exceptions are inevitable. but does your struggle against them have to be?
TRANSCRIPT
Exceptions are inevitable. But does your struggle against them have to be?
May 25, 2012 Kathleen Hamm, Accounts Payable Manager
J. R. Simplot Company
sharedserviceslink.com’s
Annual Procure-to-Pay Leaders Meeting
Agenda
Company overview
Procure-to-pay design
Using the Six Sigma Approach
• DMAIC
Results
Summary
Bringing Earth’s Resources to Life
J R Simplot Overview
Privately held
Revenues = $5 billion
10,000 employees
• 6,500 NA employees
Global presence
• US (33 states)
• Australia
• China
• Canada
• Japan
• Korea
• Mexico
Industries
• Food processing
• Mining
• Fertilizer
• Farming
• Cattle feeding
• Industrial products
• Feed ingredients
• Silica sand
• Turf and horticulture
• Retail farming supplies and services
Bringing Earth’s resources to life
Procure-to-Pay Design
Decentralized structure
170 buyers / receivers
150,000 purchase orders / 480,000 line items
US & Canadian operations (4 business groups)
• 3 mining facilities • 14 manufacturing / processing
plants • 2 import & distribution terminals • 95 retail stores • 2 feedlots • 30 farms • IT equipment / services
Multiple purchasing types
Multiple systems
Procurement structure Centralized AP process
19 AP employees
Process 600,000 invoices annually • 36% PO based (216,000) • 44% non-PO • 20% Interfaced
US & Canadian operations • Agribusiness group 45% • Food group 43% • Land & livestock group 5% • Corporate group 7% • Joint ventures / small businesses
Multiple invoice types Multiple systems
Accounts payable structure
April 2009
New manager joined disbursement team
Analyze
April 2011
Dig into the details to identify improvement
opportunities.
Analyze
Improve
June 2011
Take actions to improve processes and meet
defined performance expectations.
Transforming exception management Utilizing the Six-Sigma approach
Measure
Janauary 2010
Measure
performance and manage accordingly.
Control
Follow up, continuous measurement and
change management.
May 2012
Define
November 2009
A new direction for AP team to assure we are
working hard on the right things.
Discrepancy between PO Receipt and Vendor Invoice on 3-way PO Match. An invoice that does not make it through the AP process to pay
and gets rejected to a queue requiring human intervention.
Simplot exception reasons • No receiver • Price discrepancy • Quantity discrepancy • No PO provided on invoice • Invalid container ID/ticket • Wrong PO no. • Items not on PO • Freight unreconciled • Other • Miscellaneous
Transforming exception management Define – what are exceptions?
Transforming Exception Management
Time & Money • Manual processing & research (45 days on average to resolve exception) • Communicating exception issues (30 seconds per exception) • Additional processing time (5 working days in processing queue)
Decreased Efficiencies • Impacts service level commitments • Causes payment delays • Increases support center calls
Frustrations • Vendors • Internal customers • AP processors / business partners
Perception of poor service delivery • Accounts payable / shared services reputation
Define –Business Impact
32,879
38,608
50,887 20%
19%
22%
0%
5%
10%
15%
20%
25%
0
50,000
100,000
150,000
200,000
250,000
FY2009 FY2010 FY2011
Exceptions No Exceptions Exception Percentage of Total Invoices
PO invoices processed by fiscal year
The bad Lack of exception control
Transforming exception management
The good Exception processing activity
Measure – the good, the bad, and the ugly
The ugly Exception activity on the rise
Measure – the cost
Who
Avg Hours / Month
#
Months
# People
Hrs / Year
Avg Salary / Hour
Total Cost
Field Staff 4 12 150 7,200 $30.29 $218,088
Accounting 15 12 20 3,600 $36.06 $129,816
AP Processing 15 12 12 2,160 $24.52 $52,963
AP Exception Processors 170 12 1.5 3,060 $26.52 $81,151
Estimated Totals 204 183.5 16,020 $482,018
Transforming exception management
….to get buy-in
51%
26%
4%
5% 8% 6%
No Receipt Price Discrepancy
No Container ID Freight Unreconciled
Items not on PO Miscellaneous
Transforming Exception Management Transforming exception management Analyze – digging deeper – breaking it up!
Exceptions by reasons
0%
17% 4%
12%
67%
Corporate Agribusiness
L & L Food Group
SGS
n=4,012
Exceptions by operating group
Identified our greatest opportunities for improvement.
n=4,012
What – specifically causes the exceptions?
Who –specifically is causing
exceptions?
Where – are our “biggest” pain points?
Why –do we continue to have exceptions?
How – can we fix the root problems and reduce exceptions?
Transforming exception management Analyze – ask the tough questions?
Evaluate / Communicate / Educate
Transforming exception management
Built a dedicated team
• Repurposed our existing resources
o Shifted resolution responsibilities
• Redefined exception processing
o Shifted focus from managing to resolving exceptions
• Short term pain is worth the long term gains
Customized technology based on need
• Created PO classifications to manage specific invoice types
o Railcar
o JOB/CIP
Improve - evaluate
Worked with business to increase knowledge of complete procure-to-pay process
• Getting to Know You Assembly
• Shadowing Programs
Expand to outside locations
Created subcommittees for a more defined focus
• JRS Wholesale-to-JRS SGS Activity
• Six Sigma Project - SGS Exceptions
Transforming Exception Management Transforming exception management Improve – communicate & educate
Developed alliances with business partners
• Took advantage of opportunities to enhance AP presence.
o Participated in sales/department meetings (3)
o Attended Location visits (6)
o Encouraged visits from business (10)
• Listened to our customers
o Understand business and challenges
o Offer choices that support policies & procedures
• Continuously assess training needs
• Continuously provide training opportunities
Transforming exception management
Make sure the improvement efforts are working
• Continue to share results +/-
• Follow up and follow through
• Monitor and report
• Seek improvement opportunities
• Don’t give up….
Control
Where are we today?
Transforming exception management
Still room for improvement……………………
• Overall PO match rate remains stagnant at 78% - Goal of 90% by Dec 2012
• Retail exception rate has increased
• Culture change – be patient
• Continue with improvement efforts, subcommittees, education process
Successes: • Increased PO matched invoiced for all
operating groups. • Decreased average days to complete PO
exceptions (from 50 days (June 2011) to 17.84 days on average (May 2012)
• Decreased number of exceptions overall from 4,012 (June 2011) to 2,015 (May 1012)
• Maintained overall match percentage rate with “new” business sectors and acquisitions
0
10
20
30
40
50
Corp AB L&L Food SGS AVG
Average Calendar Days to Complete PO Exceptions
Corp AB L&L Food SGS AVG
Accounts Payable 3.7 3.4 3.3 4.1 5.6 4.0
Locations 6.2 13 5 11.9 33 13.8
Total 9.9 16.4 8.3 16 38.6 17.84
0%
17% 2%
12%
69%
Corporate Agribusiness L & L Food Group Retail
n=2,015
Exception Activity 4/30/12
Summary
Define Exceptions
• Caused by human interactions • Impact our disbursement efficiencies • Affect disbursement performance • Influence service perceptions • PREVENTABLE
• 22% of invoices to exception • $500,000 in additional costs • Ranked in 4th quartile for % of exceptions • ROOM FOR IMPROVMENT
Measure Performance
Analyze
• Break up into categories? • What’s the data telling us – are there specific areas of concern? • Continue to ask the questions (Who, What, Where, Why & How) • FOCUS ON WHAT’S IN OUR CONTROL?
Improve
• Evaluate • Communicate • Educate • BE PATIENT – IT MAY NOT
HAPPEN OVERNIGHT!
Control
• Consistently review, measure and adjust to assure improvement efforts are working