ADOPTING E-COMMERCE TECHNOLOGIES IN THE P2P PROCESS

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1 ADOPTING E-COMMERCE TECHNOLOGIES IN THE P2P PROCESS by Colin Darch (Ex CIO Balfour Beatty Group and experienced e-trading professional)

2 Understanding and Developing the Business Case THE BUSINESS CASE The business case for the adoption of any form of e-commerce technology within the Purchase to- Pay process (P2P) traditionally begins with a review, quite often in isolation, of the benefits and opportunities of introducing an e-catalogue, or delivering e-orders or processing e-invoices, and would produce a conventional outline Cost/Benefit Analysis and Return-on-Investment. It would be more meaningful to the business to have the proposed e-commerce strategy put into the context of the wider business and financial objectives and to develop a 3-year Purchase-to-Pay (P2P) strategy. This would articulate the overall business drivers and the particular challenges that the Finance function has to address, and would describe the contribution that improving the cost and performance of the P2P process would have on meeting or mitigating these challenges. The P2P strategy would outline the overall driving forces for change, the headline objectives, targets and possible time-scales, together with the influence that any given technology would have on improving quality and reducing risk. The overall strategy would put the individual e-commerce project into context; identifying other possible improvement projects that would build on the initial project, or more often, would widen the scope of the initial project to deliver greater downstream value than was at first envisaged.

3 PRIMARY OBJECTIVES: Below are some of the possible objectives that might be considered: 1. Reduce the number of delinquent orders (without Purchase Orders) 2. Increase the number of e-orders 3. Reduce authorisation complexity 4. Reduce transaction costs 5. Reduce headcount 6. Increase FTE productivity in terms of invoices processed per year 7. Increase the level of transaction automation 8. Reduce the number of Cheque payments (non e-payment) 9. Increase the number of e-remittances remove all printing, paper handling and post by automating the delivery of remittance advices 10. Reduce the number of invoice queries and errors using interactive collaboration tools to resolve queries / disputes quicker and more effectively 11. Drive towards 100% raised orders orders drive / control payments. Missing or incomplete orders increase process costs, increase process times and frustrate goods receipting and invoice clearing process 12. Increase the use of Evaluated Receipt Settlement (ERS) 13. Drive towards 100% Goods Received Note (GRN) input 14. Reduce the number of European P2P centres 15. Create a European payment centre (Payment Factory) 16. Reduce PO process cycle time 17. Reduce transaction complexity removing consolidated invoices and moving towards single line invoicing 18. Increase e-invoices to above 75% of transaction volume

4 AP INVOICE ANALYTICS When introducing potential change into transaction handling processes, it is good practice to provide analytical evidence of today s transactions throughput. This will provide both the benchmark against which ongoing improvement will be measured and the supplier focus, based on transaction volume rather than total spend. Typical detail required for the analysis is the number of transactions for each supplier, numbers of detail lines, value, number of credit notes and detail lines etc. It is also helpful to include the VAT registration number so as to link together businesses that have multiple accounts. The resultant analytics provide the volume components of the ROI calculations. EXISTING PROCESSES Details of the current as-is processes are needed to identify the timings of activities, especially those that have manual components, so as to establish those labour intensive activities that would either not be required within an e-commerce process, or that would be substantially changed. Again the detail is required for the ROI calculations. RETURN ON INVESTMENT (ROI) CALCULATIONS AND BUSINESS CASE The ROI calculations require details about FTE s involved in a process, their fully expensed costs, outputs from the Volumetrics and details of the as-is processes to be able to establish the time and cost components of labour-intensive activities in the existing processes that would not be necessary in an e world. The ROI would identify the ongoing savings in FTE time and cost together with identifying other miscellaneous costs that could be saved or substantially reduced through the adoption of e-technologies; printed stationery, postage etc. The Business Case contains an assessment of the as-is and to-be processes, and comments on the benefits and opportunities and draws comparison to best practice. It also identifies other related process improvements that should be considered within the same proposition. The Business Case will also contain key measurement metrics that should be considered to quantify the exact level of achievement against agreed targets and against the as-is benchmark and also to drive ongoing improvement in performance and quality.

5 ABOUT THE AUTHOR Colin Michael Darch has over 25 years experience of IT within the Construction Industry. Holding several senior management positions within this sector including CIO for Balfour Beatty Group. If you would like more information, please contact Colin directly at CONTACTS: OpenECX Matthew Jones (Managing Director) +44 (0) OpenECX Ltd Manor Court, Salesbury Hall Lane, Ribchester, Preston, PR3 3XR T: +44 (0) E: W: e ehub3 Simple e-commerce for Construction