ASUG Presentation on SAP External Services Management and a Case Study on TOP Software

1. 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

2. [ 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

3. [ Services vs Materials
Real Experience. Real Advantage. 3

4. [ 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
Real Experience. Real Advantage. 4

5. [ Service Purchase Order (ME23N)
 Services = Planned
 Limits = Unplanned
Real Experience. Real Advantage. 5

6. [ Service Entry Sheet (ML81N)
 PO History shows SES
Real Experience. Real Advantage. 6

7. [ 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
Real Experience. Real Advantage. 7

8. [ Case Study:
Rapid implementation of TOP® Software with existing SAP
functionality provides immediate Contractor Management
benefits for a Regional Gas Utility Company – FortisBC
Real Experience. Real Advantage. 8

9. [ 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.

10. [ 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
Real Experience. Real Advantage. 10

11. [ 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
Real Experience. Real Advantage. 11

12. [ 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
Real Experience. Real Advantage. 12

13. [ 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
Real Experience. Real Advantage. 13

14. [ 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
Real Experience. Real Advantage. 14

15. [
The Owners Perspective
Real Experience. Real Advantage. 15

16. [ 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
Real Experience. Real Advantage. 16

17. TOP® Business Process
[
Real Experience. Real Advantage. 17

18. [ Contract (ME33K)
Real Experience. Real Advantage. 18

19. [ Service Purchase Order (ME23N)
 Services = Planned
 Limits = Unplanned
Real Experience. Real Advantage. 19

20. [ TOP® Process – Vendor Entry Sheet - Highlight
Real Experience. Real Advantage. 20

21. [ TOP® Process – Vendor Entry Sheet - Zoom
Real Experience. Real Advantage. 21

22. [ TOP® Vendor Entry Sheet Details
Real Experience. Real Advantage. 22

23. [ TOP® Vendor Entry Sheet Cost
Real Experience. Real Advantage. 23

24. [ 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.
Real Experience. Real Advantage. 24

25. [ TOP® Process – Vendor Payment Request - Highlight
Real Experience. Real Advantage. 25

26. [ TOP® Process – Vendor Payment Request - Zoom
Real Experience. Real Advantage. 26

27. [ TOP® Vendor Payment Request Details
Real Experience. Real Advantage. 27

28. [ 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
Real Experience. Real Advantage. 28

29. TOP® Business Process
[
Real Experience. Real Advantage. 29

30. [ AccM Workplace
 Assigned tasks
 PO Warning
 Tab Access
 VES
 VPR
 Reports
 Admin
Real Experience. Real Advantage. 30

31. 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.
Real Experience. Real Advantage. 31

32. [ TOP® Standard Reporting
Real Experience. Real Advantage. 32

33. [ TOP® Vendor Performance Report
Real Experience. Real Advantage. 33

34. [ 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
Real Experience. Real Advantage. 34

35. [ 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
Real Experience. Real Advantage. 35

36. [ 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
Real Experience. Real Advantage. 36

37. [ 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
Real Experience. Real Advantage. 37

38. [ 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
Real Experience. Real Advantage. 38

39. [ 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.
Real Experience. Real Advantage. 39

40. [ Services Process with TOP®
Real Experience. Real Advantage. 40

41. [ 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®
Real Experience. Real Advantage. 41

42. [ 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
Real Experience. Real Advantage. 42

43. [ AccM Website www.accminc.com
Real Experience. Real Advantage. 43

44. [ Questions?
Real Experience. Real Advantage. 44