Kaushik Ba

Ashwin B

Increase
Profitabilit
y

Increase
Cash
Flows

Decrease DPO

Industry Characteristics Oil Service Industry

* -> Human Factor

CSFs

Root Causes:
1.Lack of Centralization
2.Lack of Standardization
3.Process Complexity
4.Lack of Controls
5.Lack of Training, documentation and Knowledge
management
6.Lack of Incentives (Poor alignment of Performance
Objectives)
7.Lack of interoperability
8.Lack of Automation
9.Lack of Collaboration
10.Lack of Planning Software

1. Standardization, Centralization
and Simplification of the PTP
processes
2. Designing interfaces and
optimizing EDI and e-catalogs
to ensure communication
through the system
3. Automating manual processes
to reduce errors
4. Leveraging MRP Planning
Features
5. Conducting Training for the
operators
6. Ensuring adequate
documentation about the
processes and policies
7. Making documentation and

Standardization, Centralization & Simplification of PTP Processes

Process
Technology
People

Standardization, Centralization & Simplification of PTP Processes

Process
Technology
People

Standardization, Centralization & Simplification of PTP Processes

Process
Technology
People
Field Service Level
(Plant)
Purchasing Organization
(Shared Service Level)
Order>Threshold Value

Simplify contract terms, if

possible renegotiate contracts

Purchasing Organization
(Field Service Level)
Order<=Threshold Value

Integrate the various purchase

processes at L2 level (sub
process level) where ever
possible for further
standardization and
simplification, to re duce errors
Align performance incentives to
metrics like
1)Procurement with PO
2)Automatic Reconciliation
Account differences for the
particular user, etc

Run batches for consolidated

procurement reports at the
country level
Run audit reports on automatic
reconciliation accounts for
monitoring mismatch
Take up change management
initiatives to get buy in on the
centralization and
standardization and use of P
Cards from the field services

Create tolerance groups to

limit field level purchases to
the threshold value, have
different MRP controllers, limit
purchase at field services to
petty cash, use role based
access
control
Have
2-way match processes
for field level procurement
through a manual approval
process for FI invoices. Run
audit reports to monitor the
extent of such activities.
Run audit reports to keep track
of FI invoices number and
status

Standardization, Centralization & Simplification of PTP Processes

Greater
standardization and
simplification, less
errors and ease of
training
Fixing accountability
and having dedicated
owners and teams to
reduce error and
delays

Cost Savings due to

economies of scale,
Higher buying
leverage, Lower
Errors, Easier
monitoring and

Limiting the dollar

value of errors due to
FI invoices and
Nonstandard
Procurement Process

Easier Training and

Tracking,
Simplification
leading to lower
number of errors

Process

Interoperability & Automation

Technology

People

Process

Interoperability & Automation

Technology

People

Process

Interoperability & Automation

Technology

Content Standards
Standardize the Product and Service attributes master
data, preferably based on universal guidelines like the
UNSPSC(United Nations Standard Products and
ServicesCode)
Standardize supplier catalogs to agree with the above
Define EDI schema for seamless integration
Take up change management initiatives to get buy in on
use of P Cards from the field services and vendors
Take up change management
initiatives with suppliers for
consistent use of EDI and E
Catalogs
Take up change management initiatives to get
buy in from field services and other employees
on the automation and standardization of
interfaces

People

Transaction standards
Define secure
channels and protocols
for communication via
EDI and E-portal
including encryption
and transaction
protocol
Supplier Development may be
necessary

Depending on volume and criticality of purchase

suppliers can be divided into two groups:
One with whom seamless integration is
mandatory. If needed take up supplier
development initiatives with them
Others who will be encouraged to move to EDI
in a phased manner using bargaining power

Interoperability & Automation

Reduction in cost,
errors and delays

Fixing accountability
and reducing human
errors and delay

Less training for

employees, more
user friendly

Process

Forecasting and Planning

Technology

People

Process

Forecasting and Planning

Technology

MRP planning at the field service

level to cater to need of each
location
In case of substantial difference
manual override of MRP
parameters
Incremental orders
captured for
monthly reviews

Training MRP
controllers on
configuring MRP
parameters

Monthly
exception
reports for
demand supply
mismatch to
monitor
efficiency of
MRP process

People

Optimized parameters for MRP

derived from SAP BW

Audit data
capture on such
modifications
for monthly
review
Training MRP
controllers on
the use of
various
reports

Parallel validation by MRP

controller at the plant
level by monitoring
Requirement and Stock
levels
All data validated
against actual
consumption
Aligning
performance
initiatives of MRP
controllers to
accuracy of

Forecasting and Planning

Implementation of
Best Practices and
Forecasting Methods,
Reduction in delays
and Rush Orders
Concerted effort at
Material Planning to
reduce shortages and
rush orders

Monitoring at
aggregate and
granular level for
measuring efficiency
and initiating changes
as required

Tailor made
Matching to
Individual Field
Service
Requirement

Process

2 Way Match
Technology

People

Process

2 Way Match
Technology

People

Goods receipt from same

Contract terms
extracted from
vendor within those tolerance
company code level
limits extracted in the form of
data for vendors
reports and matched to invoice
Migratin
values using default pricing
g to
Detailed dashboard showing aging of
Two way match made automatically
accurate
invoices and those approaching payment
within tolerance limits and verified
OCR
as per contract terms along with goods
manually by MRP controllers
software
and services delivered by the vendors
like
made available to the MRP controllers
Invoice and Goods
Manual Override if MRP
Omnipag
Custom flags updated
Receipt automated
controller wants to add
e or
for selected goods on
through EDI and
or remove goods and
Presto
release of payment to
manual scanning and
services
remove them from
data upload by
Audit metrics based on
matching list
interfacing batchControl limits on
aging of invoice
centralized and
Audit metrics based on difference in
aligned to performance
decentralized service
goods receipt and invoice date
incentives of MRP
ordering based on
monitored for control
controller
FI invoices allowed below
certain tolerance limits by
defining tolerance groups and
role based access control

2 Way Match
Reduction in Default
in Payments, Increase
in FI invoice
processing rate

Monitoring age of
invoices through
dashboards to avoid
default

More accurate
matching of Goods
to Invoices through
aging and matching
dashbards

Knowledge Management

Knowledge Management

Recognition for contribution

to knowledge development
and dissemination to act as a
trigger for active
participation by employees

Employees are sure about

the processes and protocols
to follow

Easy resolution of on
job technical and
process related issues

Propagation of best practices

through training and
communities of practice

Lower resistance to use

processes and workflows and
automated software, Lower
errors

Goal Alignment & Controls

Goals

Controls

Standardization

Clearly lay down policies for country specific procurement processes. Define metrics to measure
compliance to policies. Align compliance with performance appraisals

Centralization

Tolerance Groups to disallow purchase above a threshold value at the field service level
Monitoring through audit report the amount of decentralized purchases, purchases without POs
and aligning these metrics to performance appraisals

Efficiency

Monitoring the aging of invoices assigned to a MRP controller through reports and aligning the
metrics to performance appraisal
Monitoring the mismatch between goods receipt and invoice receipt dates through reports and
reviewing them in monthly status meetings
Enforce PTP workflows through logical access controls and tolerance groups, monitor aging of
tasks through audit reports and enforce the performance of tasks in such cases through redressing
mechanisms. Align such metrics to performance appraisal
Monitor the use of FI workflow in the fields. Give incentives based on % utilization. If 100% of FI
invoices had been processed through the workflow system, 100% utilization is achieved.
Follow a top down approach to refer to PTP metrics during monthly status calls with field services
to encourage their usage

Accuracy

Monitoring the performance of purchase officers based on incremental orders above MRP planned
limits and consumption of such materials, manual modifications of MRP parameters, etc through
audit reports and aligning that to performance reviews
Monitor % mismatch in invoice values and goods delivered through audit reports, automatic
reconciliation accounts and internal dashboards

Change Management
Steering Committee

Pilot Project -> All Features,

Some Locations

Early Wins

Preferably at one US and one non US

location
Locations with low resistance to
change and where high vendor
collaboration

Steering Committee
Meeting
Organization Wide
Deployment
Week
Contract Signing
Further As Is Study
Steering Committee
Meeting
Development
Testing
UAT
Steering Committee
Meeting
Pilot Project
Steering Committee
Meeting
Go Live

System Development

Project Charter

1 1 1 1 1 1 1
1
2
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 18 9 20 1

KPIs

Impact

Reason

Product Price variance (Percentage

price variance between contract
unit price and international unit
price for focus products)

5%

Methodology for demand forecasting is put into place of direct

services and consumables and controls

P-Cards Transactions Processed per

FTE

10%

Issues and barriers that prevent expansion of E-catalogues and

P-card and e-procurement transactions are eliminated because
of automation and policy changes

% of POs automatically set up via

Requisition

5%

Greater training of personnel and greater documentation of

workflow processes to encourage employees to create purchase
requisitions in SAP

Supplier Performance

5%

Supplier development programs and use of E Catalogs and EDI

to decrease manual effort for suppliers, greater accuracy
through automation will also give incentives

Number of requisitions created in

SAP

5%

Automation is the key driver behind the cost cutting and hence
the check runs and manual payments are completely
eliminated

Automation of Entry of Invoices in

SAP

10%

% Payments manual checks at sites

10%

All invoices will be centrally received at shared service centre ,

EDI data transfers and timely OCR scanning will eliminate
reconciliation problems and inconsistent data entry
FI invoices being limited to petty cash purchases

KPIs

Impa
ct

Reasons

Procurement Cycle time

10%

As the Requisition and PO are getting processed quickly this will

automatically lead to decrease In lead and cycle time

Procurement cost (ordering cost)

5%

Cost savings will be through indirect method as reduction in

processing time will lead to decrease in setup costs

FI Invoices Processed per AP FTE

5%

Automatic management of FI invoices which is in consistent with

availability of workflow system

% of BSC Payments Automated

Clearing House (ACH) / Electronic
Funds Transfer (EFT)
% of Payments that are Checks at
Transaction Centres

5%

Due to standardization of processes and focus on using P Cards and

E Payments

5%

Receiving is done at the perfect time and no delay in GR-IR match

and invoice processing

Staff Training (Total number of

procurement FTEs)

5%

All performance metrics in the field to measure PTP efficiency will be

used and shared service level procurement centers set up, staff will
be trained

Number of procurement FTEs as a

%of the
total number of company employees
Invoice scanned and Processed per
FTE

2%

Standardization and centralization of processes will require a lesser

number of procurement FTE

2%

Increases due to goal alignment and centralized reception at shared

service level, decreases due to emphasis on EDIs

% of orders via PO

10%

Due to standardization and emphasis on PO creation

Process

Related KPIs

Product Price variance (Percentage price variance

between contract unit price and international unit price
for focus products)
Identifyi
Product
Price
variance(Percentage by value of
ng the
need purchases made under simple purchase orders, annual
contracts, and multi-year contracts )
P-Cards Transactions
Ordering Through POs

PO
Process

PTP Cycle

Cost
Saving
s

Dead
weig
ht

Cost
Savin
gs

2%

2%

2%

Focus Areas
pertaining to the
process
Standardization
Leveraging MRP

2%
1%
3%

Supplier performance(Percentage of orders in

compliance with contract criteria )
Procurement system( Indicates system[s] utilized by
manufacturer to track
materials purchasing and production planning)
Ordering Costs

2%

Procurement Cycle time reduction

3%

Optimizing EDI and

E-catalogue
Standardization
Automation
1%

8%

0%

3%

2%
1%

Centralization
Leveraging MRP
Optimizing EDI and
E-catalogue
Goal Alignment
Leveraging MRP
Standardization
and centralization

Process

Related KPIs

Cost
Savings
(KPI) after
change
mgmt

Dead
weig
ht

Cost
Savings
after
change
mgmt

Focus Areas
pertaining to
the process

Processing
AP

FI Invoices Processed
% of BSC Payments Automated Clearing House
(ACH) / Electronic Funds Transfer (EFT)
% of Payments that are Checks at Transaction
Centres

2%
1%

2%

3%

Automation
Documentati
on about
process and
policies
Dashboards
and workflows

2%

2%

Goal
alignment
Conducting
training for
the operators

Staff Training
Number
of
procurement
FTEs as a percentage of
Manageme
the
nt Issues
total number of company employees
Total Spend Under Management

2%

1%
1%
2%

Sources for Tentative Cost Reduction:

1)http://www.navca.org.uk/blog/view/cost-of-procurement
2)NSW Department of Public Works and Services
3)Genpact, Impact from Bottom line of Source to Pay
4)Hritabrata Basak, SAP BW Expert, TCS

Sales/year (Mn $)
8000

Standardization
Designing Interfaces EDI
Automation
Leveraging MRP (SAP BW
Reports)
Training
Adequate documentation
Goal Alignment
Investment

NO of POS /yr
Avg value of PO
Total PO
85000
.022

0
0.20
0.20
0.15
1.00
0.10
0
-1.65

NPV:76.70 Million Dollars

*All Figures are in Million

1700

Average Case: Change management

is still a work in progress. Not all
suppliers are collaborating
successfully .There are delays in
updating FIs and manual PO still
exists in some cases .Inconsistent
timing of scanning of OCR
Worst Case: Due to the resistance
from the employees change
management is not accepted and
hence most of the process are not
automated with no addition of
updated technology. The problems I
delay and matching still remains
and there is no scope of
improvement in the near run (30 %
Best Case: Change management is
increase inaccepted
costs from
case)
completely
bynormal
the
employees of the company .
Suppliers are collaborating as
anticipated and there is a complete
removal of manual transactions and
large volume of purchases made
automatic with SAP and demand
forecasting is perfect. There is no
delay in updating of FiI. 10 %