The role of supplier networks in financial transformation

The role of supplier networks infinancial transformation

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Agenda

• The CFO perspective• The HP roadmap• Enabling technologies• Where the market is headed• Potential financial impact


The CFO Perspective

Is A/P More Strategic

More Same

Less

Source: 2009 Aberdeen Survey


The CFO Perspective

Treasury Purchasing

Finance

A/P



The CFO Perspective

Improve Purchasing Compliance

Lower A/P Department Costs

Improve Payment Performance

Optimize Working Capital

Improve / Standardize Process

0 10 20 30 40 50 60 70 80


©2010 HP 6

HP GBS – our strategy journey

6

Decentralized

Regional SharedServices

Global Consolidation

andAdoption

Technology Enablement & Process Optimization

Business Value Add as End-to-endProcess Owner

COSTS VALUE

TIME1990 2010


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Invoice Receipt

A/P Workflow ERP

Invoice To Pay Process

Settlement& Financing

The A/P Process


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Account Payable Workflow

A/P Workflow Implementation

On Premise71%

Hosted20%

Out-Sourced

9%

No Intention5%

Implemented45%

Currently Implementing

15%

Actively Planning

20%

Planning15%

Source: 2009 Paystream Advisors Survey


Benefits of A/P Workflow

• Automates routing and approval of invoices• Standardizes the process• Ensures greater visibility / compliance• Enables off-shoring of non value added activities• Compresses invoice approval cycle time


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Invoice Receipt

A/P Workflow ERP

Invoice To Pay Process

Settlement& Financing

The A/P Process


Why paper invoices persist

Customers:

− ERP Input formats are proprietary − Cost and complexity of working with hundreds of suppliers

Suppliers:

− Billing Systems output invoices proprietary formats − Cost and complexity of customizing for clients


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Invoice submission methods

• Imaging• Optical character recognition• Outsourcing• E-Invoicing supplier network


CustomerSupplier Network Services

Service components


The Supplier Network

Many of your suppliers will be on the network

We enroll those who are not

http://en.wikipedia.org/wiki/Image:Unilever.svg

http://en.wikipedia.org/wiki/Image:Unilever.svg

http://www.motorola.com/

http://www.sap.com/index.epx

http://www.lenovo.com/us/

http://www.iff.com/internet.nsf/HomePage!OpenForm

http://www.nielsen.com/

http://www.sca.com/

http://www.usa.philips.com/index.html

http://www.officedepot.com/index.do?tab=

http://www.officedepot.com/index.do?tab=

http://www.kodak.com/

http://www.anixter.com/AXECOM/US.NSF/HomePage?OpenForm


The global supplier enrolment team

OB10 Office Locations

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Buyer SummaryBuyer Name: AAA148735442 - A large CompanyTotal Suppliers: 1,526Total Invoice Volume: 406,616Total Invoice Value: 1,750,605,024

Buyer Overview - Actual Breakdown

Sales Overview- Actual Breakdown

Implementation Overview - Actual Breakdown

Campaign ReportingCampaign Reporting


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Touchless, Straight Through Processing

Recycling is good at home… but not in AP operations

• No Touch• Automated Matching• Immediate Receipt• VAT Compliant• Full Line-Item Level Detail


SAP Add-on

Connector

Supplier

Supplier

SupplierSupplier

Supplier

Supplier

Customer / Buyer Firewall

Supplier

Archive


Self-Service – Collaborative Network

Procure to Pay Framework

Electronic Purchase Order Delivery

Electronic Invoice Management

Supplier Financing

Payment Management

Purchasing

Treasury

A/P

Sales Order

Billing

Treasury

A/R

Standard Supplier Information

Buyer Supplier


Self-Service – Collaborative Network

Procure to Pay Framework

Electronic Purchase Order Delivery

Electronic Invoice Management

Supplier Financing

Payment Management

Purchasing

Treasury

A/P

Sales Order

Billing

Treasury

A/R

Standard Supplier Information

Buyer Supplier


Discounting Is More Attractive Than Ever

Sources: REL/Hackett Group; own analysis; Cash: Goldman analysis of S&P 500; Interest on 4 week T-Bills by Federal Reserve;

Invoice date Approval Due date

53 days25 days

Cash as % of assets Interest rates’02 ’10

6%

10%

’05 ’100%

5%


Supplier views approved invoices…

Click to View Details for Accelerated Payment


…Evaluates accelerated payment offer…

Invoice Details & CurrentTerms Displayed

Click Here to Select a Date for Accelerated Payment


…Selects payment date…

Click on the DateDesired for AcceleratedPayment


…Requests early payment

Proposed Terms forAccelerated Payment

Click “Submit” to AcceptTerms for AcceleratedPayment or “Cancel” toLeave Payment Date as is


$5bnInvoiced spend

Non-discount spend: 80% $4bn

Accelerated spend: 20% $800M

Accelerated spend: $800M

Offer rate (APR) 12%

Average acceleration 30 days

Additional discount p.a.: $8M

Example of $5 billion spend company


‣Spend: $5 billion

‣Invoices: 300,000

‣Cost per invoice: $10

Business case example

Business Case AP automation

‣Save $5 per invoice

‣Annual savings $1.5M

‣Payment terms: 45 days

Net

‣Approval cycle: 25 days

Example company

Business Case including Dynamic Discounting

‣Acceleration 30 days

‣Combined annual savings $1.5M + $8M = $9.5M

‣Reduce approval cycle to 10 days

Documents

The role of supplier networks in financial transformation