Your Path to the Networked Economy: Digital or Domino’s?
To improve how you order and pay for goods and services to run your business, is your model more closely aligned with digital connections or pizza delivery?
The issue came up in a breakout session at Ariba LIVE, where procurement leaders from Al-Futtaim Group, based in the United Arab Emirates, and U.S. based Ryder Logistics & Transportation Solutions, discussed approaches to removing complexity in business transactions by “closing the loop” in their procure-to-pay operations.
Before automating procure-to-pay activities, Al-Futtaim would print purchase orders and send them as attachments via email. In many cases, though, it would go one step further: arrange for a driver to deliver the PO to a supplier. I imagine Ryder would have been willing to provide trucks for that purpose.
In that same session, Ryder talked about its own manual P2P process before taking steps to automate. Ryder got buy-in from internal stakeholders and external suppliers by sharing the cumbersome manual process, illustrated in the diagram below.
For both Al-Futtaim and Ryder, a disconnected business process was the source of many problems. Here’s a partial list:
- Tedious PO approval process
- Field locations easily bypassing the contract process
- Many invoices with errors requiring extra attention
- Journal entries to correct and charge back cost centers
- Inability to control and monitor spend
Simplifying procure-to-pay operations over a business network was key to both Al-Futtaim and Ryder. For Al-Futtaim, one benefit was straight-through processing of orders and invoices. Before the change, Al-Futtaim would often fix errors relating to prices and general ledger entries. “Now, 97 percent of POs go through without any rework, and the ability to flip a PO to create an invoice provides a level of accuracy we never had before,” said Pravas Paikaray, assistant general manager, procurement services for Al-Futtaim. In addition, he added, users now handle the goods receipt notifications to further expedite transaction processing, and there is better visibility into spend.
Meanwhile, as of the first quarter of 2015, Ryder reported that 98 percent of its invoice volume was being processed electronically through the Ariba Network. In addition, purchases now have approval to buy before the money is spent. That wasn’t the case with its manual operations. The simplified procure-to-pay process is also helping Ryder get more control over its spend. Valdes shared cases where one Ryder location might be paying 15 to 20 percent more than other locations for the same product. The ability to generate reports on spend data now identifies sourcing opportunities that lower costs, and ensure that contracts will be enforced at all locations by ordering off catalogs.
Mapping commodity codes to the general ledger and automating accruals are two other business process improvements that have helped Ryder to run simple. Accruals occur upon goods receipt, not invoice receipt. “That makes finance very happy, as it often eliminates work they had to do.” said Valdes.
There’s so much more to these transformative stories. For more details, you can access the recording at your leisure and learn how to improve business operations and thrive in a networked economy.