Are P-cards the answer to making payments easy? What about losing control? And what about fraud?

presented May 23rd, 2012

From Chaos to Control -- Moving from a disparate,

multi-ERP environment to a standard and stable ERP for P2P

Paul Williams Director of Global Source-to-Pay Business Process Management and Catalyst Kraft Foods

Agenda

• Background

• Process Improvement Approach

• Key Learnings

• Questions

3

Kraft Foods Fact figures

4

•12 brands with more than $1 billion in revenue

•70+ brands with more than $100 million in revenue

•40 brands over 100 years old

•80% revenue from #1 share positions

An Amazing Brand Portfolio

Background and Objective

Objective: Move from numerous disparate global processes and ERP systems to globally standardized processes across 3 instances of SAP.

Background:

• 5 Regions -- North America (KFNA), Latin America (LA), Asia Pacific (AP), Europe (KFE), Central Europe Eastern Europe Middle East and Africa (CEEMA)

• 100,000 employees; 1,000 Procurement employees

• Starting point: 17 Source-to-Pay Process maps, 120 Procurement systems

• Key activities during the transition:

– Divestiture of the Pizza business unit

– Acquisition and integration of the Cadbury business

– Spin off of North American Grocery business (pending)

Agenda

• Background

• Process Improvement Approach

• Key Learnings

• Questions

P2P Process Improvement Approach

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1. Detailed “As-Is” process mapping is the critical key first step

2. Define the “To-Be” process with clear regional and local governance definition

3. Establish baseline metrics and targets before making any process changes

4. Establish a cross-functional working team and steering committee.

5. Effective Change Management is critical and multifaceted

Take a true view of your end-to-end process

• Solicit input from process owners, inputters, and customers.

• Perform real work observation to check for “ghost processes”, i.e. undocumented variations.

• Prepare for surprises.

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View of the Accounts Payable FI Invoice Coding Process

P2P Process Improvement Approach

9

1. Detailed “As-Is” process mapping is the critical key first step

2. Define the “To-Be” process with clear regional and local governance definition

3. Establish baseline metrics and targets before making any process changes

4. Establish a cross-functional working team and steering committee.

5. Effective Change Management is critical and multifaceted

Define the To-Be Process with clear Governance

Look at P2P in the context of a broader source-to-pay process

11 11

Define and Align to Functional Handoffs Everyone must understand their role in the process or P2P will be deprioritized

P2P Process Improvement Approach

12

1. Detailed “As-Is” process mapping is the critical key first step

2. Define the “To-Be” process with clear regional and local governance definition

3. Establish baseline metrics and targets before making any process changes

4. Establish a cross-functional working team and steering committee.

5. Effective Change Management is critical and multifaceted

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Establish Baseline Metrics and Targets before making any process changes

# Metric P2P Area Jun-11 2011 YE Target Best in Class Average Who’s

Responsible

1 # of New Vendors Created Master Data 924 NA NA NA Procurement

2 % PO Invoices PO Processing 74% 70% 2011 YE / 80%

(Q1 2012) 79 - 90% 64% Procurement

3 Open Invoice Counts Accounts Payable 24,557 27,000 – 36,000 n/a n/a Accounts

Payable

4 % 1st first pass match for PO

spend Accounts Payable 49% 65% 93 - 95% 65 – 80% Procurement

5 % On Time Payment Accounts

Payable

Due date 53% 64% / TBD on the 7

day buffer target 95 - 98% 80 – 87%

Accounts

Payable 7 day

buffer 83%

6 Average Invoice Cycle time Accounts

Payable

FI 8.8 7 days

4 days 7 days

Accounts

Payable (BU and Mfg)

MM 6.7 7 days

7 % OB10 Invoices Accounts Payable 14% 35%, 80% 30% Procurement

8 % EFT Payments Cash Disbursements 30% 35% 57 - 58% 9-37% Accounts

Payable

9 Duplicates Cash Disbursements

Data available

starting in

Aug 2011

0.1% TBD TBD Accounts

Payable

10 Payment Accuracy Cash Disbursements

Data available

starting in

Sept. 2011

Baseline & Target

to be established by

Oct. 2011

98 – 99.9% 90 – 95% Accounts

Payable

11 Days Payable Outstanding (DPO) Cash Flow 41.8 Days 44.8 (Q211), 44.2

(Q311), 43.1 (Q411) 45 Days 35 -40.2 Days

Corporate

Finance

P2P Process Improvement Approach

14

1. Detailed “As-Is” process mapping is the critical key first step

2. Define the “To-Be” process with clear regional and local governance definition

3. Establish baseline metrics and targets before making any process changes

4. Establish a cross-functional working team and steering committee.

5. Effective Change Management is critical and multifaceted

Governance Structure

Having a cross-functional sponsorship and operating team is critical

Finance

P2P Process Improvement Approach

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1. Detailed “As-Is” process mapping is the critical key first step

2. Define the “To-Be” process with clear regional and local governance definition

3. Establish baseline metrics and targets before making any process changes

4. Establish a cross-functional working team and steering committee.

5. Effective Change Management is critical and multifaceted

Effective Change Management is critical and multifaceted

Business Engagement and Readiness • Early business engagement driven by Procurement Leads

• Trained and properly rewarded Key User network

• Detailed cutover readiness metrics with pre-determined escalation points in each BU and function

• Monthly business readiness review with each part of the business; more frequently close to cutover

• Upfront, tracked, mandatory training. Partnership Alignment

• Clear alignment on support expected from internal and external partners during cutover and stabilization

• Clear, vetted contingency plan with measurable trigger points.

Communication • Robust internal and external communication plans

• Simplified, “Twitter-level” monthly Newsletter

• Repeat. Repeat. Repeat…

Agenda

• Background

• Process Improvement Approach

• Key Learnings

• Questions

Key Lessons Learned

1. Business Partner Support: – Be very explicit about expectations for input into design and go-live support – Dedicated Key User for onsite issue resolution

2. Stakeholder Involvement in Design: – Change management: go directly to end users to establish awareness – Process design: ensure adequate end-user input to design and review of new process

and system

3. Training: – Mandatory awareness training on process change in A/P, context in the business setting

and systems environment, and the tools to support – Mandatory classroom training for Key Users, high/med impact end users – Track training participation and retention – Get end user feedback on training materials prior to go-live

4. Testing: – Focus testing on the most complex scenarios – Test a broader range of situations and volume to get an accurate picture of potential

issues – Despite three test cycles and end-to-end regression analyses, not all interdependencies

were identified

5. Cutover: – Prioritize complex issues in legacy system clean-up – Confirm all contingent master data elements are active, as expected – ReadSoft tool under-delivered on reporting capabilities

6. Vendor Readiness: – Prioritize key/critical vendors against business disruption risk – Work closely with Procurement for supplier change readiness & impact assessment

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Agenda

• Background

• Process Improvement Approach

• Key Learnings

• Questions

Questions?