The Sequel to Savings: Transforming Source-to-Pay, Transitioning to Trusted Advisors

Presenter – Richard Waugh

Richard Waugh

VP Corporate Development, Zycus Inc.

• As Vice President for Corporate Development, Richard leadsstrategic initiatives in the areas of new product introduction,market development, thought leadership, analyst relations, andstrategic partner development programs.

• Richard has an extensive background in B2B E-Commerce. Hehelped launch GE's Trading Process Network (TPN), the first on-line Marketplace for Sourcing and Procurement. He was also Co-Founder of B2eMarkets, one of the first SaaS (Software as aService) Sourcing Suite providers and later covered the SupplyManagement market as an Industry Analyst for the AberdeenGroup.

richard.waugh@zycus.com

540.454.5809

Presenter – Paul Stasko

Senior Director, Supply Chain Management

Curtiss Wright

Paul W. Stasko has been a member in good standing of ISM Pittsburgh for 11

years. Professionally, he has been working in Supply Chain for the past 12 of his

29 year career. Prior to working in Supply Chain, Paul held technical and

management roles in operations, all with Westinghouse / Curtiss-Wright in

Cheswick. His current title is Sr. Director, Corporate Supply Chain where his

team is chartered with bringing benefits of centralized procurement through

strategic sourcing to a decentralized business model. Paul holds a BSMET from

the University of Pittsburgh in Johnstown and a BSME from the University of

Pittsburgh.

Zycus Comprehensive Source-to-Pay Solution Suite

Zycus is among the only 3 Leaders in the Gartner’s 2017 Magic Quadrant for Strategic Sourcing Application Suites

Agenda

▪ Savings Still Matter

▪ S2P Value Levers

▪ Building the Business Case

▪ Case Study: Transforming S2P at Curtiss-Wright

▪ Sequencing Strategies

▪ Plot Twists – Anticipating and Managing Change

▪ Building the Brand

▪ Becoming a “Trusted Advisor”

▪ Promoting the Procurement Brand

Savings Still Matter

Source-to-Pay Technology Value Levers

Increase SUM – Discover Savings Opportunities

Higher Sourcing Throughput & Savings ID

Visibility & Compliance to Preferred Agreements

Rationalize Suppliers/Cleanse Master/Mitigate Risk

Track Finance-Approved Savings to P&L, Balance Sheet,

Cash Flow

Maximize Early Pay Discounts/P-Card Rebates

Reduce Transaction Process Cost

Reduce/Eliminate Maverick Spend

Source-to-Pay Technology Value Proposition

• Best-of-Breed S2P Technology Enables Best-in-Class Performance

• Maximum Benefits Achieved Through End-to-End Process Efficiency and Visibility

• ROI from S2P Technology Based on Incremental Improvement from Current Baseline to Best-in-Class Performance

Source-to-Pay Performance Benchmarks

SUM

Avg. – 57%

BIC – 91%

Spend Soured

Avg. – 47%

BIC – 67%

On-Contract

Spend

Avg. – 54%

BIC – 69%

Contracting Cycle

Avg. - 49 Days

BIC - 40 Days

Discount Spend%

Avg. - .002%

BIC - .11%

Cost per PO

Avg. - $17.37

BIC - $4.58

Maverick Spend

Savings

8%

Sourcing Savings

Avg. – 6.8%

BIC – 7.7%

Cost per Invoice

Avg. - $4.80

BIC - $2.27

P-Card Spend%

Avg. - .1.1%

BIC - 5.2%

Spend w/Line Item

Visibility

Avg. – 38%

BIC – 73%

Suppliers

w/Failing Scores

BIC – 3.8%

Sourcing Cycle

Avg. – 75 Days

BIC – 45 Days

Invoice Approval

Cycle

Avg. -16 Days

BIC - 3 Days

SM Productivity

Savings

20%

Suppliers per $1B

Avg. -10.838

BIC - 2,403

Source: Hackett Group Benchmarks Source: SpendMatters Benchmark

Source: Hackett Group Benchmark

Source: Aberdeen Group Benchmark

Source: Ardent Partners Benchmarks

Source: Ardent Partners Benchmark

Source: Ardent Partners Benchmark Source: Hackett Group Benchmark

Realized Savings – Best-in-Class Advantage

Best-in-Class• $1B Spend

• $2.5M Supplier Management Cost

• 75K POs

• 150K Invoices

Savings Management

Spend Analysis

eSourcing

Procure-to-Pay

Contract Management

Supplier Management

₊ 34% More SUM₊ 20% Incremental Spend Sourced₊ .9% Higher Savings Capture Rate₊ 15% Higher Compliance to Contract₋ 20% Lower Supplier Management Cost√ Best-in-Class Cost per Transaction√ Best-in-Class Discount Capture Rate

$200M Incremental Spend Sourced$15.5M Incremental Savings Identified

$10.7M Retained Sourcing Savings$.5M Supplier Management Cost Savings

$1.3M Transaction Cost Savings$1.1M Early Pay Discounts

-------------$13.6M Incremental Realized Savings

Best-in-Class Advantage

Source-to-Cash Cycle Time – Best-in-Class Advantage

Best-in-Class Achieve Higher

NPV of Savings Realized 53

Days Faster

Best-in-

Class

Industry

Average

45 DaysSourcing Cycle

75 Days

40 DaysContracting Cycle

49 Days

1 Days Order Cycle

2 Days3 Days Invoice Cycle

16 Days

89 Days

142 Days

RFX

Award

Contract

Order

Invoice

Pay

Case Study: Transforming Source-to-Pay at Curtiss Wright

Case Study: Transforming Procurement at Curtiss-Wright

Supply Chain Transformation Strategy

80%of our time is spent on only 5% of our spend!

Our focus is moved to where the vital spend is!

Pareto everything. Save on the “A” items and simplify the process on the “C” items.

ProCard™MRO Integration

P2P

Phasing Approach Follows Best Practice S2P Technology Sequencing

Spend analysis E-Sourcing SBM

Map external spendNegotiate Strategic Agreements

Manage complianceManage Supplier Relationships

Key Success Factors• Identify and use data from

relevant transaction systems

• Deduplicate and classify• Assign ownership of spend

categories

Key Success Factors• Promote a culture of

control and responsibility• Involve stakeholders in

category plans, work flow and templates

Key Success Factors• Build a pipeline of cost

reduction opportunities• Create a center of excellence• Make use of e-sourcing

mandatory

Key Success Factors• Segment supplier base to

rightsize management• Deploy solutions that support

supplier collaboration

CLM

VMSP2P

Source: Gartner “Best Practices for Sequencing Procurement Solution Investments” December 2014

Step 1 Step 2 Step 3 Step 4

Step 1: Deployed Spend Analytics to Achieve World-Class Spend Under Management

• CW SUM @ World-Class for Direct• Leveraging Spend Analytics to Target

World-Class for Indirect

• Normalized Spend Taxonomy Across 40+ Disparate ERPs/Part # Schemas

• Multi-dimensional Spend Cube – Supplier, Category, Part, $, Compliance

Benchmarks

Application

• Triage and Prioritize Savings Projects• Pinpoint Non-Compliance for Root Cause

and Remediation

Value

Direct Materials Direct Services Indirect Materials Indirect Services

Source: Hackett Group

Spend Analysis

Step 2: e-Sourcing Event Savings Fund S2P Transformation Program

• Direct vs. Indirect Spend – 75/25• Historical Cost Savings Correlate to

Industry Averages

• Prioritize Direct Materials due to Greater Spend Leverage

• Maximize Savings Impact by Balancing Scale ($, # BUs) with Ease of Execution

Benchmarks

Strategy

• Per Project Event Savings Exceed World-Class Savings Rate

• Utilizing Automation to Target World-Class Spend Sourced and Savings

Value

Source: Hackett Group

% of Spend Competitively Sourced

Cost Savings as % of Spend

Direct Indirect

eSourcing

Building the Brand

Step 3: P2P Transformation – Catalysts for Change

1 Better, Faster, Cheaper

A key component of the Finance Transformation is the ability to transition the end-to-end procure-to-pay process from a heavily manual and paper based environment to an environment that introduces best in class automation or EDI (Electronic Data Interchange) between our business partners.

2 Change from Cost Center to High-End Value Add

Re-engineer the P2P process to be a strategic advantage to:

• Create process efficiencies and improve effectiveness, and

• Enhance spend management, contract compliance, and cash management capabilities

3 Inextricable value partners

Critical to align strategies of procurement and payables to maximize the end-to-end value stream. Disparate strategies and lack of communication and transparency between AP and procurement prevents smooth processing of purchase orders and invoices.

4 Multiple touches vs. Once & Done

Based on the volume of paper that CW processes including invoices, paper checks, supplier contracts, exceptions and discrepancies, incongruent systems over AP and procurement produce excess costs, slow processing times, and inconsistent quality.

Procure-to-Pay

Expected Benefits of P2P Transformation

Key Features

• Easy-to-use, configurable & comprehensive P2P solution

• Artificial intelligence-based Guided buying allowing end-users to pick the right items, and select the right category, suggest the right suppliers & route to the

appropriate buyer

• Auto-flipping- Eliminates duplicate data-entry by Auto flipping Requisition-to-PO & PO-to-Invoice

• 2-way, 3-way Auto match - Rules-based 2-way and 3-way auto-matching ensures accurate invoice payment

Key Benefits

• Rapid and mass user adoption- near zero training software

• Faster process turnaround – considerably reduced Requisition to PO cycle

• Potential for on-the-fly spend analysis for all purchases

• Increase compliance & visibility into purchases across the organization

• Accelerated implementation timelines – set-up time expedited through on-screen configuration and customization without any programming

Critical Success Factors

P2P transformation drives significant bottom-line savings for CW:

• IF systems change is accompanied by process change

• IF compliance is mandated from top down

• IF exceptions are managed

• IF the right path forward in prioritization of BUs and Categories is selected

• IF the user interface is simple and intuitive to drive user adoption

Must-haves for P2P Success:

• Standardized process – configurable (not customized) to BU requirements

• Single channel for all spend – Direct as well as Indirect

• Payback in Year 1

• Digitization of PO’s and Invoices

Step 4: Create a Culture of Compliance

Savings Management

Contract Management

Supplier Management

• Aggregate agreements in central, searchable repository

• Proactively monitor compliance – preempt auto-renewals

• Streamline on-boarding, governance

• Standardize performance and risk management disciplines

• Establish consistent savings project methodologies

• Create transparent savings pipeline visibility

Building the Brand

Hierarchy of Procurement Roles

Source: The Hackett Group

Achieving Trusted Advisor Status

77%

64%

Consistently deliver on the basics

Hire and retain high-caliber staff

Build better awareness of procurement’s services

Discover and recommend innovative suppliers

Prove value through small projects

Improve the overall buying experience

Other

N/A

Develop category management strategies

Deliver high-quality market insights and research

61%Increase agility

Cost quality performance

Which capabilities will help the most to achieve this status?

Credible with people who matter to me

Brings knowledge and insight

Excellence

Source: Key Issues Study, The Hackett Group, 2016

Stakeholder Perceptions of Procurement’s Value

Source: The Hackett Group, Procurement Stakeholder Survey, 2015

30%

24%

20%

20%

34%

35%

16%

21%

Peer Group

World Class

Administrator Gatekeeper Negotiations/Sourcing Expert Valued Business Partner

Higher Value Correlates to Performance

3.5%

2.6%

2.1%2.2%

1.2%

0.9%

0.7%0.1%

Valued Business PartnerNegotiations/Sourcing ExpertGatekeeperAdministrator

Cost Reduction Cost Avoidance

Savings and the Current Role of Procurement

Source: The Hackett Group, Procurement Benchmark, 2015

Understand

Engage

Define

Create

Understand the key areas of importance

for internal customers

Define details of processes and the

new role of procurement

Create a distinctive brand for your programEngage and communicate with

stakeholders on an ongoing basis

4 Steps to Re-branding Procurement

Branding – Technology Platform

Promoting the Brand: The Elevator Speech

P2P is a Corporate mandate to Automate, Simplify and Standardize our Purchasing and Payables

P2P is a web based common platform across all of CW

Requisitioners use web platform – to complete an on-line purchasing experience (like Amazon purchase)

Purchasing rules and controls are built into process

No need to route to purchasing/buyer

Approvers receive notification with all appropriate details

Easy approvals include mobile devices

Goal is to save money via better contract pricing, compliance to existing contracts, elimination of paper

Goal is to make the process easier, faster, cheaper

We are “All In” as One Curtiss-Wright

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