Contracts - the Missing Link: Utilizing Contract Management to Close the Gap on Savings and Compliance
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The document discusses the implementation of SAP Ariba for contract management at Schlumberger and UnitedHealth Group, highlighting the need for a unified system to enhance procurement processes and ensure compliance. It outlines the challenges faced, such as inconsistent processes and low collaboration, and the subsequent improvements achieved in efficiency and risk management through electronic signatures and structured workflows. The overall goal of both companies is to maximize value and streamline operations across their respective sourcing and procurement functions.
Contracts - the Missing Link: Utilizing Contract Management to Close the Gap on Savings and Compliance
- 1. Contracts - the Missing Link: Utilizing Contract Management to Close the Gap on Savings and Compliance Moderator: Florain Seebauer, Senior Solution Manager - SAP Ariba Theresa Smart, ITT Transformation Business Process Manager - Schlumberger Amy Forbes, Director of Procurement Operations - UnitedHealth Group March 16, 2016 Public
- 2. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 10Public Panelists Theresa Smart ITT Transformation Business Process Manager Schlumberger Amy Forbes Director of Procurement Operations UnitedHealth Group
- 3. Theresa Smart, ITT Transformation Business Process Manager/ March 15, 2016 How Schlumberger Achieved Sourcing Process Excellence through Ariba Contract Management Solution
- 4. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 12Public © 2015 Schlumberger. All rights reserved An asterisk is used throughout this presentation to denote a mark of Schlumberger. Measurable Impact is a mark of Schlumberger. Be Certain is a mark of Schlumberger. Other company, product, and service names are the properties of their respective owners. About Schlumberger: Schlumberger is the world’s leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. Employing approximately 115,000 people representing over 140 nationalities and working in more than 85 countries, Schlumberger provides the industry’s widest range of products and services from exploration through production.
- 5. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 13Public An assessment of existing Procurement & Sourcing practices surfaced significant challenges requiring a change in direction… • Standardized workflows that enable better enforcement of gate reviews • Better record of contracting activities for auditing and internal controls • Increased responsiveness • Reduced administrative work • Accuracy on measuring and recovering control • Better knowledge sharing • Better service delivery to stakeholders • Improved negotiation positions with suppliers …To desired future state • Inconsistent, inefficient processes • Unable to ensure compliance of contracts management processes • No single contracting tool • Duplicate work across contracting teams • Lack of complete visibility into contracts being generated worldwide • Unable to assess productivity performance • Unable to achieve a strategic competitive advantage • Little collaboration & engagement across business units and stakeholders From current state… WhatchallengesdoIfaceonadaily basis? What’sinitformeforachange?
- 6. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 14Public …and revealed the need for a common robust system that can help structure and enforce a global common procurement & sourcing process …with a comprehensive focus covering all aspects of the P&S process SAP Ariba has been recognized in a 2015 Gartner survey as the best strategic sourcing suite… 6) Invoice Invoice Pro Process Invoice 5) Procure Procure to Order Request Approve Receive 7) Pay Discount Payment Mgt Manage Cash Spend visibility Analyze 1) Sourcing Ariba Discovery Ariba Sourcing Pro Discover Plan Tender/ Negotiate 2) Supplier contracting Ariba Contract Pro Contract 4) Procurement content Catalog Content Broadcast Catalog Category management Source to Contract Procure to Pay SIPM 3) Supplier management Supplier Info and KPI tracking The end-to-end Source to Pay will be enabled by SAP Ariba through a phased approach between 2014-2017
- 7. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 15Public Key value drivers and value at stake Contracting initiatives Use of best practices Productivity2 Contract Process Efficiency1 Full set of KPIs to track value capture Non- financial Reduced risk exposure 3 • Contracts set to expire in 90, 60 and 30 days • Number of contracts amendments • Increased regulatory compliance (e.g., fewer penalties) from document and message tracking • Increased compliance with internal policies (e.g., contracts template selection, mandatory information to request contracts) • Greater visibility into residual risk exposure after T&C from built-in risk analysis tool Actionable levers • Number of contracts per Area by Contract Type • Contracts personnel managing contracts through standardized templates templates and workflow management, including approvals • Average contracts processed per person per month • Contracting personnel processing contracts requests as a result of sourcing events that properly awards business to approved suppliers • Integration of sourcing and contracts process resulting in synergistic corporate benefits allowing continuous improvement and adoption of lessons learned • Template usage by Area • Improved contract adherence through notification of key events • Number of contract requests as a result of sourcing events• Increased visibility through workflow management and standardized contracts templates • Enable structured contracting process, including negotiation and administering long-term contracts – contracts management process • Contract Cycle Time by Contract Type (in days)• Increased collaboration between sourcing specialist and contracts personnel and adherence to an organized process workflow • SAP Ariba enhances global visibility of sourcing plans and contracts initiative with suppliers • Number of contract requests per Area per Contract Type Value drivers
- 8. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 16Public Additional enhancements after Go-Live Contracts migration ~64,000 agreements were migrated to SAP Ariba with the assistance of a third party supplier Project Plan was achieved by leveraging existing meta data (contract attributes) from our legacy system, and analyzing agreements by contract type and term (expiration) Contracts were migrated in Test environment before loading them to Production Detailed communication was required to the contracts community before, during and after project completion Migration of contracts with third party supplier provided access to contracts data that was unknown, e.g. considerable amount of agreement are in several languages
- 9. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 17Public Additional enhancements after Go-Live Electronic signature 6 0.5 0 1 2 3 4 5 6 7 Paper Signature in Ariba Electronically Signature Ariba 91% Improvement! Paper vs. Electronic Contracts Days • Signature process on average takes ~6 days. DocuSign has reduced the turnaround time to half a day • The electronic signature implementation has reduced time and expense of shipping and handling, improving the overall efficiency of the process • Electronic signature has been implemented in 3 countries and plan is to roll it out in other several countries “With a couple clicks, a contract is sent to the signatories and it gets signed in matter of minutes or seconds. This process is extremely convenient, fast, easy and seamless. DocuSign will improve the efficiency of the turnaround time of the contracts signature process, reducing printing, courier handling, and archival costs.” Global IT Security 34 77 136 192 Contract Type 4 Contract Type 2 Contract Type 1 Contract Type 3 Number of Contracts Executed Electronically (2015)
- 10. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 18Public Change and support Support tools Champions Calls Change Materials QRG+FAQs Change Sessions Helpdesk Support ilearn Modules Ariba S2C Pre/Post Deployment calls Summary Documents Quick Reference Guides Practice and Refresher Online learning videos (max. 10 minutes each) SAP Ariba support email distribution list Weekly, bi-monthly or monthly calls Documents Calls Online Support Bi-weekly/monthly follow up
- 11. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 19Public Change and support Change management Summary document as supplement to Quick Reference Guides • Easy to use • Trigger reminders rather than full training • High level view of contract process in SAP Ariba Practice sessions with areas • Focusing on the Change • Engage users by leading the training Process documenting • Contracts process to align Procurement and Contracts functions
- 12. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 20Internal Change management Survey – continuous improvement • The implementation team developed a survey in order to identify opportunities of improving and to ‘hear’ what the users might be struggling with • The goal is to determine and target focus to the sections of Ariba Contracts where the most challenges are being faced • The survey’s results were shared and improvement action items were put in place to make sure the efforts were focused where most needed, e.g. remedy support ticketing system was put in place 2% 8% 90% Have you created contract workspaces in Ariba? N/A No Yes 52% 27% 21% If you are a part of the pilot do you utilize the electronic signature? N/A No Yes
- 13. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 21Internal Training assessment and feedback Self-assessment feedback Students are asked to rate themselves on a scale of 1 to 5, based on the key lessons they learned in training (i.e. I can create a Contract Workspace, I can create and download a pre-configured report, etc.) 3.8 4.5 4.8 4.6 4.3 4.6 4.5 4.2 4.4 0 1 2 3 4 5 6 AVERAGE Nov-14 Jan-15 Feb-15 Apr-15 May-15 Jun-15 “Training provided is a huge asset in helping me navigate Ariba ” “Each step for creating a Contract Workspace was very clear” “Excited about having an electronic process to measure time delays and improve overall process ” “The contract request will force business folks to engage P&S prior to requesting agreements”
- 14. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 22Internal Results Ariba Contract Management reports – efficiency as of February 26, 2016 AVERAGE CYCLE TIME IN DAYS COUNT OF ELECTRONIC SIGNATURE BY CONTRACT TYPE
- 15. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 23Internal Results Reporting accomplishments Clarity: Clearer and more accurate reports, providing details by various parameters (Month, Region, Group, Category) Contribution: Building reports that allowing other groups to track KPOs Contracts data: Ability to view all contracts with suppliers in a single system/repository, company wide Contract Details: Full picture of contract details including contract type, term, parties’ legal entity, etc. 2 Contract Workspace (CW) is created once the Contract Request (CR) is received and approved 240 601 1856 3064 1668 0 500 1000 1500 2000 2500 3000 3500 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Contract Request 146 476 1803 3189 1695 0 500 1000 1500 2000 2500 3000 3500 4000 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Contract Workspace
- 16. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 24Internal Overall project challenges Adoption: Users are reluctant to accept the change. Significant 1-1 user assistance and support is required. Areas with low management support have low utilization. Intermediate solution: Review utilization and process gaps then provide additional support or solutions as needed (from core team) Long-term solution: Transfer accountability to support users to regional champions/experts. Requires management support Management Support: Users are adapting to the sourcing procedure compliance and have many process related questions as well as terminology. Intermediate solution: Provide support and direct questions to the Contracts Function on the case-by-case basis Long-term solution: Single point of contact or a committee to advise and provide support Champions/Experts: Are not fully committed to the change and/or supporting their teams Need to make the champions/experts accountable of this responsibility by adding this role as a specific objective. Management to send a clear message to managers to commit the chosen champions to their regions and to be part of their objectives Suppliers: Use by local suppliers (language), acceptance of using Ariba Contracts to respond Significant component of business is done with localized suppliers. Suppliers who do not transact in English have trouble since some communications from SAP Ariba are sent in English. Suppliers reluctant to access a system to input their information (as opposed to providing it via email) Economic Downturn The deployment plan had to be modified multiple times to adjust timings and account for travel capabilities of the affected region. Several additional training venues were added beyond the original plan. Still in some cases personnel could not attend and have struggled significantly since then.
- 17. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 25Internal Lessons learned 1. Use SAP Ariba to ensure process compliance 2. Focus on delivering 80% immediately and emphasize continuous improvement (suggestions and requests coming from the function directly and incorporated into design) 3. Ensure that milestones are linked to performance goals (KPIs from SAP Ariba to be incorporated to employee performance KPOs) 4. SAP Ariba module go-live happened immediately after training (so personnel retain knowledge and stay fresh) 5. Change management, communication and support are critical elements for success
- 18. Thank you Contact information: Theresa Smart ITT Transformation Business Process Manager Schlumberger smartt1@slb.com
- 19. Realizing Contract Value Amy Forbes, UnitedHealth Group, March 16, 2016
- 20. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 28Public UnitedHealth Group Procurement Overview
- 21. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 29Public UnitedHealth Group procurement overview Enterprise Sourcing & Procurement (ES&P) Delight our customers by offering simple, efficient, value-added procurement solutions and improve business engagement by executing and marketing our ES&P value proposition Outstanding Customer Service Mission “We deliver collaborative, constituent-based, innovative sourcing and procurement solutions that manage risk and leverage our size and scale to advance the integrity, quality, competitiveness and agility of UnitedHealth Group” Maximize Value Continuously improve and optimize the tools and processes associated with the procurement lifecycle through innovation and collaboration. Ensure our teams are engaged and have the tools and training needed to succeed. Common, Innovative solutions Continue to create competitive markets for ES&P managed spend that maximizes the value realized throughout the procurement life cycle for the categories we support. Maximize Value Optimize the structure and framework required to identify and manage risks introduced by third party suppliers and govern risk throughout the Supply Chain Mitigate Risk
- 22. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 30Public UnitedHealth Group Procurement overview ES&P by the numbers ~ $5.9 Billion Spend in ES&P Scope ~ $700 Million in Run-rate Savings ~ 4,500 Risk Vendor Engagements ~ 9,100 Suppliers in ES&P Scope ~ 4,800 Ariba Contracts per Year ~ 16,000 Ariba Purchase Orders per Month ~ 207 Onshore Employees ~ 40 Offshore Employees BUSINSS JUSTIFICATION FOR A CENTRALIZED PROCUREMENT (ROI)
- 23. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 31Public UnitedHealth Group Procurement overview Roles and responsibilities Maximize Value • Competitively bid goods/services • Obtain competitive pricing • Leverage UHG size and scale • Draft and author contracts Mitigate Risk • Review risk for each supplier engagement • Include contract terms on managing handling of protected data • Prevent data breeches ES&P - Authors Contracts Business Partners– Orders/Pays• Order via Purchase Orders for goods (~20%) • Order via email/phone SOW-based work (~80%) • Process and approve invoices • Different teams and tools managing invoices/contracts • No visibility to compliance • Limited view to company-wide spend/activities • Invoices can technically be paid without a contract/risk review
- 24. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 32Public Technology bridges the gap Supplemental Benefits of ACC: At UHG, alternative invoicing channels are shut off for most of our SAP Ariba-enabled suppliers, which then ensures: • ES&P is engaged for all supplier contracts • Risk is assessed for every engagement Key Benefits of ACC: • Price Compliance against contract • Spend Visibility by SOW • Controls on total contract spend Ariba Contract Compliance (ACC) Validates ES&P savings
- 25. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 33Public Technology bridges the gap How it works Contract: Loaded in Ariba Contract Management Setup: Contract Terms setup for invoicing Invoice: Supplier submits invoice against contracts Reconcile: System reconciles invoice against contract terms Approve: Invoice routed for approval Payment: Invoice routed to ERP for payment Ariba Contract Compliance
- 26. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 34Public Ariba Terms for Invoicing: Contract: Loaded in Ariba Contract Management Setup: Contract Terms setup for invoicing Contract: Technology bridges the gap How it works
- 27. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 35Public Reconcile: Invoice: Supplier submits invoice against contracts Reconcile: System reconciles invoice against contract terms Invoice Technology bridges the gap How it works
- 28. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 36Public Payment: Approve: Invoice routed for approval Payment: Invoice routed to ERP for payment Approve: Technology bridges the gap How it works
- 29. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 37Public Spend visibility – reporting benefits Supplier 1 UNSPSC Code 1 Invoice 1 Invoice 2 UNSPSC Code 2 Invoice 3 Invoice 4 Supplier 2 Supplier 1 SOW 1 Invoice 1 Invoice 2 SOW 2 Invoice 3 Invoice 4 Reporting by good/services Spend Breakdown Supplier Optimization Price/Volume Comparisons Reporting by SOW Visibility to spend by contract Future negotiations Manage Contract Spend
- 30. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 38Public In Conclusion Ariba Contract Compliance at UHG 739 contracts setup for invoicing in SAP Ariba 89% of SAP Ariba contracts have contract compliance (others are lump sum invoices against a SOW) $1.9 Billion in Annual Spend throughput in SAP Ariba (80% is ACC, 20% PO) UHG realizes the value of our contracts Tool automates match of invoice pricing against the contract pricing Drives compliance of Corporate Policies • Ensures Risk is managed for all supplier engagements • Ensures ES&P is engaged for all supplier contracts
- 31. Thank you Contact information: Amy Forbes Director of Procurement Operations UnitedHealth Group amy_forbes@uhg.com
- 32. Questions
- 33. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 41Public Please complete session survey Locate Session Click Surveys Button Select Breakout Survey Rate Session