The DNA of Source-to-Pay: Cracking the Code on a Business Case for Procurement Transformation

Agenda

• About Zycus

• Building the Business Case:

– Source-to-Pay Value Levers

– Establishing Baseline and Target Performance

– Developing the Pro-Forma

• Future State Vision – Procurement Transformed

Comprehensive Source-to-Pay Suite

Recognized Market Leader

Gartner Magic Quadrant 2013

Challengers Leaders

Visionaries Niche players

Abilit

y to

exe

cute

Completeness of vision

Key Gartner Findings

Product Quality “Zycus has the most even product set of all the vendors in the magic quadrant, with no missing modules and all modules scoring in the top 50% of the field.”

Customer Satisfaction “Zycus was the second highest ranked leader’s quadrant vendor in terms of customer satisfaction. “

Customer Vertical Market Focus

Pharmaceuticals

Food & Beverage

Manufacturing

Electronics

BFSI

Oil & Gas

Building the Business Case

Source-to-Pay Value Levers

Increase SUM –

Discover Savings Opportunities

Higher Sourcing

Throughput & Savings ID

Rationalize Supply Base – Increase

Spend w/Preferred

Visibility and Compliance to

Preferred Agreements

Reduce/Eliminate

Maverick Purchases

Capture Prompt Pay Discounts/ P-Card Rebates

Reduce

Transaction Process Costs

Track Finance-

Approved Savings

Baseline and Target Performance - SUM

Selected Industry Benchmarks

Source: CAPS Research Cross-Industry Benchmarks

Aerospace & Defense

Automotive & Transport

Chemical Manufacturing

Pharmaceutical Financial Services

Industrial Manufacturing

Metals & Mining

Petroleum Utilities

% SUM 93.00% 93.08% 77.70% 82.91% 63.86% 85.18% 83.61% 81.66% 67.91%

Benchmark Laggards Average Best-in-Class

Spend Under Management 22% 62% 80%

Cross-Industry Benchmarks

Establish Baseline - Spend Actively Sourced/Managed by Procurement

Sourceable Spend

Set Target – Goal to Achieve Best-in-Class/Industry Standard

Source: Aberdeen Group

Gartner research shows Top Performers have more than 95% of spend accurately classified to a sufficiently detailed level for procurement to analyze and scope potential sourcing savings.

Baseline and Target Performance – Spend Visibility

Establish Baseline – Current Spend Visibility at Granular Level

Set Target – Goal to Achieve Best-in-Class

Baseline and Target Performance - Savings

2.13% 2.73%

2.30% 2.29% 2.00%

3.06% 3.39%

2.19% 2.93% 2.97%

4.94% 5.54%

4.40% 5.25%

4.80%

7.04% 7.68% 7.56%

6.46%

5.34%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Non World Class World Class

Total Spend Cost Savings Total spend cost savings (reduction and avoidance) as a percent of annual spend

The Hackett Group Procurement Benchmark-2014

Establish Baseline – Identify Current Savings on SUM

Set Target – Incremental Savings By Achieving World-Class

Baseline and Target Performance - Compliance

Source: Aberdeen Group

Establish Baseline – Identify Current Compliance

Set Target – Ensure Compliance Visibility and Control to

Prevent Savings Leakage

Baseline and Target Performance – Transactional Efficiency

Source: Hackett Group Procurement Benchmarks

Establish Baseline – Identify Transaction Cost and

Discount/Rebate Capture Rate

Set Target – Goal to Achieve World-Class

Baseline and Target Performance – Supplier Management

2,894

355

2,798

353

Non-World Class World Class

2013 2014

9,613

2,627

9,374

2,420

Non-World Class World Class

2013 2014

5,822

2,018

5,806

1,959

Non-World Class World Class

2013 2014Direct Indirect Overall

Establish Baseline – Determine Need for Supplier

Rationalization

Set Target – Ensure Supply Management Resources Aligned to

Achieving World-Class Goal

Suppliers per Billion Spend

Source: The Hackett Group Procurement Benchmark-2014

Baseline and Target Performance – Additional Considerations

Increased Revenue from Procurement-led Supplier Innovation 3.5%

7.4% AverageTop Quartile

Source: The Hackett Group Procurement Benchmark, 2014

13

4.5 2

Top Quartile Median Bottom Quartile

Reduced Supply Risk Exposure

Increased Stakeholder Satisfaction

Number of procurement FTEs focused on supply risk

Developing the Pro-Forma `

Pro-Forma Business Case

Total Adressable Spend $350,000,000 Esitmated Spend Not Under Management (%) 43%Estimated Spend Under Management (SUM - %) 57% Targeted SUM (%) 80%Realized Savings (%) 6% Req-to-Order Cycle Time (Days) 1Annual Requisition Volume 45,000 Invoice Processing Cycle Time (Days) 7Annual Purchase Order Volume 60,000 Per PO Processing Cost $11.63Annual Invoice Volume 225,000 Per Invoice Processing Cost $6.67Current Prompt Pay Discounts (% of Spend) $140,000Current P-Card Rebates -

ComponentCurrent Incremental

ImprovementTarget

PerformanceIncremental

Savings

Incremental Negotiated and Realized Savings($) 57% 23% 80% $4,800,000Incremental Prompt Pay Discount Savings ($) 0.04% 0.12% 0.16% $420,000Incremental P-Card Rebates Savings ($) 0.00% 11.00% 11.00% $385,000PO Processing Cost ($) $11.63 59% $4.80 $409,800Invoice Processing Cost ($) $6.67 69% $2.06 $1,037,250

Total Savings $7,052,050Cycle Time Improvement:

Requisition-to-Order Cycle (Days) 3 67% 1 *Invoice Processing Cycle (Days) 25 76% 6 ** Note: Assumes Best-in-Class Cycle Time Achievement with P2P of 1 Day Order and 6 Days Invoice Process Cycle Times

Business Metrics - Annual Spend & Transaction Volume

Business Value - Savings & Process Improvement

Future Vison – Procurement Transformed

Best-in-Class Technology Adoption and Benchmarks

Spend Analysis (80%)

Sourcing (57%)

Contract Management

(68%)

Procure-to-Pay

(65%)

Supplier Management

(63%)

Financial Savings

Management (Emerging)

• Procurement/Finance collaboration 4.35 out of 5 – 3.5 for all others

• 2/3 can track savings impact to Financial Statements

• 72% follow formal/standard process

• 52% higher realized/implemented savings than all others

• 80% adoption rate – 2x

lowest performers • 60% more likely to have

classified/cleansed spend data

• 54% higher contract compliance rates than all others

• 15-20% faster contract creation and approval cycle time (~33 days) than all others

• 86% of POs contract compliant

• 2-3 days to on-board suppliers

• 71% more likely to monitor supplier

risk • 1% duplicated suppliers – 27% for

lowest performers • 2% suppliers catastrophic failure –

5% for lowest performers Source: Aberdeen Group Benchmarks

Future Vision – OneView Dashboard Visibility

Spend Management Dashboard

Procurement Operations Dashboard

Supplier Management Dashboard

Q&A - Contact

For more information, please contact:

Richard Waugh, VP Corporate Development Zycus Inc. Richard.Waugh@zycus.com