the facts of friction in the supply chain and how to ... · • optimizes procure-to-pay to achieve...

November 12-14, 2017

Bellagio Resort, Las Vegas

The Facts Of Friction In The Supply Chain And How To Effectively Remove It

Mark Brousseau

Editor of Special Projects

Institute of Finance & Management (IOFM)

Olaf Weidhaas

Vice President, Strategic Account Relations

Tungsten Network

What is Friction?

Friction Wastes time

Wastes money

Creates risk

Limits ability to

be strategic

Manual paper-based invoice

processes create friction that:

“Numerous processes in the financial

world remain tedious and time

consuming when they needn’t be. It is

surprising that in this day and age

businesses are still spending so many

hours per week managing a process

that could be automated.”

Richard Hurwitz

CEO, Tungsten Network

Every business has friction in its P2P cycle

Significant Percentage of Companies Anticipate Increased P2P Complexity

7.6%

37.6%

8.3%

31.8%

14.6%

Significantly more complex

Slightly more complex

Unchanged

Slightly less complex

Significantly less complex

Source: IOFM Future of Accounts Payable Survey

HIGH PROPORTION OF PAPER INVOICES RECEIVED

Eliminating P2P Friction

How P2P Staff Spend their Time

[CATEGORY NAME] [PERCENTAGE]

Analysis work 16%

Best-in-class finance organizations spend 20% more time on analysis work than

their peers, PwC finds

Source: IOFM

PAPER and Lack of Digitization

<10%, 1.2%

10-25% 11%

26-50%, 4.9%

51-75%, 20.7%

76-100%, 62.2%

What percentage of your annual invoice volume is in the form of paper documents, fax or email attachments that require manual handling?

Source: IOFM

Annual Number of Invoices Per FTE

1,350

3,600

8,600

10,938

19,889

22,756

Level of Automation Low High

Limited Automation Moderate Automation Significant Automation

Source: IOFM 2017 Benchmark Study

Cost Per Invoice $8.78

$6.92

$5.81

$4.76

$3.41 $2.87

$2.44 $1.77

Level of Automation Low High

Limited Automation

Average Cost Per Invoice

Moderate Automation Significant Automation


Source: IOFM

Cost Reduction & Productivity Obstacles

P2P Departments are Investing in Process Standardization & Automation

59.4%

24.0%

61.1%

20.0%

45.7%

13.1%

Automation

Innovation

Process standardization

Finance talent

Compliance and security

No investments


TOO MANY NON-PO BASED INVOICES

ELIMINATING P2P FRICTION

Aligning AP & Procurement

Between the CPO and the CFO

With Accounts Payable

With Suppliers

With Budget Holders

71%

62%

60%

47%

"Strong" Collaboration

Source: Ardent Partners

The High Cost of Poor Alignment

$16.71 $15.98

$18.00

$10.04

$6.45 $4.80

2009 2011 2013

Best-in-Class Companies are Reducing Purchasing Costs (Per Order)

Peer Top Performer

Source: The Hackett Group

Procurement Priorities

42% 39%

33%

28% 27%

Savings Processes Compliance Innovation People


Procurement Priorities

66%

53%

53%

48%

44%

Earlier engagement of sourcing opportunities

New (or improved) technology

Larger and/or more talented staff

Better communication plan

Better team execution


HIGH VOLUME OF SUPPLIER INQUIRIES

Eliminating P2P Friction

AP Will Become More Collaborative with Enterprise Functions

Significantly more collaborative

29%

Slightly more collaborative

52%

Unchanged 19%

None of the respondents believe that AP will be less

collaborate with other functions.


Suppliers See Collaboration as Critical

Suppliers Are Already Betting On Improved Technology

• 74% of suppliers expect to increase their level of investment in billing technology – 21% by more than 10%

• 53% of suppliers say increasing their use of electronic invoicing is a priority in managing their customers over the next 12 months – Their highest-ranked customer priority

A Forrester Consulting Thought Leadership Paper Commissioned By Tungsten Network. March 2017. Supplier Networks Enable Innovative And Streamlined Supply Chains

Nationwide Insurance: A case study

Mohawk Industries: A case study

LACK OF AUTOMATED EXCEPTIONS Eliminating P2P Friction

6.3% 17.5%

5.0% 8.8%

7.5% 7.5%

12.5% 3.8% 3.8% 3.8% 3.8%

13.8% 6.3%

Days Payables Outstanding (DPO)

Paid on time percentage

Staying within the AP budget

Percentage of invoices processed straight through

Duplicate/erroneous payments

Number of invoices processed per FTE per month

% Invoices requiring problem solving (re-work)

Cost per invoice

Forecasting payables working capital

Compliance and audit preparedness

Reducing monthly accrual amount

Number of invoices past due (backlog)

Discounts not taken (lost discounts)

Most Important P2P Metrics

Source: IFO


OF THE TYPICAL COMPANY’S INVOICES CAUSE EXCEPTIONS.

17%

Reasons for Invoice Exceptions

Wrong price and/or

quantity

Missing tax amount, ID number, PO

number or zip code

No requestor name, contact data, contract

and/or PO

No order confirmation,

or shipping notice

No matching invoice and

purchase order data

Net amount exceeds sub-total

or invoice total exceeds contract

amount

Incorrect spelling of company

name

Invoice Exceptions & Errors Eliminating paper-based processes: Slow, error-prone, paper-based processes are being phased out in favor of electronic and web-based solutions, which enable more efficient workflows throughout the purchase-to-pay lifecycle. For example, 70% of top performers use e-invoices, compared to just 19% of peers.

LACK OF AUTOMATED APPROVAL Eliminating P2P Friction

Best-in-Class Versus The Rest

Efficiency Metrics

• Pay on Time Rate: >90%

• Process nearly 23,000 invoices annually per FTE

• At an internal cost of $1.77/per invoice

• Capture 97% of early-payment discounts

Effectiveness Metrics

• PO First-Pass Match: 90%

• Share of Invoices Requiring Correction: 1%

• Frequency of Duplicate Payment: <1%


Organizations That Pay > 90% of Their Invoices On Time

46%

37%

46%

35%

53% 55%

PO Non-PO

Limited Automation Moderate Automation Significant Automation


38

Time to Process a Single Invoice

46%

28%

14%

6%

Under 5 days 10 to 15 days 15 to 30 days 30 days or more

Source: Ardent Partners 2017

Best-in-class performers will process a single invoice within 3.5 days while the majority of companies will

take 12 days to process a single invoice.

Source: Ardent Partners 2017

40

The Problem with Long Cycle Times

Agnico Eagle strikes gold and accounting visibility

Enters 20,000 more invoices per year without adding any

headcount

Achieved 80% invoice throughput rate

Validation time of 1 minute per invoices

What’s next?

Implementing solution in Finland, United States and Vancouver

Rolling out Invoice Staus Service

How To Remove The Friction

• Tungsten Network receives all invoices (electronic,

paper, email) and captures data

• Lower cost per invoice

• Little to no impact on invoice submission methods

• Eliminates paper from the invoicing process

• Increases the efficiency and accuracy of accounts payable

• Improved Supplier communications and reduced Supplier

inquiries through Invoice Status

Invoice Data

Capture

Purchase

Order

Services

Workflow

Analytics

Invoice

Financing

Invoicing

Services

Currency

Conversion

E-billing \\\

A complete product solution

• Facilitates the delivery,

acceptance, variation and

conversion of Purchase

Orders into invoices

• Automates accounts payable processes

• Provides an audit of purchasing from the

point of order to payment

• Optimizes procure-to-pay to achieve business

goals

• Provides visibility into purchases, leading to better

informed spending

• Improves procurement controls

• Ensures compliance with contracts and reduces

costs

• Allows suppliers to decide when

to get paid

• Maximizes working capital

• Eliminate the energy and materials

wasted

in sending paper invoices

• Reduce your Day Sales Outstanding

• Reduce the time and cost of your

invoicing

process

• Offers cross-border payments in

local currency at competitive

rates

Reducing friction in

your P2P process is

transformational

AP cost

reduction

Efficiency

improvement

Cash and

working capital

management

Transparent

spend

Agility and

scalability

for business

enablement

Str

ate

gic

co

ntr

ibu

tio

n

Provider capability in driving network effect

Find more information

and opportunities to begin your

journey!

THANK YOU!

the facts of friction in the supply chain and how to ... · • optimizes procure-to-pay to achieve...

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