplier on vendor portal


Dealing with Supplier Objections
• Benefits to Vendor (educate)
♦ Payment Terms (receipt of invoice)

♦ Payments received 7-10 days sooner

• High-volume suppliers – little resistance (realize benefits)
• Low-volume suppliers – almost free
• Medium volume – most objections (educate fee
structure/rationale)
• Annual fee broken down to cost per invoice
• Multiple connectivity to reduce / eliminate vendor rework
• Escalate “inactive” suppliers to Procurement


New Suppliers

• New supplier setup process
Onboarding needs to be part of the process
• New / Renewed Contracted Spend
Needs to be part of the commercial negotiations
• Non-procurement spend
Requisitions for new suppliers are stopped until supplier agrees
to e-invoicing
Current success rate >90%


New Supplier Onboarding
New Supplier
identified at
purchase order
requisition

Contracting process
Invoices received and T&C‟s include
electronically e-invoicing
requirement

Supplier agreement
Purchase order to transact via
released e-invoicing
with GSK

Project Outcomes
Lessons Learned Benefits
Executive sponsorship is critical Enrolled ~2300 suppliers
Change Management Champion Reduction in pending volumes
Procurement buy-in and support by 40%
New vendor enablement at the Vendor Portal (self service) –
outset (avoids post facto chasing) call/query reduction by 30%
Paper rejection for all “enabled” Ariba is flexible; faster
suppliers
implementation at lower cost
EDI/cXML implementation
process at the outset (dedicated Major contribution to 20%
resource) savings goal in GSK Shared
Dedicated and trained team to Financial Services
manage on-going enablement Strong support from Ariba
and supplier issues implementation team


Next Steps

• Identify working capital solutions
• Increased compliance in new service regions


MC
Winning Supplier
Enablement
Strategies
Gerald Clarke
Program Manager, eProcurement, Online
Commerce
IBM

“Smarter Commerce” Purchasing
Experience with IBM

What IBM Sells What IBM Does

IBM Client
Smarter
Planet
IBM online commerce
Buy Market
Applying a consultative approach to ‘how’ clients
buy, electronically integrating “Source to Pay”
Smarter Client processes, globally
Commerce Service Sell


Best Practices: Client/Supplier
Enablement
For Clients:
• Take advantage of your most “experienced” suppliers first
• Business processes and IT capabilities can vary widely among suppliers
• Establish a supplier enablement program, including dedicated staff & concise documentation
• Have clear end to end (P2P) requirements & share how they link back to your overall strategy
and goals
• Don‟t create new ANIDs for your suppliers
• Create your Ariba profiles with your suppliers in mind
For Suppliers:
• Don‟t immediately accept relationship requests without talking to your clients first
• Clearly understand client requirements
• Discuss entire P2P landscape early in the discussion
For Both:
• Talk about the process as much as the IT. Seek to understand the “why?” and the “how?”
• Jointly establish a project plan early in the discussion to better manage expectations
Source: If applicable, describe source origin


What’s Next for Suppliers?

• Increased Focus on Value
Increasing levels of integration, through both process and technology, will drive
true collaboration in client/supplier relationships allowing both to attain greater
value from the pairing
Increased volume of transactions and data will be exchanged
Better tracking of the „cost of doing business‟ electronically vs. other methods
• Increased Focus on Services Brands
Improved adaptation/application of traditional supply chain concepts and P2P
automation for all services purchases
• Technical Standardization
Large multinational clients‟, suppliers‟, third-party vendors‟ and government
regulators‟ support of select protocols and formats will drive adoption


Successful Supply Chain Collaboration
Relies on Commitment and Communication

Define Success from
both points of view

 Buyer

Joint plan  Supplier

Measure
Success

Communicate

Focus on process improvement, then apply technology

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Winning Supplier Enablement Strategies

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