Closing the Invoice to-Contract Cycle for Huge Savings
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This document discusses SunTrust Bank's implementation of a spend management strategy using Ariba solutions. It provides an overview of SunTrust, describes their lack of spend visibility and contract compliance prior to the strategy. The goals were to ensure contract compliance by matching invoices to contract rates and to increase spend visibility. Ariba solutions deployed included supplier management, sourcing, contract management, procurement, accounts payable, and the Ariba Network. An evaluation of SunTrust's $2.1 billion procurable spend found 80% was concentrated among 400 suppliers and critical suppliers accounted for 40% of spend. The strategy aimed to close the invoice-to-contract cycle for significant savings.
Closing the Invoice to-Contract Cycle for Huge Savings
- 1. B MC Closing the Invoice-to-Contract Cycle for Huge Savings Ashley Miller SunTrust Bank © 2012 Ariba, Inc. All rights reserved.
- 2. Agenda • SunTrust at a Glance • State of Spend Management before a Spend Management Strategy • Goals and Benefits of a Successful Spend Management Program • Ariba Solutions Deployed • Spend Profile for a Financial Services Organization • Evaluation of Procurable Spend • How Did We Get Started with Invoice to Contract? • Good Candidates for Invoice to Contract • How We Use Invoice to Contract • Metrics Tracking • Best Practices 2 © 2012 Ariba, Inc. All rights reserved.
- 3. SunTrust at a Glance • The most direct corporate ancestor, the Trust Company of Georgia, was founded in 1891, and merged with SunBanks, Inc of Florida in 1985 to form SunTrust Banks, Inc • Having total assets of $172.6 billion it is one of the nation's largest and strongest financial holding companies. • Employs approximately 30,000 teammates Diversified Business and Corporate & Wealth & Product Mix Retail & Household Investment Investment Commercial Lending Banking Management SunTrust National National National Footprint Full line of Residential Full array of 1,658 investment mortgages, c private wealth Branches banking ommercial management and products lending institutional 2,889 ATMs and services solutions including Mortgage 800+ personal and servicing Relationship institutional portfolio of Managers investment $163B management 3 © 2012 Ariba, Inc. All rights reserved.
- 4. State of Spend Management before a Spend Management Strategy Lack of robust spend visibility – • Limited product / Line Item visibility • Imperfect visibility to what was being purchased and at what price No formal means for spend / contract compliance – • Contracts negotiated, but limited ability to match invoice to terms No centralized contract repository – • Had a paper contracts room, no automation to manage compliance No place to store sourcing project documents & deliverables – • Limited access and infrequent updates to online tool 4 © 2012 Ariba, Inc. All rights reserved.
- 5. Goals and Benefits of a Successful Spend Management Program 1. Contract Compliance – ensures financial stewardship and expense management of Supplier Spend; Invoices are matched to negotiated Contract Rates with preferred suppliers 2. Increase Spend Visibility – implement process and reporting that ensures detailed information on our Spend (What was bought, How much was paid, How many received, Who consumed, Supplier utilized) Procurable Spend The Plan for our Effort 80% 45% Identify Solution Commodities 20% Enable Suppliers Transact via the Tool Continuous Improvement 5 © 2012 Ariba, Inc. All rights reserved.
- 6. Ariba Solutions Deployed • Supplier Management • Procurement Performance Surveys Catalog & Non-Catalog Purchase Orders: Punch- Scorecards out, supplier hosted, custom workflow, etc (approx. Repository for all macro data on SRM managed suppliers 200,000/yr. and 5,000 users/mo. Functionality Not Used: For supplier “collaboration” with • Sourcing specific modules for service categories (i.e. Temp Project Management: Reporting, timeline, Save Labor, Print, etc.) Tracking, Project Artifact, etc Standardization in Process & Templates: Sourcing • Accounts Payable Library Invoice Processing: Invoices matched to PO and/or Contract Performance of RFI, RFP, and Auctions Invoice Workflow: Exception handling, approvals, receipt Document Archival verification Functionality Not Used: Tasks, Workflow Payment Terms: Prompt payment & Dynamic Discounts • Contract Management • Ariba Network Contract Administration: Storage, Archival, & Retrieval eBilling: 94% volume of invoices are eBilled and about Establishes linkage between Master & Sub-Agreements 50% of spend is eBilled (approx. 11,000 agreements) Electronic issuance of POs, Contracts, etc Contract Compliance: Invoice to Contract Match Electronic Supplier Connectivity: EDI, cxml, csv uploads Reporting: Expiring Contracts, Contracts by Catalog Maintenance: Supplier managed Supplier, LOB, etc. Functionality Not Used: Contract Templates, Clause Library, Contract Authoring & Workflow through Process, eSignature 6 © 2012 Ariba, Inc. All rights reserved.
- 7. Spend Profile for a Financial Services Organization • $2.1 Billion of procurable spend with over 13,000 suppliers • 80% of spend concentrated with 400 suppliers • Critical suppliers account for approximately 40% of total spend Traditional “Purchase Order” transactions accommodates only 10% to 20% of our spend 7 © 2012 Ariba, Inc. All rights reserved.
- 8. Evaluation of Procurable Spend Out of Scope Total Out of (Commodities 2500 Scope deemed out of Spend Alternative Scope because we $2,162 $434 have no control Compliant over pricing): 2000 System Sponsorships, Direct $300 Solutioned in or Fees, Employee Ariba Relocation, Taxes, H $1,428 ealthcare Services & 1500 Plans, Legal VMS, Settlements, Loan eCounsel, Brokers, Postage Asentinel, Alternate 1000 ERS, FedEx Compliance Systems (where we get Contract 500 Compliance and Spend Visibility): Temp Labor, Telecom, Lega 0 l Services, Employee Total Spend Out of Scope Alternate Compliance System Solutioned in Ariba Expense Reimbursement Numbers in Millions 8 © 2012 Ariba, Inc. All rights reserved.
- 9. How Did We Get Started With Invoice to Contract? • Majority of our spend is services • Services does not always work well with PO solution so Contract Compliance or Invoice to Contract solution is the solution for the bulk of our contracts and spend • As part of our Commodity Onboarding effort, we assembled team who would be responsible for determining method of Procurement (Catalog, Non- Catalog, Contract Compliance) and team implemented designs on how to get the contract and spend into Ariba Charts are FY 2011 data 9 © 2012 Ariba, Inc. All rights reserved.
- 10. Good Candidates for Invoice to Contract • Use for recurring fixed and variable expenses on a month over month basis; where there is no Work Order or Purchase Order Requirement. • This enables invoices to match directly to the Contract (no Requisition or PO required, after contract and budget approval has been obtained) • Good examples are: Maintenance Agreements (IT & Non-IT), Time & Material Services, Janitorial Services, Agency Agreements, Auditing Services, Legal Services, Consulting, etc. 10 © 2012 Ariba, Inc. All rights reserved.
- 11. How We Use Invoice to Contract New Contracts Procurement Set Up Identify Sourcing Contract Procurement Contract Engages Publish Notified Contract Invoice Payment Need Process Negotiated Assigned LOB / SFO / Request Contract Supplier Procurement Set up Task Identify Sourcing Contract Procurement Contract Engages Publish Contract Invoice Payment Need Process Negotiated Notified Assigned LOB/SFO/Su Contract pplier Request Method Owner/ Commodity Procurement Procurement Procurement Procurement Supplier / Requestor Commodity Manager SunMart AP Manager SME Buyer Buyer Buyer / SME LOB • Identifies • Defines • Obtain alignment • Upon creation • Procureme • Validate setup • Build contract • Internal quality • Supplier • If LOB need for opportunity with LOB on award of Contract nt SME of Contract in system control tollgate submits approves purchases with LOB recommendation Workspace reviews invoice invoice or and negotiation (CW), SunMart contract • Engages LOB • Scope, Terms, • Verifies electronical if invoice • Must be • Analysis & strategy sends an email request and to get Effective/Expir information is ly matches done requirements notification to assigns accounting ation accurate the before definition • Negotiate business Procurement contract information Dates, Billing • If contract, • Contract # (C#) Key Points goods/servi and legal terms Frequency, Inv applicable, ces are • Identify supply team request to a • Work with LOB oice approvals is generated LOB the • Finalize supplier Procureme to define invoice s committed base • Supplier is receives selection and make nt Buyer invoice • Identify pricing notification paid • Engage • Gather data & contract award approvals if characteristics notified via electronic email with to approve ally Strategic evaluate applicable Sourcing market • Create CW in • Sourcing instructions on invoice SunMart & load • Contact provides how to invoice • Perform draft word version supplier & signed contract against the competitive of contract and supplier contract (C#) sourcing PCAR enablement • Submit CR for events teamto P2P quality control (RFI, RFP, Auc enable supplier tions) in SunMart Strategic Strategic Strategic Contact Procurement Procurement Procurement Procurement Procurement Supplier AP Sourcing Sourcing Sourcing 11 © 2012 Ariba, Inc. All rights reserved.
- 12. How We Use Invoice to Contract Ongoing Process for Capturing Existing Contracts Identify Commodities & Suppliers By Leaking Spend (Not going through process) Review “Leakage” Report & Report Out on Non-Compliant Suppliers By pulling data, determine if Suppliers are Enabled & if Suppliers Need to Be Enabled Pull Data & Enable Suppliers Pull Spend & Commodity Data Pull Overall Spend & Commodity Data from Spend Visibility Tool Identify if a Design for Getting Spend into Ariba exists & Determine, if Relevant Review Previous Commodity Onboarding Work, if Applicable Create Design for Getting Spend into System, if Necessary Work with LOB Contact & Supplier Quality Control of Design & Creation of Contract Quality Control, Send to Procurement to create C, Send C to Supplier, Train Supplier 12 © 2012 Ariba, Inc. All rights reserved.
- 13. Metrics Tracking Procurement Monthly Metric Executive Summary Contract Compliance Cycle Time Contract Compliance Production 25.00 600 500 20.00 20.74 400 16.75 416 16.35 300 15.00 14.88 12.83 13.73 200 10.00 100 133 0 5.00 0.00 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 New Contracts Change Order Contracts Contract Compliance Quality Monthly Analysis 50.00% • Contract Compliance Cycle Time 45.00% Cycle Time decreased by 7 days since last month 40.00% 35.00% SLA: 7 Calendar Days (5 Business Days) 30.00% 25.00% • Contract Compliance Production 20.00% Number of new contracts increased by over 30 while change order 15.00% contracts increased by over 100 since last month 10.00% 10.93% 5.00% • Contract Compliance Quality 0.00% % of denials continued to go down month over month Feb12: 549 Approved / 60 Denied SLA: 2-5% Denied in a Month % Denied 13 © 2012 Ariba, Inc. All rights reserved.
- 14. Metrics Tracking Contract Compliance Task Cycle Time January 2012 Task Names Average of sum Project Task Duration Count of Contract Id • Report shows tasks Triage Request Contract Documents 0.85 1.09 36 28 cycle time in days of Assignment 0.15 88 tasks that were in Assignment - Restricted 0.00 8 Completed status only • Supplier Enablement 0.25 23 Analyze Contract 0.30 19 New Task names Request Accounting and Approver Information 0.24 14 went into effect 1/5/12 • Confirm Executed Contract 0.00 71 Submit Contract 0.98 39 As adoption of using February 2012 tasks increases, task Task Names Average of sum Project Task Duration Count of Contract Id reporting will be able Triage 1.30 124 to be used to identify Triage - Restricted 0.00 17 Request Contract Documents 1.55 102 issue areas Assignment 1.33 119 Assignment - Restricted 1.01 17 Supplier Enablement 0.66 132 Analyze Contract 1.73 124 Request Accounting and Approver Information 2.54 116 Confirm Executed Contract 0.00 128 Submit Contract 0.06 128 Project Task Duration measured in calendar days 14 © 2012 Ariba, Inc. All rights reserved.
- 15. Best Practices to Be Successful When Using Invoice to Contract • Important to create a strong connection / • Ensure you have executive buy-in to your line of communication between Sourcing, company’s P2P policy Procurement, AP • Establish standardized communications for new suppliers to Ariba • Important to get Procurement engaged BEFORE (early in Sourcing process) the • Look at getting Ariba for Supplier Enablement services to help with onboarding and training contract is signed to begin work creating new suppliers electronic contract • Establish an exception handling process for • Understand what commodities work best those times when invoices do not match with each Procurement solution (Catalog, the contracts Non-Catalog, Contract Compliance) • Create a No PO or C, No Pay policy to let • Create stop gap for suppliers you know are suppliers know you will not pay them without a PO or a C number in advance set up to process invoices in Ariba to prevent them from circumventing the • Cease accepting paper invoices for suppliers where you have an Ariba relationship system and your process • Realize P2P Strategies for Services likely • Workflow and tasks are good for requires a phased approach with a solution that tracking cycle time and ensuring matures in cycles of process improvement standardized processes 15 © 2012 Ariba, Inc. All rights reserved.
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- 17. B MC Appendix © 2012 Ariba, Inc. All rights reserved.
- 18. Session Overview • We all know that contract leakage provides a significant opportunity for savings. In fact, it represents nine million dollars of savings for every billion in spend. If your company has many contracts but the invoice-to-contract linkage is still wide open, then this session is for you. Join us to learn how SunTrust bridged this process to load contracts and automate the invoice-to-contract process for nearly one billion in spend. 18 © 2012 Ariba, Inc. All rights reserved.
- 19. Contract Creation Process 19 © 2012 Ariba, Inc. All rights reserved.
- 20. Contract Creation Phases / Tasks • When Sourcing creates a CW, Procurement receives a task notification that the CW has been created. Procurement’s tasks are divided into Phases: Contract Triage • Review of attached documents • Assignment to a Procurement Buyer Contract • • Supplier enabled (if applicable) Contract analyzed Configuration • Contract terms created in Ariba • Accounting & Approver requested Contract • Performed by Contract Administrator • Contract Administration Requirements Administration • Confirm executed contract, create PDF, upload final signed copy & advise Procurement when done • Submit draft contract for publishing Publish Contract • Contract is reviewed (QC) and published • Contract number is communicated to the supplier, commodity manager, LOB 20 © 2012 Ariba, Inc. All rights reserved.
Editor's Notes
- #9: Procurable SpendTotal procurable spend: $2.1BTotal addressable spend in scope: $1.7BTotal % of spend under management: 84.5%% Enabled Spend Invoiced via Ariba vs. Oracle: Monthly Ariba invoice amount processed as a percentage of total Oracle invoice amount processed
- #12: All new Contracts are Sourced, Contracted, Invoiced and Paid in AribaProcurement team engaged early and helps Sourcing to design contracts so that they fit well with Contract ComplianceProcurement is engaged by using workflow and tasks so when Sourcing creates a CW, Procurement is notified so Sourcing doesn’t have to remember to engage Procurement
- #13: Ongoing Process for Capturing Existing Contracts we discover or catching previously onboarded contracts that have invoices going around the system
- #14: What Metrics We Track and Why they Are ImportantCycle Time What is it: Time Contract Enters Contract Room (has been executed) and time C is published. Important Because: Speed. We want to make sure suppliers can invoice as soon after the contract is signed and executed as possibleProductionWhat is it: Number of new Cs created in a month and number of Change Orders executed in a monthImportant Because: Need to be able to track production per FTE and gauge volume coming in vs. volume going outQualityWhat is it: % of Contract Requests (CRs) submitted for publishing that are denied in Quality Control checkImportant Because: Want to make sure team is continuing to improve with time and be more accurate in CRs submitted (ultimately impacts cycle time)