Business cases are not a dark art: the science behind the numbers

©2011 ADS Alliance Data Systems, Inc.

Confidential and Proprietary

Business Cases Are Not a Dark Art The Science Behind the Numbers

2



Agenda

About Alliance Data

Share Services Make UP

Why A Business Case Driven Improvement Strategy

How We Closed The Gap

• Baseline Performance

• Improvement Strategy and Objectives

• Results Realized Consequences of Inaction

Business Case: Results Driven

Results and Business Value Obtained

3



Alliance Data: Three Businesses. One Focus.

Total Enterprise Value: ~$8.0 Billion | Revenue: $3 Billion | Associates: ~9,000

Each business on its own is a Fortune 1000 company.

The largest and most comprehensive provider of

transaction-based marketing and loyalty solutions

Multi-channel marketing

services including database,

data, digital marketing

and agency services

Design, deliver and

manage both coalition

and stand-alone

loyalty programs

Integrated credit and

marketing solutions

Retail Services

4



Shared Services Organization

Key Office Locations:

• Dallas, TX

• Boston, MA

• Columbus, OH

• Toronto, CA

• EMEA

• APAC

KPI

• Invoice per FTE: 4.5K

• Invoices on PO: 30%

Technology

• PeopleSoft ERP

• Concur Non-PO Invoice

• OB10 – eInvoice and IDC

• OBIEE – Spend Analytics

Shared Services:

• Based in Plano, Texas

• Small Global Presence

• 24 FTE

• Procurement Governance

and Framework

• Invoice processing and

Exception Handling –

140,000 invoices

• Transitioning Invoice Data

Capture (IDC) to third party

• Management of P-Card

program and equipment

leases

5



WHY A BUSINESS CASE

DRIVEN APPROACH

6



Our Strategy Required a fact based business case driven approach to

gain stakeholder buy in

Needed a solution to support a variety of needs

Lines of Business Corporate

Invoice visibility to manage

the business

Autonomy to make

purchase decisions

Assurance of proper

expense coding

Timely visibility into

expenditures and liabilities

Maintain relationships

Better visibility into invoice

& spend information

Enhance ability to influence

LOB purchasing behavior

Leverage scale

Timely payment of

suppliers

Enhance overall supplier

governance

Influencer

& Enabler

Customer

& Decision Maker

7



Where We Were Establish a common baseline from which to measure

performance

Unfavorable perception of AP

performance

100% paper based invoices

Invoice receipt and processing varied by

Business Unit

Inconsistent utilization of systems across

business units

Elongated invoice processing cycle

Invoices “Past Due” when received for

processing

Low productivity levels

Satisfactory

Metric ADS

Cost per Invoice $ 20

Invoices/ FTE 4.5K

% manual invoices 86%

% paid in terms 48%

Invoice cycle time 53 days

% Purchases on PO 32%

8



Our Future State Vision Establish a performance goal to measure success

Leverage technology to

reduce cost per transaction

Improve efficiency in the

accounts payable operation

Reduce duplication of effort

Enhance data accuracy

Secure invoice delivery

Expand electronic invoice

presentment for payment

Expand electronic payment

methods (ACH)

Benefits To be Realized

$2-$3 million annual cost reduction

4-7% annual spend value savings

Metric Goal

Cost per Invoice $ 4

Invoices/ FTE 20K

% manual invoices 35%

% paid in terms 99%

Invoice cycle time 6 days

% Purchases on PO 70%

9



HOW WE CLOSED THE GAP

10



Plan on an Uphill Battle for Change Construct a comprehensive business case with sound

assumptions and realistic fact driven estimates

Business Leader buy in

“Fact based” approach

Overcome resistance to change

Dispel fear of business disruption

Quantify the “value” of change

Demonstrate how value would be

received

11



How We Used A Fact Based Approach

To Build A Business Case For Change

Benchmarked our performance

Analyzed our transactions and

supplier base

Developed a case for change

and gained executive support

Communicated how change

would occur and gained

Business buy in

Financial Services/Banking Industry All Industries $1-$5 Billion Revenue

$19.57

$9.27

$3.03

$19.43

$7.72

$25.55

$14.10

Alliance Data Systems Top Performers Median Bottom Quartile

Economically viable

$2.3 million savings

169% ROI

Better position for growth

Low execution risk

12



What We Did to Execute Change

Streamlined invoice

management processes

Increased PO utilization

Reduced invoice matched

exceptions

Enrolled suppliers into

electronic invoicing

Selectively outsourced paper

invoice processing

PeopleSoft Application Suite

Human Resources

General Ledger

Accounts Payable

Procurement

Web Invoice

Entry

Manager / Authorized

Approver

Electronic Invoice

Accounts Payable

Audit/ Control

Department

Codes

PreMatched

PO Invoices

· Reviews Invoice

· Approves or Denise Invoice

· Notifies Requisitioner / Buyer of

Denial Reasoning

· Reviews and Releases

Approved Invoices for

Payment

· Selectively Audits Invoice

Processing Activity

· Acknowledges Receipt of

Purchase Order

· Delivers Goods/ Services

· Submits Electronic Invoice

Data From Billing System

Employee

Names

Pay

to $

ACH Payments

to Suppliers

Accounts Payable Invoice Processing – Best Practice Data and Workflow

Preferred Suppliers(High Volumes of

Recurring Activity)

3rd Party Supplier Network

Manager

Supplier Network

Database

Electronic Purchase Order

Server

Billing

Sysytem

Electronic Purchase Order Acknowledgement

Electronic Invoice

Cus

tom

er In

voic

e V

alid

atio

n R

ules

Other Suppliers(Low Volumes of

Infrequent Activity)

Paper Invoices

Invoice Imaging

/ OCR

· Delivers Goods/ Services

· Flips PO Into Invoice / or

Enters Invoice Via Web

· Prints and Mails Invoice To

Central Invoice Receiving

Paper Invoice

Purchase

Orders

Invoice Workflow Application

“Concur”

Employee Data Accounting Code

Data

Approval Rules

Invoices

(Released for

Payment)

Invoices

(Approved)

Invoices

(In process)

Cus

tom

er In

voic

e V

alid

atio

n R

ules

Valid

Invoices

Employee & Organizational Data

Account Code Validation Data

Web Review &

Approval

Employees /

Requisitioners/ Buyers

Web Invoice

Access

· Enters Receipt Info ( PO

Invpices)

· Reviews Invoice Image

Authorizes Invoice Validity

· Enters Accounting Coding

· Releases Invoice for

Approval

Invoice

Images

Electronic Invoice and Image

Receipt of Goods

/Services For POs

Invoice Coding/ Release For Approval

Invoice

Approval

Web Review &

Approval

Accounts Payable

Invoice Processing

· Manages and Resolves

Paper Invoice

Exceptions

· Enters and Processes

Check Requests

· Codes /Approves

Specific Categories of

Invoices for Payment

Release (Utilities, etc.

Web Invoice

Entry

Paper

Invoice

Exceptions

13



BUSINESS CASE:

ELECTRONIC INVOICING

14



Supplier EIPP Enablement Implementing change initiatives defined in the business

case to achieve our Vision

Incenting (EIPP), and providing disincentives for the continued

submission of paper invoices.

Incentives:

Electronic invoices receive priority processing

Electronic invoices are guaranteed to be paid within negotiated

payment terms

Suppliers with ability to comply with EIPP requirements receive higher

component ratings in eRFX quote reviews and scoring

Suppliers who participate EIPP program are listed as preferred

suppliers in internal publications/ tools Disincentives:

Paper invoices receive secondary processing priority

Paper invoices are not be guaranteed to be paid within negotiated

payment terms

15



EIPP: Multi-Wave Supplier Enrollment

Wave I Wave II Wave III Wave IV

Targeted

Suppliers

Targeted

Suppliers

Targeted

Suppliers

Targeted Suppliers

Suppliers with 30 or

more invoices

Suppliers with 10 –

29 invoices

Suppliers with 10 –

29 invoices

New Acquisition: All

invoice Volume

Target Results Target Results Target Results Target Results

45% of invoices

transitioned to

EIPP

Additional 14% of

invoices converted

to EIPP

Additional 8% of

invoices

converted to EIPP

Additional 33% of

invoices converted to

EIPP

Timetable Timetable Timetable Timetable

Jan – July 2012 Mar – Sept 2012

Apr – Oct 2012 May – Nov 2012

Proactively managing initiatives to achieve sustainable

productivity improvements and change

16



EIPP Active Campaign: YTD April 30, 2012

Sold * In Sales **Refer toBuyer ***

NonPotential

****

CampaignPending

*****Total

Total Inv Vol % YTD Apr30, 2012

31.24% 15.50% 7.06% 5.33% 40.87% 100%

Total Inv Vol % as of Jan30, 2012

17.62% 12.88% 4.45% 4.65% 60.39% 100%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Sta

tus %

To

tal

17



RESULTS AND BUSINESS

VALUE OBTAINED

18



What I Would have Done Differently

Manage Expectations. High conversion rates take

time

Cleansing of vendor master must be priority

PO line validation helps reduce match exceptions but

does not eliminate match exceptions

Do not underestimate the importance of matching

supplier PO invoice lines to PO’s.

Strength of messaging is key

Communicate, Communicate and Communicate

19



Critical Factors That Made The Difference There is no silver bullet …. Just make sure you have a well

thought out plan and execute on it.

Baseline

Performance

& Benchmark

Robust

Solution

Design

Detailed Well

Thought Out

Execution

Plan

Business

Case for

Change

Presentation

& Request for

Sponsorship

Communication

& Change

Management

Plan

Business

Leader and

Unit Road

Show

Well Defined

Execution

Plan

(Multi Wave)

Effective

Program

Governance

Effective

Execution and

Implementation

of Plans

Progress &

Results

Monitoring

Business Value

Generation

Communication

Objective fact

based analysis of

performance

Benchmarking to

quantify the

opportunity

Detail “Vision”

and “solution

designs”

Robust action

plan and

business case

Active Executive

sponsorship

Effective communication

of the issue, solution,

and business value to

Business Leaders

Developing

the right

strategic

partnerships

to enable

execution

Relentless, well

managed change

execution

Strong Program

leadership and

management

20



Business Results Achieved To-Date

5% increase in spend under management / contract

$5.39 reduction in cost per invoice

27% improvement in annual accounts payable

operating cost

10% reduction in invoice processing cycle times

Eliminated lost discounts

Improved service standards to business operators

21



Discussion / Questions

Contact Us:

Todd Holcomb

Director Supplier Services

Alliance Data

7500 North Dallas Parkway

Suite 700

Dallas TX, 75209

[email protected]

www.alliancedata.com

mailto:[email protected]

http://www.alliancedata.com/

Education

Business cases are not a dark art: the science behind the numbers