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The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Continuous Improvement
It Pay$
Penny Weller, PhD, CMA
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 2 5/9/2016
Continuous Improvement – It Pays • Whether you are considering or already have a continuous
improvement
• program this session is for you. You will learn a variety of quick tips
to engage staff in submitting ideas, the power of measurement and
which tools are most commonly used and easiest to understand.
• Insights will also include the value of continuous improvement, how
to get started by measuring something, the secret to great
suggestions and even how to have a mustang attitude when it
comes to promoting your achievements.
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 3
• The Hackett Group – advisory services
and research Global Business Services
and Shared Services
• 30 year Shared Services executive with
Pfizer (formerly Pharmacia)
• Director of Performance Management
• Six Sigma Motorola-certified Black Belt
• Global Director, Institute of Management
Accountants
Penny Weller, PhD, CMA
Global Business Services Advisory,
North America Operations Leader
Phone: 269.345.7240
www.thehackettgroup.com
Contents
Hackett Overview
Why Continuous
Improvement Matters
How to Get Started and
Sustain a Program
Nuggets, nuggets, nuggets
Opportunity to Participate
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 5
86% of the
Fortune 100
93% of the Dow Jones
Global Titans
87% of the
DAX 30
52% of the
FTSE 100
48% of the
CAC 40
93% of the
Dow Jones
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 6
▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett
Certified Best Practices through the Best Practice Intelligence Center
▪ Unlimited inquiry access for members to Hackett experts for transformation steering
▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events
▪ Enterprise, functional and process-based performance studies & value accelerators
▪ “Gold Standard” Benchmark – over 10,000 conducted, the empirical backbone for your
transformation at the SG&A Enterprise, Functional, and Process level.
▪ World-Class, Peer, and Custom Peer comparative metrics and best practices
▪ Ability to provide multiyear World-Class Program view of performance over time
▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP)
Finance
Human Resources
Information Technology
Procurement
Supply Chain and Operations
Membership Advisory & Research
(Provides insights into World-Class Performance)
Benchmarking (Defines World-Class
Performance) Hackett Perspective on World-Class Finance – Accelerating GBS | 9
Peer Group World Class
The World-Class Advantage – FinanceWorld-Class organizations always find a way to get there
IT Cost (per end user Equivalent)
Procurement Cost (% of spend)
Peer Group World Class
23%
$1.7K$2.2K
HR Cost (per employee)
Peer Group World Class
19%
0.59%0.73%$6.0K
22%
2014 Cost of Finance by Process Category (as a % of revenue)
Finance Cost (% of revenue)
Peer Group World Class
1.12% 46%
-59%-46%
-23%
0.60%$7.7K
0.39%
0.21% 0.23%
0.16%0.11%
0.17%
Transacting Control & Risk Planning & Strategy
Practice or
Outcome
Process
Taxonomy
Vision
Dimension
SDM
Component
Capability /
Enabler 1 - Lagging 2 - Achieving 3 - Exceeding 4 - Leading
Current
State
Assessment
PriorityFuture State
TargetAverage Gap
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree to which a
sourcing strategy
exists
Sourcing strategy is ad hoc or
nonexistent.
Sourcing strategies reflect and are
aligned with overall business
strategy and objectives, including
high level risk requirements.
Historical spend analyses are
regularly and routinely conducted
by market and across markets -
i.e. by specific commodity, service,
location and business.
Commodity management and
sourcing strategies define
appropriate purchasing and
payment processes and tools.
Contract terms, lengths, and
conditions are defined to drive
optimal benefits to the enterprise;
in terms of total life-cycle cost,
service, and quality.
Sourcing strategy is reviewed and
updated annually (or more
frequently) to reflect direct linkage
to the company's strategic growth
plans, market changes and
product innovations, production
plans and business
M&A/ventures.
2 - Achieving 2 - Medium 3 - Exceeding 1.00
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Breadth of supplier
universe
Supplier selection is based on
historical or personal
relationships; suppliers often
selected prior to Procurement’s
involvement in a project.
Projects are initiated to limit the
total number of suppliers and
bundle the spend volume.
Procurement is involved in the
supplier selection process.
Suppliers are often considered on
a regional or compartmentalized
basis.
Supplier universe is considered
by major commodity or service
area rather than in aggregate.
Suppliers are considered for
bundled and/or extended services
that may extend to multiple areas
of competency.
Supply universe is global and not
limited to traditional commodity
suppliers.
1 - Lagging 2 - Medium 2 - Achieving 1.00
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree to which
supplier risk is
measured and
managed within the
sourcing process
Risk not considered as part of
sourcing decisions or supplier
management.
Supply risk is considered as part
of category-specific sourcing
efforts and supplier performance
management processes.
Supply base risk is explicitly
factored into broader business
continuity objectives. Supplier
risk is considered beyond the
specific good or service being
sourced.
Procurement works with other risk
management staff, ensuring
alignment between internal
risk/return preferences, business
objectives, and both general and
specific supply market risks.
3 - Exceeding 3 - High 4 - Leading 0.90
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree of
contingency
planning performed
to assure supply
No supply contingency planning
exists.
Contingency plan exists in case of
supply shortage; alternate
suppliers and alternate locations
identified.
Alternative supply sources are
developed in conjunction with
current suppliers for key
purchases.
Back-up suppliers are required for
critical or strategic categories and
items, including formalized
contingency plans to ensure
seamless supplier transition and
application of penalties and
liabilities with supplier(s) at fault.
3 - Exceeding 2 - Medium 3 - Exceeding -0.55
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree of supplier
qualification in
place
No formal supplier qualification
process.
Simple processes in place to
register suppliers and inspect
supplier qualifications at time of
registration or category review.
Established supplier training
program on enablement
strategies and buyer’s
technologies. Formal program
exists to identify key qualification
metrics with stratification based
on category criticality and supply
alternatives.
Annual review of at risk suppliers
and suppliers of key categories.2 - Achieving 2 - Medium 2 - Achieving 0.37
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree of
effectiveness and
efficiency of price
refresh process
Quoting and price refresh process
is undefined and performed
manually and on an ad hoc basis.
Quoting and price refresh process
is defined and audited manually.
Quoting and price refresh
processes are structured to
minimize enterprise financial
impact to all parties.
Quoting and price refresh
processes are automated, nearly
error-proof,, with appropriate
controls in place..
2 - Achieving 2 - Medium 2 - Achieving 0.46
Practice
Sourcing and
Supply Base
Strategy
Purchased
Cost
Reduction
Process
Design
Level of
rationalization of
supply base size
Large number of suppliers due to
short-term, “one-off” relationships.
Organization has identified the
need to rationalize the number of
suppliers in order to create
leverage.
Supply base rationalization is
complete. Few new suppliers are
needed and an added supplier
typically results in a removed
supplier (equilibrium). Strong
relationships developed with
current suppliers focusing on JPI
in critical or large dollar spend
areas.
Structured process is in place that
benchmarks the marketplace and
ensures continual supply base
assessment.
2 - Achieving 2 - Medium 2 - Achieving 0.50
Practice
Sourcing and
Supply Base
Strategy
Purchased
Cost
Reduction
Process
Design
Maturity of use of
supply market
intelligence
Supply market knowledge is ad
hoc and incomplete.
Process, tools, and sources
established to gather and
organize data on most categories.
Supply market intelligence /
knowledge captured to identify
when a supply strategy needs to
be re-visited.
Supply market intelligence /
knowledge captured, modeled,
and utilized for pro-forma
simulations done during strategic
planning, design, sales, etc.
2 - Achieving 2 - Medium 2 - Achieving 0.66
Strategy & Business
Transformation (Transforms Performance
into World-Class)
Service
Delivery
Components
Information
Service
Placement /
Scope
Process
Sourcing /
Location
Strategy
Process
Design
Enabling
Technology
Skills &
Talent
Governance
&Organization
Enterprise Performance Management
Shared Services, Global Business Services & Outsourcing
Merger Integration
Working Capital Management
Oracle EPM (Platinum Partner)
SAP ERP (Gold Partner)
Hyperion
Kronos
Workforce Management
Application Managed Services
– Functional Application Support
– Technical Application Support
– Cloud and Hosting
– Remote Development
Best Practice Technology Enablement
(Implements Technology to enable World-Class)
In
-h
ou
se
Co
mp
le
te
O
utso
urc
in
g
Colo
catio
n
CustomerResponsibility
ProviderResponsibility
Sa
aS
A
pp
lic
atio
ns
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 7
• We are the global leader in operations improvement strategies, implementation know-how, and G&A agility
• We address both efficiency and effectiveness improvements to enable strategic business objectives
• Our insights are fact based, from over 10,000 performance improvement benchmark engagements
Our Best Practices Intelligence Center™ is a significant differentiator and enabler. It contains:
– 20,000+ performance metrics updated annually
– 1,500+ best practices across 95 business processes
– 1,000+ best practice-based process maps, requirements and configuration guides
– 1,000+ case studies, implementation examples and research
• We deliver results through a global team of senior practitioners using a consistent methodology and best practice-based toolset
Hackett Value Grid™
We help companies establish and implement business performance
improvements.
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 8
Hackett Purchase to Pay Value Grid™
Effectiveness Drivers
• First Pass Match Rate
• On Time Payment Rate
• Level of Spend Visibility
• Streamlined Transaction Strategy
• Level of GBS/Shared Services
• Training Investment
• Compliance to Preferred Suppliers
• Guided Buying Effectiveness
• Supply Base Consolidation
Efficiency Drivers
• Cost per Transaction
• Transactions per FTE
• Span of Control
• Order Cycle Time
• Invoice Processing Cycle Time
• Percent of Electronic Transactions
• Level of Automation
What are you measuring? How do you compare? What do you want to improve?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 9 Source: 2016 Hackett Study
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
What’s important to
your key
stakeholders?
How and what to improve?
How do you know
you are doing a
good job?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 11
Step
change…
BIG
Continuous
improvement
… SMALL BUT…CHANGE THE
CULTURE
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Foundation of Continuous improvement – Measurement and Encouragement
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Senior business leaders Key stakeholders Operations
Your customers will impact what you improve… What do you already know you want to improve? Who are your key audiences? What is important to them? Are there some Quick wins?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 14
• Start small; ‘what’s stopping you from being effective?’
• What’s irritating to your customers and to you?
• You probably have more control than you think!
• Start tall; ‘external benchmark’ -- Pharmacia Example
Automate… Something Something …Eliminate
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 15
$5 million savings opportunity in transaction processing!
Key Financial Processes Total Cost Cost per
Billion Quartile
1st Quartile
Cost/Billion
$ Savings
Opportunity
Transaction Processing $12,955 $ 4,093 3rd $2,431 $ 5,262
Control & Risk Mgt. 5,523 1,745 3rd 959 2,488
Decision Support 3,793 1,198 3rd 607 1,871
Finance Management 1,772 560 3rd 408 481
Systems 7,660 2,420 2nd 1,760 2,090
Overhead 6,561 2,072 2nd 1,275 2,523
Total Finance $38,264 $12,088 3rd $7,440 $14,715
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
• Quality
• Cost
• Delivery
• Customers / Employees
• Best Practices
• Value
• Defect-free processing
• First-pass yield;% errors
• Process cost
• Transactions per FTE
• Cycle time (days to close)
• % automated transactions
• Customer satisfaction
• Employee engagement
• % suggestions
• Process steps – add value
• Organizational alignment
• % of G&A in Shared Services
• Speed to add new product or
acquisition
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 17
Start Measuring…Start Comparing
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Effective Continuous Improvement
Executive Sponsorship
Change Management
Effective Methodology
Communication Plan
Training & Empowered Employees
Measurement
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Resource Constraints
Company Culture
Non Standard Processes
Top Leadership
Support
74%
59%
52%
41%
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Lean – eliminates waste
6 sigma – eliminates variation
Service Design – Customer view
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Final Close
Preliminary
Close
Prepare
Special Ledger
Adjusting
Entries
Financial Close Process
Run
Assessment
Process
Entry into
Hyperion
Run
Consolidation
jobs
Reverse
Assessment
Process
Run Final
Assessment
Process
#1 CI Tool over
90%
Process Mapping
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Rule #1: If you submit an idea you don’t have to fully develop it…. Voice of the Customer
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Pareto Analysis
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Why? Why? Why? Why? Why?
4 The 5 Whys…
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Kaizen Events are easy to run since the whole point is to plan, start and end within a limited time frame, such as a few dedicated days of work. Suggestion: Set a goal for each department that requires 100% of employees to participate in at least one event per year, including all new hires. Brainstorm ideas to pick the best projects.
Examples of successful events • Workspace improvements like organizing the mail, fax, scan or office supply areas • Employee-related, such as safety, new hire orientation • Specific business processes or procedures
• Manual billings • Procurement card • Journal entries • Aged invoices • Unclaimed property • Traveler central billing • Cell phone billing
5 Kaizen Events
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
The Land of Month End…
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
PUSH
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
The patient
is waiting...
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Mom says, “if no one’s in charge….you are!”
Payment terms
$326,000 savings
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Having a Mustang Attitude… We don’t know how to market ourselves
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Continuous Improvement can
reap huge benefits
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Source: www.istockphoto.com_Stock Photo #12357951
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Source: www.istockphoto.com_Stock Photo # 753654
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Source: www.istockphoto.com_Stock Photo # 9506988
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 38
Hackett Performance Studies define and capture how World-class performing organizations are organized, governed, and their savings potential compared to their Peers. The study covers key concepts including service management, governance, performance achievements, technology, and KPIs to assess your performance objectives. Participants in these studies will: • Learn how your organization compares with World-class or Top
Performers • Receive a report with key research findings and an assessment of
your performance • Have a one-on-one session with a Hackett Advisor to review your
performance
• Participate by joining the Hackett Research Community
• http://www.thehackettgroup.com/research/studies/
• www.thehackettgroup.com or contact [email protected]
Free
Studies
| 39 © 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Questions or Comments?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 40
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The Accounts Payable & Procure-To-Pay Conference & Expo is produced by:
Statement of Confidentiality and Usage Restrictions
This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior
written consent of The Hackett Group.
www.thehackettgroup.com