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 6 th , 2014 You Innovation and Support Company For companies leveraging SAP solutions
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Presentation: Moving toward the perfect order by automating your procure to pay process
This presentation covers how EDI can be leveraged to help mature your Procure To Pay (PTP) process. In addition it also focuses on how it affects the perfect order and outlines vendor management implications.
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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
Q Data SAP EM Webinar Series http://www.qdatausa.com
Viewing this and previous webinars
a member of The Business Maturity Group
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.
– 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
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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
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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
a member of The Business Maturity Group
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
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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
a member of The Business Maturity Group
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
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Agenda
1. Describing Supply Chain Maturity
2. About EDI
3. The PTP Process
4. Vendor Compliance
5. Summary
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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:
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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
a member of The Business Maturity Group
Agenda
1. Describing Supply Chain Maturity
2. About EDI
3. The PTP Process
4. Vendor Compliance
5. Summary
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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
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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
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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?
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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?
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PTP – ASN EDI Process
Procure to Pay ASN EDI Process
CarrierSupplierClientCustomer
856 -> Dlv. Idoc
214 -> Ship Status Idoc
214 -> Ship Status 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