How To Develop A Business Case For FSCM
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This document provides an overview of developing a business case for automation opportunities in deduction management. It discusses identifying opportunities by analyzing key processes like deduction processing, cash application, and sales agreements. Specific improvement areas are highlighted like managing deduction documentation and validation of trade promotion claims. The document also covers quantifying the opportunities by calculating current operational costs and estimating potential cost savings. It demonstrates calculating return on investment by determining implementation costs versus estimated savings. Finally, it provides a sample business case template for identifying sub-processes, improvement opportunities, and modeling potential benefits.
How To Develop A Business Case For FSCM
- 1. Developing a Business Case SAP FSCM Seminar Jessica Butler Principal Attain Consulting Group February 2011 jbutler@attainconsultinggroup.com
- 2. Agenda • Introduction • Identify the Opportunities/Improvements • Quantify the Opportunities/Improvements • Develop the Return on Investment (ROI) • Sample Business Case Attain Consulting Group 2011 – Developing a Business Case
- 3. Introduction What is a Business Case? Attain Consulting Group 2011 – Developing a Business Case
- 4. Introduction Definition A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation Contains 3 Key Components • Identify the Opportunities/Improvements (What am I going to get?) • Quantify the Opportunities/Improvements (What is it going to cost?) • Develop the Return on Investment (What is my Payback?) Attain Consulting Group 2011 – Developing a Business Case
- 6. Identify the Opportunities/Improvements How do you know what opportunities or improvements are available? • Internally driven: Identified need or pain point – search for solution • Externally initiated: Hear about a solution – creates a previously unknown opportunity Attain Consulting Group 2011 – Developing a Business Case
- 7. Identify the Opportunities/Improvements Deduction management automation TOPIC Deduction Processing Cash Application / Remittance Processing Sales Agreements Attain Consulting Group 2011 – Developing a Business Case
- 8. Identify the Opportunities/Improvements Deduction management automation TOPIC AREA OF POTENTIAL IMPROVEMENT Managing Pre-Deduction Notification Information Gathering Supporting Documentation Preparing Customer Correspondence Deduction Processing Credit / Debit Memo Matching Credit Memo Approval Cross Functional Workflow & Collaboration Attain Consulting Group 2011 – Developing a Business Case
- 9. Identify the Opportunities/Improvements Deduction management automation TOPIC AREA OF POTENTIAL IMPROVEMENT Use of Bank Lockbox Services Cash Application / Manipulation of Remittance Info. Prior to Posting Remittance Processing Reason Code Mapping Attain Consulting Group 2011 – Developing a Business Case
- 10. Identify the Opportunities/Improvements Deduction management automation TOPIC AREA OF POTENTIAL IMPROVEMENT Importance of Program / Claim Validation Sales Agreements Validation Drivers Validation Process Attain Consulting Group 2011 – Developing a Business Case
- 11. Identify the Opportunities/Improvements Deduction management automation TOPIC AREA OF POTENTIAL IMPROVEMENT Managing Pre-Deduction Notification Information Gathering Supporting Documentation Preparing Customer Correspondence Deduction Processing Credit / Debit Memo Matching Credit Memo Approval Cross Functional Workflow & Collaboration Use of Bank Lockbox Services Cash Application / Manipulation of Remittance Info. Prior to Posting Remittance Processing Reason Code Mapping Importance of Program / Claim Validation Sales Agreements Validation Drivers Validation Process Attain Consulting Group 2011 – Developing a Business Case
- 12. Identify the Opportunities/Improvements Deduction management automation TOPIC AREA OF POTENTIAL IMPROVEMENT Managing Pre-Deduction Notification Information Gathering Supporting Documentation Preparing Customer Correspondence Deduction Processing Credit / Debit Memo Matching Credit Memo Approval Cross Functional Workflow & Collaboration Use of Bank Lockbox Services Cash Application / Manipulation of Remittance Info. Prior to Posting Remittance Processing Reason Code Mapping Importance of Program / Claim Validation Sales Agreements Validation Drivers Validation Process Attain Consulting Group 2011 – Developing a Business Case
- 13. Identify the Opportunities/Improvements Remittance processing Improvement Area: Manipulation of remittance information prior to posting Common Situation: • Customer’s remittance information needs manual processing prior to posting deductions in ERP. For example: – Deleting / adding columns – Changing column signs – Removing prefixes/suffixes from invoice numbers associated with deductions • Hours are spent manipulating unique formats and logic associated with remittance information Attain Consulting Group 2011 – Developing a Business Case
- 14. Identify the Opportunities/Improvements Remittance processing Automation Opportunity: • Rules based engines • Allows customer specific automated pre-processing • Increases on-invoice hit rate / decreases manual remittance processing • Offered as SaaS (software as a service) – Minimal IT involvement – Avoid in-house EDI mapping Attain Consulting Group 2011 – Developing a Business Case
- 15. Identify the Opportunities/Improvements Deduction management automation TOPIC AREA OF POTENTIAL IMPROVEMENT Managing Pre-Deduction Notification Information Gathering Supporting Documentation Preparing Customer Correspondence Deduction Processing Credit / Debit Memo Matching Credit Memo Approval Cross Functional Workflow & Collaboration Use of Bank Lockbox Services Cash Application / Manipulation of Remittance Info. Prior to Posting Remittance Processing Reason Code Mapping Importance of Program / Claim Validation Sales Agreements Validation Drivers Validation Process Attain Consulting Group 2011 – Developing a Business Case
- 16. Identify the Opportunities/Improvements Sales agreement validation Improvement Area: Validation of Trade Promotion Claims Common Situation: • Customers take deductions with minimal program reference • Matching & retrieving program documentation is labor intensive – May be maintained in internal system – May be available on customer vendor portals • Programs may require Sell Through or Sell In information for validation • Validation may required “clicking through” numerous screens and supporting documentation may need to be manually analyzed for validation Attain Consulting Group 2011 – Developing a Business Case
- 17. Identify the Opportunities/Improvements Sales agreement validation Automation Opportunity: • POS information can be routinely extracted from key customers and customer reports generated using SaaS solution • Claim documents and deal sheets maintained on customer vendor portals can be automatically retrieved and pasted within ERP using Web Aggregation technology • Internal source documents can be: – Retrieved and attached within dispute case – Calculations can be performed automatically to streamline validation processing Attain Consulting Group 2011 – Developing a Business Case
- 18. Identify the Opportunities/Improvements Deduction management automation TOPIC AREA OF POTENTIAL IMPROVEMENT Managing Pre-Deduction Notification Information Gathering Supporting Documentation Preparing Customer Correspondence Deduction Processing Credit / Debit Memo Matching Credit Memo Approval Cross Functional Workflow & Collaboration Use of Bank Lockbox Services Cash Application / Manipulation of Remittance Info. Prior to Posting Remittance Processing Reason Code Mapping Importance of Program / Claim Validation Sales Agreements Validation Drivers Validation Process Attain Consulting Group 2011 – Developing a Business Case
- 19. Identify the Opportunities/Improvements Deduction processing Improvement Area: Deduction Processing Common Situation: • External supporting documents require significant manual effort to retrieve (e.g., PODs, claim copies) • Internal supporting documents are stored throughout multiple systems • Preparing customer correspondence (e.g., denial letters and dispute forms) is labor intensive • Credit memo approval process is multi-step process • Limited cross-functional workflow & collaboration Attain Consulting Group 2011 – Developing a Business Case
- 20. Identify the Opportunities/Improvements Deduction processing Automation Opportunity: • Retrieval of supporting documentation, such as PODs and customer claims can be can be automated using Web Aggregation technology • Paper documents, such as customer claims, BOL can scanned and indexed (using OCR technology) • Internal source documents can be automatically attached to dispute case eliminating need to manually retrieve • Customer dispute forms can be auto-populated • Workflow engine can be used to streamline & automate manual processes: – Credit memo approval process – Deduction research by reason code Attain Consulting Group 2011 – Developing a Business Case
- 22. Quantify the Opportunities/Improvements Current Costs 1. Calculate Current Operational Cost % of Depart. / Benefits Number of Resources Full Time FTE Role Division FTE Salary Markup Resources on Process Equivalent Total Amount Attain Consulting Group 2011 – Developing a Business Case
- 23. Quantify the Opportunities/Improvements Estimate savings 2. Estimate Min/Max Savings % of # FTE FTE Min Max Min FTE Max FTE Avg FTE Task/Sub-Process Time Resources Equiv Amt Automation Automation Savings Savings Savings Attain Consulting Group 2011 – Developing a Business Case
- 24. Develop the ROI
- 25. Calculate the ROI Estimated Savings Minimum Maximum Average OPERATIONAL EXPENSES TOTAL VALUE CAPTURE Implementation Costs IMPLEMENTATION COSTS Provider Internal Total First Year Second Years onwards (Annual Recurring) Return on Investment Minimum Maximum Average NET YEARLY SAVINGS First Year savings Second Year and Ongoing Savings Attain Consulting Group 2011 – Developing a Business Case
- 27. Sample Business Case Identify Key Processes Break into Sub-Processes Identify Improvement Opportunities Model Potential Benefits Summarize Results Attain Consulting Group 2011 – Developing a Business Case
- 28. Sample Business Case Identify Key Processes Break into Sub-Processes Identify Improvement Opportunities Model Potential Benefits Summarize Results Attain Consulting Group 2011 – Developing a Business Case
- 29. Sample Business Case Identify Sub-Processes Process # Deduction Sub-Processes 1 Gather Supporting Documentation 2 Prepare Customer Correspondence 3 Credit Memo Approval 4 Cross Functional Workflow & Collaboration
- 30. Sample Business Case Identify Improvement Opportunities Deduction Sub- # Improvement Opportunities Process A % of backup can be automated via Web Aggregation, scanning/indexing etc and automatically attached to Dispute Case so Analyst does not have to retrieve manually. Relevant SAP transactions such as Sales Order, Delivery Invoice, Return Credits can be linked to Dispute Case Gather Supporting - Automatically retrieve and attach BOL or POD from carrier websites 1 - Automatically retrieve and attach debit memos from customer websites Documentation - Automatically retrieve check and remittance backup from bank lockbox - Scan / index mailed documentation & attach to dispute via matching rules - SAP A/R documents are automatically linked - SAP SD transactions can be linked using the standard SD document flow logic Standardized Repay package can be created in SAP via SmartForms including Cover letter and Preparing Customer Denial Form that can be automatically populated and generated. Backup documentation such as 2 Correspondence Invoice Copy, Claim Copy and POD Copy can be automatically included in package based on reason codes etc. Convert complete credit memo approval process to electronic within SAP Credit Memo - Analyst/Manager approval/reject process can be orchestrated within SAP workflow 3 Approval - Eliminates need for offline email, printing & approval process - Automatically release credit memo and clear deduction upon approval All communication via email/fax/mail between various departments & analysts regarding Dispute Cases will be orchestrated via SAP Workflow so a user can "Forward" the Dispute Case within SAP. Cross Functional 4 - Most offline email communication can be eliminated brought into SAP within Dispute Case Collaboration - Eliminate need for scanning or manually attaching back up documentation - Eliminate need tor searching through email communication to review history Attain Consulting Group 2011 – Developing a Business Case
- 31. Sample Business Case Identify Key Processes Break into Sub-Processes Identify Improvement Opportunities Model Potential Benefits Summarize Results Attain Consulting Group 2011 – Developing a Business Case
- 32. Quantify the Opportunities/Improvements Current operational costs Input - Resources Benefits # of % on Related FT FTE Role Division FTE Salary markup Resources Activities Equiv. Total Amount Deduction Analyst Division 1 $ 55,000.00 $ 68,750.00 12 100% 12 $825,000.00 Deduction Specialist Division 1 $ 35,000.00 $ 43,750.00 4 100% 4 $175,000.00 Deduction Analyst Division 2 $ 55,000.00 $ 68,750.00 2 100% 2 $137,500.00 Deduction Specialist Division 2 $ 40,000.00 $ 50,000.00 7 100% 7 $350,000.00 Deduction Analyst Division 3 $ 55,000.00 $ 68,750.00 5 100% 5 $343,750.00 Deduction Specialist Division 3 $ 40,000.00 $ 50,000.00 6 100% 6 $300,000.00 Deduction Specialist Division 3 $ 35,000.00 $ 43,750.00 2 100% 2 $87,500.00 Customer Service Rep Division 4 $ 60,000.00 $ 75,000.00 1 100% 1 $75,000.00 Customer Service Rep Division 4 $ 60,000.00 $ 75,000.00 1 100% 1 $75,000.00 Total 40 40 $2,368,750.00 Attain Consulting Group 2011 – Developing a Business Case
- 33. Quantify the Opportunities/Improvements Quantify savings Division 1 % of # of FTE Min Max Min FTE Max FTE Avg FTE Sub - Process Time Resources Equiv. FTE Amount Automation Automation Savings Savings Savings Supporting Documentation Gathering 20.0% 12 2.40 $165,000.00 50% 70% $82,500.00 $115,500.00 $99,000.00 Customer Correspondence 20.0% 12 2.40 $165,000.00 35% 50% $57,750.00 $82,500.00 $70,125.00 Credit Memo Approval 2.0% 12 0.24 $16,500.00 20% 30% $3,300.00 $4,950.00 $4,125.00 Credit Debit Matching 1.5% 12 0.18 $12,375.00 50% 80% $6,187.50 $9,900.00 $8,043.75 Inter-Departmental Workflow & Collaboration 5.0% 12 0.60 $41,250.00 20% 30% $8,250.00 $12,375.00 $10,312.50 Supporting Documentation Gathering 90.0% 4 3.60 $157,500.00 20% 50% $31,500.00 $78,750.00 $55,125.00 Customer Correspondence 0.0% 4 - $0.00 10% 30% $0.00 $0.00 $0.00 Credit Memo Approval 0.0% 4 - $0.00 10% 30% $0.00 $0.00 $0.00 Credit Debit Matching 0.0% 4 - $0.00 50% 80% $0.00 $0.00 $0.00 Inter-Departmental Workflow & Collaboration 5.0% 4 0.20 $8,750.00 20% 30% $1,750.00 $2,625.00 $2,187.50 9.62 $566,375.00 $157,987.50 $225,225.00 $191,606.25 Attain Consulting Group 2011 – Developing a Business Case
- 34. Quantify the Opportunities/Improvements Quantify savings Role Sub - Process Automation Rational Division 1 operations comprised of 85% deductions & 15% Deduction Supporting Documentation invoice collections. On the higher-end we are assuming 70% Analyst Gathering Automation of Debit Memos and 80% automation of PODs. Max Automation = (0.7 x .85 + 0.8 x 0.15) = 70% Deductions: Auto-generate coversheet, customer sepcific claim Deduction Customer Correspondence denial form, invoices, debit memo & POD copies etc. Analyst Collection: Auto-generate collection letters, invoice copies and POD copies. 70% of automation above Deduction Productivity increase by converting the complete credit memo Credit Memo Approval Analyst approval process to electronic within SAP. Currently paper copies are printed for approval or reports are reviewed manually Productivity increase due to orchestrating the deduction Deduction Inter-Departmental Workflow resolution process within SAP workflow eliminating offline Analyst & Collaboration collaboration via email, scanning documents etc Attain Consulting Group 2011 – Developing a Business Case
- 35. Sample Business Case Identify Key Processes Break into Sub-Processes Identify Improvement Opportunities Model Potential Benefits Summarize Results Attain Consulting Group 2011 – Developing a Business Case
- 36. Quantify the Opportunities/Improvements Calculate ROI Estimated Savings Minimum Maximum Average OPERATIONAL EXPENSES Division 1 $ 157,987.50 $ 225,225.00 $ 191,606.25 Division 2 $ 164,500.00 $ 234,937.50 $ 199,718.75 Division 3 $ 223,234.38 $ 326,125.00 $ 274,679.69 TOTAL VALUE CAPTURE $ 545,721.88 $786,287.50 $666,004.69 Implementation Costs IMPLEMENTATION COSTS HighRadius Internal Total First Year $ 580,614.80 $ 76,428.00 $657,042.80 Second Years onwards (Annual Recurring) $ 74,400.00 $ - $ 74,400.00 Return on Investment Minimum Maximum Average NET YEARLY SAVINGS First Year savings $(111,320.93) $129,244.70 $ 8,961.89 Second Year and Ongoing Savings $ 471,321.88 $711,887.50 $591,604.69 Attain Consulting Group 2011 – Developing a Business Case
- 37. Conclusion “The sole role of a business case is that of a communication tool, composed in a language that the target audience understands and with enough detail to facilitate decision making on his or her part.” “The vast majority of unsuccessful projects fail not because of poor project management, but because of poor decisions with respect to the choice of projects. A good business case helps to make right decisions and avoid horrible waste.” Ilya Bogorad Principal of Bizvortex Consulting Group Attain Consulting Group 2011 – Developing a Business Case
- 38. Questions? Jessica Butler (201) 280-4773 jbutler@attainconsultinggroup.com