Business cases are not a dark art: the science behind the numbers
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Alliance Data focuses on enhancing its accounts payable processes through a fact-based business case strategy aimed at improving efficiency and reducing costs. The initiative has led to significant operational improvements, including a reduction in the cost per invoice and improvements in invoice processing times. Key elements of success included stakeholder buy-in, robust communication, and the strategic implementation of electronic invoicing systems.
Business cases are not a dark art: the science behind the numbers
- 1. Business Cases Are Not a Dark Art The Science Behind the Numbers ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 2. 2 Agenda About Alliance Data Share Services Make UP Why A Business Case Driven Improvement Strategy How We Closed The Gap • Baseline Performance • Improvement Strategy and Objectives • Results Realized Consequences of Inaction Business Case: Results Driven Results and Business Value Obtained ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 3. 3 Alliance Data: Three Businesses. One Focus. The largest and most comprehensive provider of transaction-based marketing and loyalty solutions Total Enterprise Value: ~$8.0 Billion | Revenue: $3 Billion | Associates: ~9,000 Retail Services Design, deliver and Multi-channel marketing Integrated credit and manage both coalition services including database, marketing solutions and stand-alone data, digital marketing loyalty programs and agency services Each business on its own is a Fortune 1000 company. ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 4. 4 Shared Services Organization Technology • PeopleSoft ERP • Concur Non-PO Invoice • OB10 – eInvoice and IDC • OBIEE – Spend Analytics Shared Services: • Based in Plano, Texas • Small Global Presence • 24 FTE Key Office Locations: • Procurement Governance • Dallas, TX and Framework • Boston, MA • Invoice processing and • Columbus, OH Exception Handling – • Toronto, CA 140,000 invoices • EMEA • Transitioning Invoice Data • APAC Capture (IDC) to third party • Management of P-Card KPI program and equipment leases • Invoice per FTE: 4.5K • Invoices on PO: 30% ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 5. 5 WHY A BUSINESS CASE DRIVEN APPROACH ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 6. 6 Our Strategy Required a fact based business case driven approach to gain stakeholder buy in Needed a solution to support a variety of needs Lines of Business Corporate Invoice visibility to manage Better visibility into invoice the business & spend information Autonomy to make Enhance ability to influence purchase decisions LOB purchasing behavior Assurance of proper Leverage scale expense coding Timely payment of Timely visibility into suppliers expenditures and liabilities Enhance overall supplier Maintain relationships governance Customer Influencer & Decision Maker & Enabler ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 7. 7 Where We Were Establish a common baseline from which to measure performance Unfavorable perception of AP performance Satisfactory 100% paper based invoices Invoice receipt and processing varied by Business Unit Metric ADS Inconsistent utilization of systems across Cost per Invoice $ 20 business units Invoices/ FTE 4.5K Elongated invoice processing cycle % manual invoices 86% % paid in terms 48% Invoices “Past Due” when received for processing Invoice cycle time 53 days % Purchases on PO 32% Low productivity levels ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 8. 8 Our Future State Vision Establish a performance goal to measure success Leverage technology to reduce cost per transaction Improve efficiency in the Metric Goal accounts payable operation Cost per Invoice $4 Reduce duplication of effort Invoices/ FTE 20K % manual invoices 35% Enhance data accuracy % paid in terms 99% Secure invoice delivery Invoice cycle time 6 days Expand electronic invoice % Purchases on PO 70% presentment for payment Benefits To be Realized Expand electronic payment $2-$3 million annual cost reduction 4-7% annual spend value savings methods (ACH) ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 9. 9 HOW WE CLOSED THE GAP ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 10. 10 Plan on an Uphill Battle for Change Construct a comprehensive business case with sound assumptions and realistic fact driven estimates Business Leader buy in “Fact based” approach Overcome resistance to change Dispel fear of business disruption Quantify the “value” of change Demonstrate how value would be received ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 11. 11 How We Used A Fact Based Approach To Build A Business Case For Change Benchmarked our performance $25.55 $19.57 $19.43 $14.10 $9.27 $7.72 $3.03 Analyzed our transactions and Financial Services/Banking Industry Alliance Data Systems All Industries $1-$5 Billion Revenue Top Performers Median Bottom Quartile supplier base Developed a case for change and gained executive support Economically viable $2.3 million savings Communicated how change 169% ROI would occur and gained Better position for growth Business buy in Low execution risk ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 12. 12 What We Did to Execute Change Streamlined invoice management processes Increased PO utilization Reduced invoice matched Accounts Payable Invoice Processing – Best Practice Data and Workflow exceptions 3rd Party Supplier Network Manager Electronic Purchase Order Preferred Suppliers Customer Invoice Validation Rules Customer Invoice Validation Rules (High Volumes of Electronic Purchase Order Acknowledgement Recurring Activity) Electronic Invoice · Acknowledges Receipt of Billing Purchase Order Sysytem · Delivers Goods/ Services Electronic Invoice · Submits Electronic Invoice Server Data From Billing System Supplier Network Database Enrolled suppliers into Paper Invoice Web Invoice Invoice Imaging Valid Other Suppliers Entry / OCR Invoices (Low Volumes of Purchase Infrequent Activity) Orders · Delivers Goods/ Services Paper · Flips PO Into Invoice / or Paper Invoices Invoice Accounts Payable Enters Invoice Via Web Exceptions PreMatched Web Invoice Invoice Processing · Prints and Mails Invoice To PO Invoices Entry Invoice · Manages and Resolves electronic invoicing Central Invoice Receiving Department Paper Invoice Images Codes Exceptions Invoice Workflow Application · Enters and Processes PeopleSoft Application Suite Check Requests “Concur” · Codes /Approves Specific Categories of Electronic Invoice and Image Invoices for Payment Release (Utilities, etc. Invoices Procurement Invoice Coding/ Release For Approval (In process) Invoices Pay to $ (Approved) Accounts Payable Invoices ACH Payments (Released for to Suppliers General Ledger Payment) Employee Web Invoice Names Access Accounting Code Approval Rules Human Resources Employee Data Selectively outsourced paper Data Employees / Requisitioners/ Buyers Account Code Validation Data · Enters Receipt Info ( PO Employee & Organizational Data Invpices) Receipt of Goods · Reviews Invoice Image /Services For POs Authorizes Invoice Validity Invoice · Enters Accounting Coding · Releases Invoice for Approval Approval invoice processing Web Review & · Reviews and Releases Approval · Reviews Invoice Approved Invoices for · Approves or Denise Invoice Payment · Notifies Requisitioner / Buyer of Accounts Payable · Selectively Audits Invoice Web Review & Denial Reasoning Audit/ Control Processing Activity Approval Manager / Authorized Approver ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 13. 13 BUSINESS CASE: ELECTRONIC INVOICING ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 14. 14 Supplier EIPP Enablement Implementing change initiatives defined in the business case to achieve our Vision Incenting (EIPP), and providing disincentives for the continued submission of paper invoices. Incentives: Electronic invoices receive priority processing Electronic invoices are guaranteed to be paid within negotiated payment terms Suppliers with ability to comply with EIPP requirements receive higher component ratings in eRFX quote reviews and scoring Suppliers who participate EIPP program are listed as preferred suppliers in internal publications/ tools Disincentives: Paper invoices receive secondary processing priority Paper invoices are not be guaranteed to be paid within negotiated payment terms ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 15. 15 EIPP: Multi-Wave Supplier Enrollment Proactively managing initiatives to achieve sustainable productivity improvements and change Wave I Wave II Wave III Wave IV Targeted Targeted Targeted Targeted Suppliers Suppliers Suppliers Suppliers Suppliers with 30 or Suppliers with 10 – Suppliers with 10 – New Acquisition: All more invoices 29 invoices 29 invoices invoice Volume Target Results Target Results Target Results Target Results 45% of invoices Additional 14% of Additional 8% of Additional 33% of transitioned to invoices converted invoices invoices converted to EIPP to EIPP converted to EIPP EIPP Timetable Timetable Timetable Timetable Jan – July 2012 Mar – Sept 2012 Apr – Oct 2012 May – Nov 2012 ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 16. 16 EIPP Active Campaign: YTD April 30, 2012 120.00% 100.00% 80.00% Status % Total 60.00% 40.00% 20.00% 0.00% Non Campaign Refer to Sold * In Sales ** Potential Pending Total Buyer *** **** ***** Total Inv Vol % YTD Apr 31.24% 15.50% 7.06% 5.33% 40.87% 100% 30, 2012 Total Inv Vol % as of Jan 17.62% 12.88% 4.45% 4.65% 60.39% 100% 30, 2012 ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 17. 17 RESULTS AND BUSINESS VALUE OBTAINED ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 18. 18 What I Would have Done Differently Manage Expectations. High conversion rates take time Cleansing of vendor master must be priority PO line validation helps reduce match exceptions but does not eliminate match exceptions Do not underestimate the importance of matching supplier PO invoice lines to PO’s. Strength of messaging is key Communicate, Communicate and Communicate ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 19. 19 Critical Factors That Made The Difference There is no silver bullet …. Just make sure you have a well thought out plan and execute on it. Robust Solution Design Communication Progress & Well Defined & Change Results Execution Management Monitoring Plan Baseline Detailed Well Presentation Plan Effective (Multi Wave) Performance Thought Out & Request for Execution and & Benchmark Execution Sponsorship Implementation Plan Business Effective of Plans Business Value Leader and Program Generation Unit Road Governance Communication Business Show Case for Change Objective fact Detail “Vision” Active Executive Developing Relentless, well based analysis of and “solution sponsorship the right managed change performance designs” strategic execution Effective communication partnerships Benchmarking to Robust action Strong Program of the issue, solution, to enable quantify the plan and leadership and and business value to execution opportunity business case management Business Leaders ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 20. 20 Business Results Achieved To-Date 5% increase in spend under management / contract $5.39 reduction in cost per invoice 27% improvement in annual accounts payable operating cost 10% reduction in invoice processing cycle times Eliminated lost discounts Improved service standards to business operators ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary
- 21. 21 Discussion / Questions Contact Us: Todd Holcomb Director Supplier Services Alliance Data 7500 North Dallas Parkway Suite 700 Dallas TX, 75209 todd.holcomb@alliancedata.com www.alliancedata.com ©2011 ADS Alliance Data Systems, Inc. Confidential and Proprietary