Weitere ähnliche Inhalte Ähnlich wie Success Measurement: Measuring the Value and Performance of Your Source-to-Pay Strategy (20) Kürzlich hochgeladen (20) Success Measurement: Measuring the Value and Performance of Your Source-to-Pay Strategy1. Success Measurement: Measuring the Value and
Performance of Your Source-to-Pay Strategy
Ann Kildahl, Director, Value Realization, SAP Ariba / March 16, 2016
Public
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Your SAP/Ariba program
What does success look like?
A successful SAP Ariba program can take many forms – and likely changes over time
A successful program requires
o Defined vision of success
o Widely communicated and comprehended
o Support that is continuously earned
o Measurement plan
Vision Strategy Value
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Value lifecycle management
Proven approach to drive & derive value
Value Optimization
Measure, Monitor, & Report
Value Discovery
Identify & Quantify
Value
Lifecycle
Commerce
Planned
Commerce Enabled
Commerce
Adopted
Value Realization
Value Enablement
People, Process, & Technology
• Articulate drivers / goals
• Identify opportunity
• Develop vision
• Prepare your people
• Prioritize projects
• Define processes
• Governance & compliance
• Institutionalize capabilities
• ID metrics that matter
• KPIs & scorecards
• Benchmark & insights
• Continuous improvement
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SAP/Ariba program value drivers
Cost Reduction
Rationalize supply base through spend visibility and
centralized sourcing
Negotiate better pricing based on advanced
negotiation tools and insights into consumption
history
Savings on ad hoc purchases through demand
management and spot quoting
4-15% in average unit price reduction
Process Efficiency
Drive sourcing productivity through deep spend
analytics and immediate supplier discovery
Reduce supply chain operation costs (e.g. content
management, supply chain planning/execution and
order processing)
Reduce cycle times and increase AP productivity
through invoice process automation
40-60% in operating cost reduction
Fiscal Control & Compliance
Control maverick spending, risk and fraud through
use of contracted suppliers and preferred specs with
standard, repeatable buying processes
Ensure supplier compliance to preferred terms with
reconciliation of invoice, PO, receipt & contract
$20M in contract leakage per $1 billion of spend
Cash Management
Avoid unintended cash flow drainage with a
formalized payment terms strategy
Realize early payment discounts and/or SCF margin
sharing via shorter invoice processing cycle times
and greater % of spend on discount or financing
Capture rebates on high volume, low value spend
through card programs
$1-2M in savings per $1 billion of target spend
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Measurement terms
Measures how effectively the organization is
achieving its business strategy
KPI
Scorecard /
Dashboard
Benchmark
A quantifiable measurement used to track, monitor
and assess progress / effort
Metric
Comparison of your organization’s performance
against peers / industry
Assembled metrics and KPIs that capture
overall progress
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SAP/Ariba program
Sample metrics
Overall Sourcing & Contracts Operational Procurement Accounts Payable Working Capital
Costs
• Headcount Costs as %
of Total Procurement
Cost (Procurement,
Tactical Sourcing,
Strategic Sourcing)
• Procurement Cost as a
% of Total Spend
• Procurement FTEs per
Billion of Spend
General/Other
• Estimated Year over
Year Business Growth
• Operating Margin %
• Operational Expenses
(% of Revenue)
• COGS (% of Revenue)
• SG&A Expenses (%
of Revenue)
• Total Spend as a % of
Revenue (Overall,
Direct, Indirect,
Services)
• Addressable Spend as
a % of Revenue
(Overall, Direct,
Indirect, Services)
Price Reduction
• Average Strategic Sourcing
Savings Rate
• Sourcing Spend Under
Management (% of
Addressable Spend)
• Average Savings per
Sourcing Event
• Average Bids per Sourcing
Event
Process Efficiency
• Total Sourcing Events per
FTE
• Total Spend Sourced per
FTE
• Average Spend Sourced
per Event, Department,
Category
• Costs
• Average Annual Tactical
Sourcing FTE Cost
• Average Annual Strategic
Sourcing FTE Cost
• General/Other
• Sourcing Platform Age
• Ariba Events by Event
Status (%)
• Supplier Event
Participation by Status (%)
Compliance
• Compliant PO and Non-PO Spend
(% of Total Addressable Spend)
• Compliant PO Spend (% of Total
PO Spend)
• Maverick Spend (% of Managed
Spend)
• Contract POs as a % of Total POs
• PO Spend and % by Line Type:
Non-Catalog, Catalog, Contract
Process Efficiency
• % Electronic POs (Count, Spend)
• Average POs per Operational
Purchasing FTE
• Average Requisition to Order
Cycle Time
• Average Approvers per Requisition
• Requisition Based POs as a % of
Total POs
Costs
• Average Annual Operational
Procurement FTE Cost
• Average Operational Procurement
FTE Cost per PO
General/Other
• % of Suppliers Representing 80%
of PO Spend/Count
• Average Lines per PO
• Average Spend per PO
• Average PO Spend per Supplier
Compliance
• Compliant Invoices (% of
Invoice Count, % of
Invoice Spend)
• Invoice Spend by Line
Type: Non-PO, Contract,
PO Contract, PO Catalog
Process Efficiency
• % Electronic Invoices
(Count, Spend)
• % Touchless Invoice
Count
• Average Invoice Approval
Cycle Time
• Average Invoices per AP
FTE
Costs
• Average Annual AP FTE
Cost
• Average AP FTE Cost per
Invoice
General/Other
• % of Suppliers
Representing 80% of
Invoice Spend/Count
• % of Invoice Count
• Average Spend per
Invoice
• Average Invoice Spend
per Supplier
Cash Management
• % of Spend Under
Discount
• Supplier Discounts
Captured (%)
• Supplier Discounts
Realized, (per Billion
in Invoice Spend)
• Average Supplier
Discount Rate (in %)
• Days Payable
Outstanding
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Success measurement approach
SAP Ariba recommends a Success Measurement Scorecard using Operational Metrics (enablers) and Savings Metrics (results).
Following is a summary:
• Value Levers - groupings of metrics by source of benefit: Price Reduction, Spend Compliance, Process Improvement, Cash Management
• Savings Levers - are typically quantified in development of a Business Case to define the ultimate goal of process transformation.
• Operational Indicators – serve as leading indicators of performance that enable the Savings Lever; primarily industry-recognized
benchmarks
• Data Metrics – transactional inputs needed to derive the operational indicators and savings levers
Example:
Process
Improvement
Invoice
Processing FTE
reduction
% of Invoices
Electronic
Invoices per
FTE
Total Invoices
AP FTEs
Avg Time to
Process an
Invoice
Value Levers Savings Levers
Operational
Indicators
Data Metrics
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Value management and measurement
Benefits are well worth the effort
Quantitative1
Increased program sponsorship
and engagement
Increased alignment between
business and IT
Tight strategy-to-execution loop
Improved change management
and end-user adoption
Strategic
(1) Performance of companies with high level of best practices adoption compared to those with low levels of adoption
Source: : SAP Value Management Best Practices Survey; 630+ respondents
Projects delivering value on or ahead of time
1.9X
On Time
1.5X
On Budget
1.5X
On Value
Projects that
deliver value on or
ahead of schedule
Projects Delivered
on or below
budget
Business benefits
achieved
Companies with active value management over-achieve on all value drivers
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Performance scorecard
Example
CLIENT NAME: ABC
INDUSTRY: TECHNOLOGY
MODULES: P2P, SOURCING, WORKING CAPITAL
ABC BEST-IN-CLASS
Cost Avoidance Savings (% of spend) 1.2% 2.2%
Metric
COST REDUCTION KPI’S
ADOPTION
ABC BEST-IN-CLASSMetric
# of closed projects (1 year) 75% 92%
% utilization of Ariba Sourcing 80% 90%
# of open projects (1 year) 85% 80%
NOTES, GAPS AND NEXT STEPS
TOTAL SPEND
TOTAL SPEND ON NETWORK $1.2B
$8B TIME PERIOD: QE DEC 31, 2015
ARIBA SOURCING
ABC BEST-IN-CLASSMetric
# of closed contracts (1 year) 75% 92%
% utilization of Ariba CM 80% 90%
# of open contracts (1 year) 85% 99%
ARIBA CONTRACT MANAGEMENT
ABC BEST-IN-CLASSMetric
% of spend on Network 75% 92%
% addressable spend managed in P2P 80% 90%
% of spend on PO 85% 99%
ARIBA P2P
% of spend on Contract 85% 99%
ABC BEST-IN-CLASS
% addressable spend under
Management in P2P
80% 92%
% invoices with exceptions 1% 3%
Metric
FINANCIAL CONTROL AND COMPLIANCE
% addressable spend under
Management
90%
Cost Reduction Savings (% of spend) 2.3% 3.5%
92%
ABC BEST-IN-CLASS
$ of active sourcing projects per FTE 8 12
% of invoice spend over Network 81% 92%
% of invoice volume over Network 90% 95%
Orders per FTE 10,000 12,000
Invoices per FTE 17,000 16,000
% of invoices require rework 4% 2%
% automated PO’s 90% 80%
PO Cycle time (ad-hoc) 18 hours 12 hours
PO Cycle time (catalog) 6 hours 2 hours
Metric
PROCESS EFFICIENCY
Sourcing cycle time 75 DAYS 60 DAYS
Sourcing FTEs per $B in spend 12 19
Addressable spend per Sourcing FTE $2.5M $1.6M
Procurement FTEs per $B in spend 12 10
AP FTEs per $B in spend 19 6
ABC BEST-IN-CLASS
Missed Discounts per $B in spend $3M $2M
Metric
WORKING CAPITAL / AP
% Discounts taken per spend
available for discount
92%
% of Spend Under Discount 2.3% 3.5%
85%
Days Payable Outstanding 60 DAYS 45 DAYS
VALUE
No of active users 240 out of a possible 1,600
No of suppliers enabled 4,500 out of 6,000
Number of plants LIVE on P2P 12 out of 24
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SAP/Ariba Benchmark Program
Peer comparison & insights
• 200+ customers across 23 SAP industry sectors
• Incorporates data from VLM Benchmark survey and
data from Ariba solutions
• Benchmarking survey covers strategic sourcing,
operational procurement and treasury and accounts
payable processes
• SAP Ariba solutions covered are Ariba Spend
Visibility, Ariba Sourcing, Ariba Contract
Management and Ariba P2X
* $53B sourcing spend, $50B Contracts, $175B in P2X and $73B in Spend Visibility
MORE THAN 200+ PARTICIPANTS
$350* BILLION SPEND ANALYSED
23 INDUSTRY SECTORS
3,500
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Value Lever Metric
Bottom
25%
Value Continuum Top 25%
Price Reduction and Spend
Under Management
Cost reduction: savings as a % of spend - Indirect 0.85% 3.8%
% Addressable Spend Under Management in Sourcing 59% 88%
Projects per sourcing FTE 0.7 12.8
Control & Compliance
Savings due to contract compliance 1.6% 3%
% of addressable spend under management in P2P TBD TBD
Process Efficiency
POs per procurement FTE 1,332 10,721
Invoices per AP FTE 5,958 24,371
% of Invoice spend via Ariba Network 21.7% 99%
% of Invoice volume / count through Ariba Network 45% 99%
% of Invoices matched to a PO, Contract, or BPO TBD TBD
% of electronic PO’s through AN (as a % of total Ariba PO’s) 59% 99%
% of PO’s based on contract or catalog TBD TBD
PO cycle time for non-catalog PO’s (ad-hoc based
purchases)
40 hours 12 hours
Cash Management
Supplier discounts realized (per $B in invoice spend)* TBD $2M
Days payable outstanding 35.8 45
Discount capture rate TBD TBD
Benchmark results
Example
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Benchmark insights
Key observations compared to peer and top quartile performers
Sourcing Spend Under Management (60.5%) is lower than
peer (69%) and top quartile performers (80%)
Spend
Managed
Orders per FTE (4,702) is lower than peer (5,887) and top
quartile performers (10.721), indicating opportunities to
continue to support self-service requisition for material and
service items, using on-line catalogs with rules-based
checks enabled
Invoice approval cycle time (18 days) is longer than peer
(15 days) and top quartile performers (6.9 days) with
opportunities to continue to automate invoice capture is and
validation via e-Invoicing solutions to alleviate the workload
of AP
Productivity
and Cycle
times
Electronic
Connectivity
Electronic PO count (95%) is higher than peer but trails top
quartile performers (99%)
PO spend on catalogs (18%) is lower than peer (26.8%) and
top quartile performers (36%) indicating opportunities to
enable more on-line catalogs
Working
Capital
DPO (34.5 days) is slightly lower than industry peer (36
days) and top quartile performers (45 days)
% of maverick spend (15%) is comparable to peer (15.9%) but
higher than top quartile performers (5%)Compliance
Cost as a % of spend (0.63%) is lower than peer (0.67%)
Number of Strategic Sourcing FTEs per $B in spend (11.4) is
comparable to peer but higher than top quartile performers (6)
FTE and
Costs
Best Practice
Top quartile performers:
• Play a strategic role within the organization and participates
in decision-making
• Manage procure-to-pay as an end-to-end process with a
single point of accountability
• Conduct regular spend reviews to identify new areas of
contract opportunity
• Use an integrated platform for indirect, direct and services
procurement
• Support self-service requisition for material and service items
using on-line catalogs with rules-based checks enabled
• Have a formal request for information proposal and
quotation to collect multiple supplier responses for new and
renegotiated buys
• Have a compliance program to optimize working capital
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Top quartile performance
1. PLANOVERALL
1. PLANSOURCING
1. PLAN
PROCUREMENT
OPERATIONS
1. PLAN
ACCOUNTS
PAYABLE /
WORKING CAPITAL
1. Assuming an average wage rate of $105K for a Strategic Sourcing FTE
2. Assuming an average wage rate of $52.5K for an AP FTE
3. Assuming an average discount rate of 1.5%
Average Performer Top Quartile
Top quartile achieves $2.9M efficiency
savings per $B in spendProcurement Cost (% of spend)
Sourcing Spend Under
Management
0.67% 0.38%
68.6% 80%
Strategic Sourcing FTEs per $B
in Spend
Number of bids placed per event
on Ariba
11.5 6.1
11 15
Orders per FTE
PO Lines on Catalog (as % of
Ariba total transaction lines)
5,887 10,721
68% 96%
Invoices per FTE
% of Spend under Discount
18,013 24,371
6.1% 7.0%
Top Quartile manages 1.2X more sourcing
spend than average performers
Top quartile requires 5.4 fewer FTEs
which translates to $567K1 efficiency
savings per $B
Top quartile obtains 36% more bids per event
on Ariba than average performers, driving
higher supplier competition
Top quartile processes 82% more POs
per FTE
Top quartile has 41% more transaction lines
that are catalog-based
Top quartile processes 35% more invoices
per FTE which translates to $76K2 savings
per 100K invoices processed
Top quartile has 14% more spend under
discount which translates to $135K3 savings
per $B
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The road ahead
Guiding principles to derive value
Develop a detailed view of spend across the entire organization
Craft a vision that encompasses people, process, and technology
• Program linked to corporate goals grounded in a business case with demonstrable outcomes
• Defined metrics / scorecards that roll up to corporate objectives
• Strong governance and ongoing executive sponsorship
Be a steward of procurement benefits across the organization
• Where can you truly help – prioritize efforts
• Take on the difficult business problems / categories
• Demonstrate & announce wins
• Qtly readouts to enlist support and adoption, refine plan
Participate with SAP Ariba and your peers
• Benchmark program (it’s free)
• Work closely with your CEE
• Attend Customer Success Days
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Please complete session survey
Locate Session Click Surveys Button Select Breakout Survey Rate Session
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SAP/Ariba Spend Visibility
Value drivers
Best-in-class procurement organizations using Ariba Spend Visibility source 63%
more of their addressable spend and manage significantly higher percentage of
overall enterprise spend (88% vs 54%).
Enterprises with Ariba Spend Visibility are significantly better at identifying and
prioritizing opportunities for savings within a spend category.
Enterprises leveraging Ariba Spend Visibility in their strategic sourcing efforts
report 36% higher levels of annual savings than ones that do not leverage Ariba
Spend Visibility. The benefits of Ariba Spend Visibility result in 30% to 50% faster
analysis in strategic projects
The improvements in ability to monitor spend internally and externally
result in a 29% increase in spend brought into contractual compliance and
savings hitting the bottom-line.
Increase Spend
Under Mgmt
Identify Savings
Opportunities
Sourcing
Process
Improve
Compliance
Source: Ardent Partners, 2011; Aberdeen Group, 2008, 2005
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SAP/Ariba Sourcing
Value drivers
Organizations that leverage e-sourcing achieve an average of 9-14% greater
savings than those that do not.
Fully integrated Ariba Discovery increases supplier discovery and overall
quality and savings. On average there is a 15% savings when using Ariba
Discovery in sourcing processes.
Access to better information and streamlining the sourcing process by eliminating
tactical work related to sourcing reduces sourcing events cycle time by up to 50%.
Improved category and market data, easier best practice sharing, better
stakeholder collaboration, and adherence to standardized processes enables
optimum sourcing savings over time
Enhanced
Sourcing
Savings
Increased
Supplier
Discovery
Reduced
Sourcing Cycle
Times
Continuous
Improvement
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SAP/Ariba Contract Management
Value drivers
Enterprise-wide visibility into agreements and ability to accurately monitor & access
satisfaction of contract commitments
Visibility into expiring contracts for timely renewals
Reduce time spent researching/reviewing contracts
Reduce contract leakage with non-contract suppliers
Drive more spend to contract suppliers
Ensure more purchases are compliant with contract pricing
Strong Contract
Compliance
Efficiency &
Visibility
Enhanced
Administration
Process
Standardization
Reduce contract duplications
Notification of expiring contracts for improved renewal management
Improved rebate/discount management
Empowers enterprise users to create contracts from predefined templates
Drives internal compliance and assists with regulatory compliance
Allows legal to manage by exception
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SAP/Ariba SIPM
Value drivers
Underperforming suppliers can be identified and weeded out more quickly.
Supply risks (safety issues, recalls, etc.) are easier to identify and react to.
Visibility into financial status, insurance certificate expiration and SLAs.
Suppliers with visibility into performance issues and quality problems address
problems pro-actively.
High-performing suppliers get the opportunity to be awarded more business because
incentives are based on high performance.
Improve Supplier
Relationships
Improve Quality &
Performance
Mitigate Supply
Risk
Formal systematic SPM programs are associated with at least a 20% improvement
in price, quality, on-time delivery and service level.
70% of Best-in-Class enterprises measure the performance of at least 51%
of their supply base.
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Achieve rationalized and normalized line level purchasing data
Lower supplier cost to service your business leads to mutual savings
Purchase requisitions automatically matched to contracts
Complex price structures (discounts, tiered, formula pricing) automatically applied
Workflow rules to proactively deter maverick purchases
SAP/Ariba Procure-to-Pay Requisition to PO
Value drivers
Easily enforce and streamline purchasing policies and approvals
Better identify and aggregate purchases
Ensure that users only buy what they are ENTITLED to buy
Demand
Management
Better Contract
Compliance
Re-Sourcing Savings
Req to PO Process
Cost Reduction
Reduced PO
Transmission Cost
Streamline req/PO creation and approvals
Reduce tactical buying & order tracking activities
Eliminate costly manual transmission (mailroom, postage, transit time)
Eliminate costly electronic transmission (fax servers, EDI VAN charges, etc.)
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Eliminate paper/manual processing (mailroom costs, manual data entry, etc.)
Eliminate EDI costs, other
Proactive invoice validation and PO/contract matching (i.e., PO flip, price/quantity validation)
Detect and auto-reject duplicates
Reduce the number of invoice errors to process
Streamline workflow and matching rules (2-way/3-way/contract)
Increase electronic payment and streamline payment scheduling
Invoice / Payment
Processing Cost
Reduction
Reduced Invoice
Errors & Duplicates
Reduced Invoice
Receipt Costs
Improved Capture of
Payment Discounts
Reduced Supplier
Inquiries
Receive, match and approve invoices in hours instead of days
Capture lost payment term discounts
Drive dynamic discount capture, improve return on Working Capital
Invoice/payment status driven to self-service portal
Automatic confirmation of invoice receipt
Up-front invoice validation rules reduce delays for inaccurate invoices
SAP/Ariba Procure-to-Pay Invoice to Pay
Value drivers
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SAP/Ariba WCM
Value drivers
Early Payment Discounting (Discount Pro)
Available to some or all suppliers
Optional program suppliers can use to manage their liquidity
Applies to some or all invoices
Delivers client savings at an average ROI of 24%
Pay Terms Rationalization
Ensures you are paying suppliers to term and not early
Review multiple vendor numbers per supplier and by commodity for inconsistencies
Drives consistent supplier payment experience
Delivers client DPO improvement and uplift adoption for early pay program
Pay Terms Extension
Aligns corporate DPO with industry peers
Rationalized across Ariba Network
Positions extended net terms to specific suppliers/categories
Delivers client DPO improvement and uplifts adoption for early pay program
All three program options work together in a balanced approach
Top performers use all three to drive maximum supplier participation & ROI
Typically drives $2-$3M in
savings per $1B in Spend.
Average return is 24% APR
Creates 2-3 days DPO
Improvement