Struggling with resolving exceptions such as missing or incorrect purchase receipts, inaccurate POs, inconsistent invoice details or misrouted invoices? In this session, Simplot share their strategy for avoiding a high cost of re-work in handling exceptions, covering how to: - Prevent exceptions from re-occuring in the future - Implement key workflow technologies and hear Simplot’s key results from this combined strategy

1. sharedserviceslink.com’s
Annual Procure-to-Pay Leaders Meeting
Exceptions are inevitable. But does your
struggle against them have to be?
May 25, 2012
Kathleen Hamm, Accounts Payable Manager
J. R. Simplot Company

2. Agenda
Company overview
Procure-to-pay design
Using the Six Sigma Approach
• DMAIC
Results
Summary
Bringing Earth’s Resources to Life

3. J R Simplot Overview
Privately held Industries
Revenues = $5 billion • Food processing
• Mining
10,000 employees
• Fertilizer
• 6,500 NA employees
• Farming
Global presence • Cattle feeding
• US (33 states) • Industrial products
• Australia • Feed ingredients
• China • Silica sand
• Canada • Turf and horticulture
• Japan • Retail farming supplies and services
• Korea
• Mexico Bringing Earth’s resources to life

4. Procure-to-Pay Design
Procurement structure Accounts payable structure
Decentralized structure Centralized AP process
170 buyers / receivers 19 AP employees
150,000 purchase orders /
480,000 line items Process 600,000 invoices annually
• 36% PO based (216,000)
US & Canadian operations • 44% non-PO
(4 business groups) • 20% Interfaced
• 3 mining facilities US & Canadian operations
• 14 manufacturing / processing • Agribusiness group 45%
plants • Food group 43%
• 2 import & distribution terminals • Land & livestock group 5%
• 95 retail stores • Corporate group 7%
• 2 feedlots • Joint ventures / small businesses
• 30 farms Multiple invoice types
• IT equipment / services
Multiple systems
 Multiple purchasing types
 Multiple systems

5. Transforming exception management
Utilizing the Six-Sigma approach
Improve
Measure
Take actions to improve
New manager joined Measure processes and meet
disbursement team performance and defined performance
manage accordingly. expectations.
April 2009 November 2009 April 2011 May 2012
Janauary 2010 June 2011
Dig into the details to Follow up, continuous
A new direction for AP identify improvement
team to assure we are measurement and
opportunities. change management.
working hard on the
right things.
Analyze
Analyze Control
Define

6. Transforming exception management
Define – what are exceptions?
Discrepancy between PO Receipt and Vendor Invoice on 3-way
PO Match.
An invoice that does not make it through the AP process to pay
and gets rejected to a queue requiring human intervention.
Simplot exception reasons
• No receiver
• Price discrepancy
• Quantity discrepancy
• No PO provided on invoice
• Invalid container ID/ticket
• Wrong PO no.
• Items not on PO
• Freight unreconciled
• Other
• Miscellaneous

7. Transforming Exception Management
Define –Business Impact
Time & Money
• Manual processing & research (45 days on average to resolve exception)
• Communicating exception issues (30 seconds per exception)
• Additional processing time (5 working days in processing queue)
Decreased Efficiencies
• Impacts service level commitments
• Causes payment delays
• Increases support center calls
Frustrations
• Vendors
• Internal customers
• AP processors / business partners
Perception of poor service delivery
• Accounts payable / shared services reputation

8. Transforming exception management
Measure – the good, the bad, and the ugly
The good The bad The ugly
Exception processing activity Lack of exception control Exception activity on the rise
250,000
PO invoices processed by fiscal year 25%
22%
20%
200,000 19% 50,887 20%
38,608
150,000 15%
32,879
100,000 10%
50,000 5%
0 0%
FY2009 FY2010 FY2011
Exceptions No Exceptions Exception Percentage of Total Invoices

9. Transforming exception management
Measure – the cost
….to get buy-in
Avg Avg
Hours / # Hrs / Salary
Who Month Months # People Year / Hour Total Cost
Field Staff 4 12 150 7,200 $30.29 $218,088
Accounting 15 12 20 3,600 $36.06 $129,816
AP Processing 15 12 12 2,160 $24.52 $52,963
AP Exception Processors 170 12 1.5 3,060 $26.52 $81,151
Estimated Totals 204 183.5 16,020 $482,018

10. Transforming Exception management
exception Management
Analyze – digging deeper – breaking it up!
Exceptions by Exceptions by
reasons operating group
0%
5%
8% 6%
4% 17% 4%
51%
12%
26% 67%
n=4,012
n=4,012
No Receipt Price Discrepancy Corporate Agribusiness
No Container ID Freight Unreconciled L&L Food Group
SGS
Items not on PO Miscellaneous
Identified our
greatest opportunities for improvement.

11. Transforming exception management
Analyze – ask the tough questions?
What – specifically causes the
exceptions?
Who –specifically is causing
exceptions?
Where – are our “biggest” pain points?
Why –do we continue to have
exceptions?
How – can we fix the root problems
and reduce exceptions?
Evaluate / Communicate / Educate

12. Transforming exception management
Improve - evaluate
 Built a dedicated team  Worked with business to increase
• Repurposed our existing resources knowledge of complete procure-
to-pay process
o Shifted resolution responsibilities
• Getting to Know You Assembly
• Redefined exception processing
• Shadowing Programs
o Shifted focus from managing to
resolving exceptions  Expand to outside locations
• Short term pain is worth the long
 Created subcommittees for a more
term gains
defined focus
 Customized technology based on
need • JRS Wholesale-to-JRS SGS Activity
• Created PO classifications to • Six Sigma Project - SGS Exceptions
manage specific invoice types
o Railcar
o JOB/CIP

13. Transforming Exception management
exception Management
Improve – communicate & educate
Developed alliances with business partners
• Took advantage of opportunities to enhance AP presence.
o Participated in sales/department meetings (3)
o Attended Location visits (6)
o Encouraged visits from business (10)
• Listened to our customers
o Understand business and challenges
o Offer choices that support policies & procedures
• Continuously assess training needs
• Continuously provide training opportunities

14. Transforming exception management
Control
Make sure the improvement efforts are working
• Continue to share results +/-
• Follow up and follow through
• Monitor and report
• Seek improvement opportunities
• Don’t give up….

15. Transforming exception management
Where are we today?
Exception Activity
4/30/12 0% Successes:
17% 2% • Increased PO matched invoiced for all
operating groups.
12% • Decreased average days to complete PO
69% exceptions (from 50 days (June 2011) to 17.84
days on average (May 2012)
• Decreased number of exceptions overall from
n=2,015 4,012 (June 2011) to 2,015 (May 1012)
• Maintained overall match percentage rate
Corporate Agribusiness L&L Food Group Retail
with “new” business sectors and acquisitions
50
Still room for improvement…………………… Average Calendar Days to Complete PO Exceptions
40
• Overall PO match rate remains stagnant 30
at 78% - Goal of 90% by Dec 2012 20
• Retail exception rate has increased 10
• Culture change – be patient 0
Corp AB L&L Food SGS AVG
• Continue with improvement efforts, Corp AB L&L Food SGS AVG
subcommittees, education process Accounts Payable 3.7 3.4 3.3 4.1 5.6 4.0
Locations 6.2 13 5 11.9 33 13.8
Total 9.9 16.4 8.3 16 38.6 17.84

16. Summary
Define Exceptions Improve
• Caused by human interactions • Evaluate
• Impact our disbursement efficiencies • Communicate
• Affect disbursement performance • Educate
• Influence service perceptions • BE PATIENT – IT MAY NOT
• PREVENTABLE HAPPEN OVERNIGHT!
Measure Performance
• 22% of invoices to exception Control
• $500,000 in additional costs
• Ranked in 4th quartile for % of exceptions
• Consistently review, measure and
• ROOM FOR IMPROVMENT
adjust to assure improvement
efforts are working
Analyze
• Break up into categories?
• What’s the data telling us – are there specific areas of concern?
• Continue to ask the questions (Who, What, Where, Why & How)
• FOCUS ON WHAT’S IN OUR CONTROL?