Presentation: Moving toward the perfect order by automating your procure to pay process

A member of The Business Maturity Group

Moving toward the Perfect Order by automating your Procure To Pay Process

An in-depth look in to the PTP process as it relates to automation and EDI

November 6th, 2014

You Innovation and Support Company For companies leveraging SAP solutions

a member of The Business Maturity Group

Q Data SAP Supply Chain Webinar Series

3 Thursdays at 11am CST

• 10/29: Small Parcel Packing Exception Monitoring

• 11/6: EDI Automation – Procure to Pay – Striving for the perfect order from your supplier

• 11/13: EDI Automation – Order to Cash – Striving to present the perfect order to your customer

http://www.qdatausa.com

Register at Q Data USA’s website http://www.qdatausa.com/resources#upcoming

http://www.qdatausa.com/resources#upcoming

http://www.qdatausa.com/resources#upcoming


Q Data SAP EM Webinar Series http://www.qdatausa.com

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About the Speaker – Kevin Wilson

Kevin Wilson has more than 24 years’ experience in business analysis, solution architecture, project management, solution

development & implementation. 18 years of SAP experience covering supply chain, retail, utilities & manufacturing, amongst

others. Business case and value engineering expertise covering

multiple, integrated SAP solutions with a strategic focus on Supply Chain Management and providing visibility to the extended Supply Chain. Author and thought leader in SAP supply chain execution processes.

Principle SAP Solution Engineer

Q Data USA, Inc.

Email: [email protected]

Website: www.qdatausa.com

Author: “SAP Event Management

SAP’s best kept secret…”

mailto:[email protected]

http://www.qdatausa.com/


About the Company - Q Data USA

• Privately held company established in 1994

• SAP centric focus, Best Practice Philosophy

• Manufacturing, Distribution, Oil & Gas, Transportation, Pharma, High Tech

• Methodology to Achieve Business Maturity

We provide pre-go-live implementation and

post go-live support services that give our

clients the highest-level of Business Performance

As Trusted Advisors, we are continually bridging the gap between IT and the Supply Chain

By following our proven methodologies, we develop

innovative solutions and concepts that ensure our clients a high

degree of Implementation Maturity from their SAP (ERP)

environment

You Innovation and Support Company For companies leveraging SAP solutions


Agenda

1. Describing Supply Chain Maturity

2. About EDI

3. The PTP Process

4. Vendor Compliance

5. Summary


Global Trends and Their Impact on the Supply Chain

Unprofitable demand and supply synchronization

– Poor visibility into customer demand, supply fluctuations & channel inventory

– Demand/Supply not aligned

– Escalating costs and inefficient operations

Inefficient Inflexible execution

– Lack of visibility & collaboration across manufacturing & logistics network

– Ineffective capacity & asset utilization

– Escalating transportation & logistics costs

Increasing number of supply chain disruptions

– Recurring supplier failure, supply shortages, and inventory liabilities

– Rising number of product recalls, counterfeits, and quality issues

– Increased government regulations and global trade and compliance requirements

– Growing focus on sustainability and carbon and greenhouse gas emission control

Increased demand and supply volatility

Global pressure on margins

Increased risk and compliance


Key Trends

• Deliver a Supply Chain Execution platform – Single solution for all logistics needs

– Provide end-to-end visibility across the supply chain

• Enable Sustainable Supply Networks – Ability to set, measure and monitor performance across

the supply chain

– Provide end-to-end visibility across the extended supply network

– Green and sustainable practices

– Product traceability and recall management across the supply chain


Supply Chain Maturity

Work

How well are you matching supply with demand?

How “real” are your supply and demand forecasts?

Is your master data and system driving the execution of the process?

Are all the tasks in the process being performed in a timely fashion by the correct people?

Is the system doing most of the work?

People

How well are you or your partners performing? Are you improving?

Are you addressing issues in a timely fashion?

Can you measure success and failure?

How are you notifying users of exceptions?

How are people doing their work? In the system?

Are your people empowered in their day to day responsibilities?

System

How well are your systems working? Are they integrated with each other?

Is there one source of truth in your process?

Is the process automated as far as possible? How many manual touches are made in your process?

Is the solution mobile enabled? Can you access your information while not wired in?

Is the system process aligned with your business process?

Reporting, Information

Is your organization streamlined to handle the exceptions to the process or are they maintaining the process?

Are your people educated in the process?

Are the users analytical in focus or custodian in focus?

Is change management conducted efficiently in your organization?

Are KPIs in place? Can you measure success or failure?

Are the reports visible to all necessary parties?

Working together towards a common goal – Scalable, Agile, Efficient, Effective Supply Chain


The value of a mature Supply Chain

• The goals of a mature Supply Chain – We aim to: – Reduce the cost of the supply chain

– Improve Service Levels

– Collapse the Supply Chain through automation

– Manage exceptions proactively in a timely fashion

– Enjoy End-to-End status visibility

– Reduce compliance errors from vendors

– Achieve the Perfect Order

– Have our work, people, system and information aligned

– Decrease the “Time to insight” • To provide insightful information to the right people at the right time


Focus of this session….

• Perfect order – On Time

– Complete

– Free from damage • Readable format

– Accurate documentation

– Compliant

• Vendor compliance – Eliminate gaps in the supply chain

– Align people, process and system

• Visibility to process and performance

Co

st

SL

A


What main processes drive the Vendor Supply Chain?

1. Vendor Management – Vendor Negotiations

– Vendor Contracts

– On boarding vendors

– Master data capture • Vendor master

• Material master

• Pricing

2. Procure to Pay (PTP) – Supply and Demand

forecasting

– Purchase Order management

• Acknowledgement

– Inbound deliveries • ASNs

• Goods receipt

• Drop ships

– Invoice Receipts

– Returns


Agenda


2. About EDI

3. The PTP Process


5. Summary


What is EDI?

• “Electronic Data Interchange (EDI) refers to a system providing global standards for the exchange of structured data, electronically between 2 parties”

• EDI Standards were developed to document the needed business transactions – ANSI X12 and EDIFACT

• Mapping – Transform to / from EDI format to / from internal format

• Communication – Envelope for message delivery between 2 partners ANSI EDIFACT Description

850 ORDERS Purchase Order

855 ORDRSP PO Acknowledgement

856 DESADV Advance Ship Notice

810 INVOIC Invoice

Common EDI PTP Transactions:


Why EDI?

• Reduction in data capture errors

• Reduction in handling costs for paper documents

• Faster execution of the process – Collapsing the supply Chain – Time between the end of one

activity and the start of the next activity is reduced

– Reduction in Supply Chain Cycle Time

Common hurdles to overcome when implementing EDI 1. Change Management – “We do it this way” 2. Cost – Time and Money to enable the functionality 3. EDI Perception: EDI is technical!!!

You can only automate a GOOD MANUAL process EDI is not the silver bullet to fix your issues in the process

0%

50%

100%

2008 2013

34%

62%

% EDI Adoption for Purchase Order

$-

$20.00

$40.00

Paper EDI

$37.45 $23.83

Cost of doing a PO via EDI vs. Paper


Agenda


2. About EDI

3. The PTP Process


5. Summary


Describing the PTP Process

Purchase Order (PO): • Vendor, Price, Quantity, Material • Requested Delivery Date

PO Acknowledgment (Confirmation) • “Signature” of confirmation of the order. I.e. The binding

agreement to delivery the correct materials, at the right quantity, at the agreed price on the required date

Advanced Ship Notice (ASN) • Document that the vendor sends the customer telling them

what material and quantity are being shipped • Carrier / Tracking information are also sent so that in-transit

status can be obtained • Packing and Serial numbers • Becomes an Inbound Delivery in SAP

Goods Receipt (GR) • Receive goods in to the warehouse against the inbound

delivery (the vendor ASN)

Invoice Receipt (IR) • Receive the invoice from the vendor to pay based on what

was agreed on in the PO Acknowledgment


Issues Recommendations • PO has incorrect details

– Master data discrepancies

• Dates, quantities, terms, product

• PO acknowledgments aren’t accurate

• PO changes are not systemically driven

– Can be untimely

• Automation of the process is not a priority (EDI)

– Untimely

• Fully utilize the PO acknowledgement

• Establish audit function

– Ensure process is followed

• Master Data Management

– Master Data governance

• Understand the financial impact of non-compliance

– Quantify disruptions

• Strive for fewer PO changes

– More accurate demand / forecast

• Automate the process

– Fully utilize EDI where possible

• Early warning of potential issues

– Reduced customer impact

– Correct timely info is reflected on the Sales Order schedule for drop ship POs

• PO Changes don’t lead to “surprises”

• PO Rejections are immediately re-sourced

• Back-office process savings

– Account Payable deal with discrepancies

PTP - PO Management Process

Advantages of a mature process


PTP - PO Management EDI Process

Procure to Pay PO EDI Process

Customer Supplier

Pu

rch

ase

Ord

er

Pro

ce

ss

850

855

860

865 Ack. Order Ch.

Sales Order

Process Ack.

Process Ack.

Change Order

PO

Order Ack.

Ack. Order

PO Change

Order Ack.

– 850 – Purchase Order • Ensure vendor compliance

– 855 – Acknowledge Purchase Order (Vendor agrees to the terms and detail in the PO)

• Workflow exceptions • Thresholds • Impact on SO schedule

– 860 – Purchase Order changes • Change in the system drives

communication – 865 – Purchase Order Change

Acknowledgement • Vendor acceptance of the

change • Workflow exceptions

It all begins with a signed Purchase Order?


Issues Recommendations

• ASN Inaccuracy

– Picking, labeling, illegible, PO discrepancy

• Vendor process not aligned with the customer process

– Packing / Labeling -> Receiving / Put away

• Ineffective PO process

– Master data discrepancies

• PO Changes

• No automation of the process

• Integration vs. Interface – Best of Breed approach

• Master Data Management

– Master Data Governance

• Document the meaning of ASN error and ASN compliance

• Understand the financial impact of non-compliance

– Basis for charge-backs

• Strive for fewer PO changes

• Initiate formal audit process

– Ensure vendor compliance

– Physical audit

• Vendor collaboration

• Focus on exception management

• Automate the process - Vendor & Carrier EDI

• Receive against an ASN

– Can reduce costs up to 40%

• Discrepancies known earlier

– Prior to goods receipt

– Less customer impact

• Fewer discrepancies in downstream processes

– GR and AP / Invoice Receipt process

• Drop ship Can send ASN to customer

• Visibility in to Vendor compliance

PTP – ASN Process

Advantages of a good process

Why are we here?


PTP – ASN EDI Process

Procure to Pay ASN EDI Process

CarrierSupplierClientCustomer

856 -> Dlv. Idoc

214 -> Ship Status Idoc



824 – Reject ASN

Receive

Product

Process Shipping

Status

Send Status

Deliver Product

Process Shipping

Status

Ceate Inv.

Send ASNReceive ASN Send ASNProcess Inb.

Dlv

Pickup

Process Shipping

Status

Reprocess

ASN

Send Status

Send StatusPickup

Receive Inv.

Inb. Dlv

Ship Product

Send Inv.

POD

Transport Product

vPO

Pickup Product

–856 – Advanced Ship Notification

Full details are to be sent by the Vendor

–GTIN must match shipment with ASN

Inbound delivery

–997 – Functional Acknowledgement

Reject an ASN if the structure is incorrect or required information is incorrect

–Missing carton level or pallet level information

–824 – Application Advice

Communicate a functional rejection of an 856

–E.g. Unknown PO, Duplicate ASN

–214 – Tracking status messages to transact the carrier status messages to the customers ERP application

Pickup

Proof Of Delivery (POD) The Advanced Ship Notice is key to the receiving process


Issues Recommendations • Invalid charges

– Freight, tax

• EDI related issues

– Amount discrepancies, PO mismatch

– Rejections not communicated automatically

• Duplicate checking

• PO Cancellations

• Past due invoice

• No impact on Vendor compliance

– Scorecard

• 3 way match

– IR, GR / ASN, Carrier pickup

• EDI automation

– Carrier 214 – Pickup / POD

– Invoice Receipt rejection 824

• Workflow error handling

• Master data governance

• Transactional data awareness – PO process

• Timely IR posting – Pay within terms

• Vendor performance measured – Charge backs enacted

• Efficient IR posting – Less analysis required to resolve

issues

PTP – IR Process

Advantages of a good process

Why are we here? Open the way to standard and effective IR process


PTP - IR EDI Process

Procure to Pay IR EDI Process

CarrierSupplierClientCustomer



Receive

Product

Process Shipping

Status

Deliver Product

Ceate Inv.

Pickup

Process Shipping

StatusSend Status

Send StatusPickup

Receive Inv.

Inb. Dlv

Send Inv.

POD

vPO

Pickup Product

Send Inv.

Accounting

Inv. Rec. Process Inv.

Receipt810 -> Inv. IDoc

824 – IR Rejection

Reprocess IR

–810 – Invoice Receipt

Parking

Invoice and CR / DR Memos

–997 – Functional Acknowledgement

Reject an IR if the structure is incorrect or required information is incorrect

–824 – Application Advice

Communicate a functional rejection of an 810

– E.g. Unknown PO, Duplicate IR

–214 – Tracking status messages to transact the carrier status messages to the customers ERP application

Pickup, POD


PTP process – Points to note and KPIS

• PO Creation – MRP – Based on Supply and Demand

– Master data driven

– Resources manage exceptions

• PO Confirmation – May change (24hrs)

– SKU, Qty, Date, Price – Decide rules

• Backorders, …

– Workflow Exceptions

• (KPI: Confirmations without changes %, Ack’d within SLA %, Ack Errors %)

• Ship product -> send an ASN (EDI 856) 1-2 hrs

– Create inbound delivery

• Inbound delivery date = 855 PO response schedule (KPI: Fill Rate)

– Warehouse receives against the inbound delivery and not individually

• (KPI: Receiving Errors, Damage %, Wrong SKUs, OTIF, Receipts without ASNs)


PTP – An understanding


Normalized EDI PTP process


Agenda


2. About EDI

3. The PTP Process


5. Summary


Vendor Management

• No KPIs

– No vendor scorecard

– No visibility to vendor compliance

• No confidence in the data

– Redundant attributes

– Run BI queries to check stock levels

– Data governance

• Incorrect master data entered

– Parts manually entered

• Need to improve vendor compliance

• Does not embrace the EDI / automation culture

• No visibility or transparency of process and issues to / from supplier

• Major parts of the process are conducted outside of SAP

• Strive towards vendor compliance (Process):

– Set up vendor guidelines

• EDI requirements

– Communicate guidelines

– Monitor, Measure Publish

• Vendor portal

– Enforce compliance

• Charge backs

– Packing process must align with our receiving process

• Labeling

• Integrate rather than Interface

– Use SAP where possible

• Catalog, Forecasting

• Data Governance – Single source of truth

• Instill automation culture – Strive for EDI compliance

Described Issues Recommendations


What is Vendor Compliance?

1. Shipments are:

– Accurate according to our order

• On time

• Correct quantity

• Complete

– Communicated

• Timely communication

• Electronically (EDI)

– To our specification

• Communication matches actual shipment detail

– Packaged correctly

– Labeled correctly

• Legible

• In support of our process

2. Products are:

– Good quality

• Damage free

– Correctly labeled

3. Regulations

– Comply with safety regulations

– Comply with social and environmental regulations

– Comply with legal terms and conditions

How well are our suppliers performing?


Path to Vendor Compliance

Develop Guidelines

•Goes in SBA

•Clear and unambiguous

•EDI automation requirements

•Performance SLA

•Chargeback agreement

•Clear expectations

•Determine non-compliance cost

Communicate Guidelines

•Accessible through Supplier portal

•FAQs available on Supplier portal

•Begin enforcement “culture”

•Communicate cost of non-compliance

Monitor, Measure & Publish

•Measure compliance against the target

•Communicate compliance values against target to supplier

•Stakeholder visibility

•Allow but track exceptions

Enforce Compliance

•Violation management - Chargebacks

•Performance trending

•KPI visibility

•Vendor coaching opportunity

•Revise guideline for supplier as required

•Audits – Warehouse and system

Normalize System and Process

•Standardize SAP EDI interface / IDocs

•Develop mapping templates for IDocs <-> EDI

•Update vendor EDI specifications

•Implement workflow error handling

Normalized process Realization

•Publish specifications to Supplier portal

•Enable PTP process through EDI and IDocs via PI

•Enable KPI reporting

•Update on-boarding procedure

Support process

•Ensure efficient use of workflow and IDoc technology

•Manage relationship with EDI service partner

•Execute on-boarding procedure

Compliance Support

•Ensure status management is performed at EDI service partner

IT

Business


Agenda


2. About EDI

3. The PTP Process


5. Summary


To summarize what is needed

1. Vendor management – Instill EDI culture

– Document meaning of errors

– Charge backs

– Collaboration

2. EDI Automation – Normalize SAP EDI PTP process

• PO Ack, PO Changes, ASN, IR

– New vendor guidelines

– Communicate / publish guidelines

– Exception management focus

3. Data governance – Vendor, Material

4. Financial impact – Non compliance

5. Receiving process – Vendor packing process aligned

with DC receiving

– Audit function

– Receive against ASN

6. Integration – Carrier collaboration


SAP Logistics and Fulfillment Management - Innovation

Optimize transportation to decrease spend, increase asset utilization, and improve customer service – SAP TM

Manage all global aspects of inventory movement, including export and import compliance – SAP GTS

Enable supply chain collaboration – PTP transaction collaboration, inventory movements, and asset optimization – SAP SNC

PTP Status Visibility and “Track and Trace” – SAP Event Management


Next Steps

• Contact us to discuss details / provide clarity

• Perform an on-site Scoping Assessment – Understanding full requirements – Match requirements with correct

technology stack to address the needs

– Provide high level design for architectural and budget consideration

– Answer open questions around available technologies

– Provide road map to implementation success Value

• Budget -> Plan -> Execute -> VALUE


YOU SAP INNOVATION AND SUPPORT COMPANY

Kevin Wilson [email protected]

http://www.qdatausa.com THANK YOU

mailto:[email protected]

http://www.qdatausa.com/

Presentation: Moving toward the perfect order by automating your procure to pay process

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Transcript of Presentation: Moving toward the perfect order by automating your procure to pay process