State of Texas

Briefing on Value Pocket SurveyBriefing on Value Pocket Survey

September 2 & 3, 2008

Agenda

Introductions Overview of Business Case Methodology

Value Pocket Concepts Value Pocket Data Collection Questions

Page 1

Overview of Business Case Methodology

Primary Components of STA’s Business Case Analysis Methodology

ERP Costs – Software – Hardware 1

– Implementation – Upgrades – Ongoing Maint. & Mgmt. – Training

Page 2

ERP Benefits/Avoided Costs Avoided Systems Costs – Replacing current systems – Not implementing planned systems – Not performing planned/anticipated

enhancements/upgrades to existingand planned/anticipated systemsonce implemented

Process Improvement Benefits – Value Pocket benefits

vs.

2

3

Value Pocket ConceptsWhat are Value Pockets©

Value Pockets (VPs) are the most likely sources of significant value (i.e., cost savings and other process-improvement benefits) to be found in each process/functional area within the scope of the ERP implementation

VPs must result from the ERP implementation – not able to realize without implementing ERP

STA’s proprietary formulas and calculations are used to quantify process improvement benefits obtained through the implementation of a statewide ERP System

Page 3

Value Pocket ConceptsPrimary Sources of ERP VPs

VPs primarily come from two (2) sources: 1. Having “true” system-wide integration that is built and maintained by the

ERP vendor 2. Introducing new technology/functionality available in a new ERP system

VPs can be: – Dollar-Quantifiable (tangible items)

• Reduce the amount of time required to perform a process (andassociated comp.)

• Non-FTE-related benefits – Non-Dollar-Quantifiable (intangible items)

• Reduced cycle times • In support of strategic initiative(s) • Increased accuracy • Improved usefulness of information

Page 4

Value Pocket ConceptsTwo Basic Types of VPs

Reduced Cost of Process Execution (efficiency). For example, reassign/reduce headcount (FTEs) by: – Reduce the time required to enter data into systems:

• Avoid entering the same data/transactions into multiple systems • Avoid entering data on a form that is then entered into a system (instead of

entering into system directly) – Reduce the amount of time required to generate needed information by no

longer being required to obtain and consolidate data from multiple sources(also results in faster and better decision making)

– Reduce the amount of time required to reconcile data among multiple systems – Reduce the amount of time required to track transactions spread over multiple

systems (e.g., avoid keeping tracking data in spreadsheets, using paper logs, etc.) Improved Process Outcomes/Results (effectiveness), for example:

– Decreased cost of goods and services – Decreased inventory carrying costs

Page 5

• Cas• Cos• Gra• Proj• Cos• Ass

rmance ppra sacruitment andplicant Trackingnefits Administrationmpensatione Reporting

ave Accounting

BUDGET DEVELOPMENT

•

Common Database

Value Pocket ConceptsVP Examples

CORE FINANCIAL • General Ledger • Budgetary Control • Accounts Payable /

Travel • Accounts Receivable

& Cash Receipts h Management t Accounting nt Accounting ect Accounting t Allocation et Management

HR / PAYROLL • Position Control • Basic Employee Data • Personnel Management • Training • Payroll • Employee Relations &

Perfo A i l • Re

Ap • Be • Co • Tim • Le

Appropriation Budget • Operating Budget • Performance Based

Budget

PROCUREMENT VALUE POCKETS • Reduce cost of goods and services • Reduce cost of conducting solicitations • Reduce cost to maintain vendor file • Reduce inventory carrying costs • Reduce inventory reorder cost

PROCUREMENT • Solicitations (RFx) • Catalog Procurement • Reverse Auctions • Warehousing & Inventory

Management • Commodity Management • Vendor Management

Page 6

Value Pocket ConceptsVPs Commonly Related to Lack of Integration

Look for the following process inefficiencies when“true” integration does not exist between systems:1. Researching, troubleshooting, and reconciling transactions across

multiple systems. These processing tasks include: – Investigating failed interface transactions – Reconciling balance discrepancies between systems – Making adjustments in the appropriate system(s) – etc.

2. Generating ad hoc and standard management reports that require retrieving data from multiple sources, including tracking procedures using spreadsheets, paper logs, etc. These processing tasks include: – Extracting data from multiple sources – Compiling and reviewing data – Formatting data into the reports – Distributing the reports – etc.

Page 7

Value Pocket ConceptsVPs Commonly Related to Lack of Integration (cont.)

Look for the following process inefficiencies when “true” integration does not exist between systems: (cont.)

3. Tracking the status of transactions outside the system on an ongoing basis using spreadsheets, paper logs, etc.

4. Manually entering data into multiple systems

Page 8

Value Pocket Data Collection VP Survey – Worksheet/Tabs

The survey is in a Microsoft Excelspreadsheet that has a number ofworksheets/tabs as depicted to the right

Data entry is only required in the “Metric Data” and “Effort-Related Data” response worksheets/tabs

You can enter hours directly into the Effort-Related Data response worksheet/tab, or use Calc Sheets, and the Calc Sheet values will be “fed” into the Effort-Related ResponseData worksheet/tab

You can access the Calc Sheet that corresponds to a Value Pocket by:

– Clicking on the appropriate tab at the bottomof the spreadsheet; OR

– Clicking on a hyperlink that is on the ValuePocket’s row. Clicking on a hyperlink on theCalc Sheet will return you to the Effort-Related Data worksheet/tab

Introduction

Calc

Metric Data

Effort-Related Response Data

VP 1 VP 2 VP 3

Sheet 1

Calc Sheet 2

Calc Sheet 3

Calc Sheet Example

Page 9

Value Pocket Data Collection VP Survey – Calc Sheets

Calc Sheets are set up to apply either the Percent-of-Time Method (PoT) or the Units-of-Work Method (UoW) of calculating the total est. annual hrs. (and comp.) spent each year performing a VP activity

– In the PoT method, you provide the % of time spent performing a VP activity ([4])and the total hrs. worked on a VP activity will be calculated ([6])

– In the UoW method, you provide total hrs. worked on a VP activity ([6]) and the % oftime spent performing a VP activity ([4]) will be calculated. For example, if 1,000units are processed each year and it takes approximately 20 minutes to processeach unit, enter 333 in column [6] (333.33 = 1,000 units x 20 minutes / 60 minutesper hour) Calc Sheet

Totals pulled into the “Effort-Related Data” response worksheet/tab

[7] provide input

[8] = [7] x [2]

[9] provide input

[10] = [8] x ([1+[9]) [11] = [10] x [4]

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11]

Individual or

Group

# of

People

Select

Calc

Method

(P or U)

Approx. %

of Time

Spent

Working on

This

Activity

Approx. Total

# of Hrs. Each

Person Works

for the State

Each Yr. (use

1800 for State

Employees)

Total Hours

Worked on This

Activity Each

Year

Approx. Avg.

Annual Total

Compensation

for Each of the

Individuals on

Each Row

Total Annual

Comp. for All

Those on

Each Row

Add 30% for

Benefits for

State

Employees,

but Add 0%

for

Contractors

Total

Comp.

Plus

Benefits

Relevant

Total Comp.

Plus Benefits

Supervisor 1 P 25% 1,800 450 60,000 60,000 30% 78,000 19,500

Data Entry Clerks 3 U 74% 1,800 4,000 30,000 90,000 30% 117,000 86,667

Contractors 1 U 78% 1,536 1,200 92,160 92,160 92,160 72,000

Analysts 2 P 50% 1,800 1,800 40,000 80,000 30% 104,000 52,000

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

7,450 230,167$

Page 10

Value Pocket Data Collection VP Survey – PoT Calc Sheet Example

To calculate total hours using the PoT Method for a Calc Sheets row: – Enter values for columns [1] and [2] – Enter “P” in column [3] – Enter % of time the group/individual works on the VP activity in column [4] – Enter in column [5], the approx. total # of hrs. each person in the group works for the

State each year – Column [6] will be calculated for you. [6] = [2] x [4] x [5]

Calc Sheet

[7] provide input [9] provide input

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11]

Individual or

Group

# of

People

Select

Calc

Method

(P or U)

Approx. %

of Time

Spent

Working on

This

Activity

Approx. Total

# of Hrs. Each

Person Works

for the State

Each Yr. (use

1800 for State

Employees)

Total Hours

Worked on This

Activity Each

Year

Approx. Avg.

Annual Total

Compensation

for Each of the

Individuals on

Each Row

Total Annual

Comp. for All

Those on

Each Row

Add 30% for

Benefits for

State

Employees,

but Add 0%

for

Contractors

Total

Comp.

Plus

Benefits

Relevant

Total Comp.

Plus Benefits

Supervisor 1 P 25% 1,800 450 60,000 60,000 30% 78,000 19,500

Data Entry Clerks 3 U 74% 1,800 4,000 30,000 90,000 30% 117,000 86,667

Contractors 1 U 78% 1,536 1,200 92,160 92,160 92,160 72,000

Analysts 2 P 50% 1,800 1,800 40,000 80,000 30% 104,000 52,000

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

7,450 230,167$

[8] = [7] x [2] [10] = [8] x ([1+[9]) [11] = [10] x [4]

Page 11

Value Pocket Data Collection VP Survey – PoT Calc Sheet Example (cont.)

Suggested ways to calculate % of time spent: – If spends about 2 hrs. each day, use 2 hours / 8 hours per day = 25% – If spends about 2 days each week, use 2 days / 5 days per week = 40% – If spends about 3 days each month, use 3 days / 21 business days =

14% – If spends about half of his/her time during only two months out of the

year, use 50% x 2 months / 12 months = 8.3%

Page 12

Value Pocket Data Collection VP Survey – Calc Sheet Example (UoW)

To calculate total hours using the UoW Method for a Calc Sheets row: – Enter values for columns [1] and [2] – Enter “U” in column [3] – Column [4] will be calculated for you after values have been entered for columns

[2], [5] and [6]. [4] = [6] / ([2] x [5]) – Enter in column [5], the approx. total # of hrs. each person in the group works for

the State each Year – Enter in column [6]: (# Units processed each year) x (# hrs. ea. Unit is

processed). For example, if 1,000 units are processed each yr. by the group andit takes 20 min. to process each Unit, enter (excluding quotation marks)“=1000*20/60” Calc Sheet

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11]

Individual or

Group

# of

People

Select

Calc

Method

(P or U)

Approx. %

of Time

Spent

Working on

This

Activity

Approx. Total

# of Hrs. Each

Person Works

for the State

Each Yr. (use

1800 for State

Employees)

Total Hours

Worked on This

Activity Each

Year

Approx. Avg.

Annual Total

Compensation

for Each of the

Individuals on

Each Row

Total Annual

Comp. for All

Those on

Each Row

Add 30% for

Benefits for

State

Employees,

but Add 0%

for

Contractors

Total

Comp.

Plus

Benefits

Relevant

Total Comp.

Plus Benefits

Supervisor 1 P 25% 1,800 450 60,000 60,000 30% 78,000 19,500

Data Entry Clerks 3 U 74% 1,800 4,000 30,000 90,000 30% 117,000 86,667

Contractors 1 U 78% 1,536 1,200 92,160 92,160 92,160 72,000

Analysts 2 P 50% 1,800 1,800 40,000 80,000 30% 104,000 52,000

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

7,450 230,167$

Page 13

Value Pocket Data Collection Things to keep in mind…

Calc Sheets are essentially “scratchpads” that can be used to calculate hours for the “Effort-Related Data” response worksheet/tab using the PoT method OR the UoW method. Use whatever method you feel comfortable using just as long as you develop for each Value Pocket activity on the “Effort-Related Data” response worksheet/tab a reasonable estimate for:

– Total number of hours spent annually performing the VP activity, and – Total amount of compensation paid for those hours

You can enter hours and compensation amounts directly into the “Effort-Related Data” response worksheet/tab, instead of using Calc Sheets

And please keep in mind that what we need are reasonably good estimates, not exact numbers

Page 14

Let’s take a look at the

Value Pocket Survey

Page 15

Value Pocket Data Collection VP Survey – Contact Information and Due Date

Please complete and return the survey via e-mailattachment no later than the close of business on Friday September 12, 2008 to: Chip Julian

– Mobile: 281.794.1391 – chip.julian@cpa.state.tx.us

If you have any questions whatsoever regarding thissurvey, please do not hesitate to contact Chip

Page 16

Questions

Page 17