The 15th annual Ariba LIVE conference was held at the Cosmopolitan Hotel and Conference Center in Las Vegas last week with a reported 2,200 procurement and finance professionals in attendance (making it the largest supply management industry event in the world). Given its size and breadth of content and announcements, we’ll spend a few articles covering the event on CPO Rising. Today we begin by highlighting the Day 1 Keynote from Deutsche Bank’s Mark Loring, Director and Global Head of Source-to-Pay Operations, who presented his group’s “Source-to-Pay Journey.”
The Journey – Phase I (2004 – 2007): Deutsche Bank’s (DB) journey began more than a decade ago when it decided to stop operating in a highly-localized AP model and establish a global organization responsible for the entire Source-to-Pay process. During this transformation, DB outsourced its AP operations to a third-party provider which freed up resources that were invested in the strategic sourcing team (including an eSourcing tool). DB worked with its AP outsource provider to establish a service model and to implement a P2P platform to manage all operations. While this program (which ran from 2004 – 2007) was an improvement over the highly-decentralized P2P model that it replaced, the DB team felt that the system was “complicated and inflexible from an agility perspective” and so DB worked with its outsource partner to identify a new global P2P platform – Ariba was selected in 2008 and the next phase of DB’s journey began.
The Journey – Phase II (2008 – 2012): DB decided to install Ariba’s Invoice and eProcurement solutions behind the firewall. Mark notes that not only did DB decide on a new technology strategy when it implemented the Ariba solutions (in 10 countries), it also took a fundamentally different approach in how the solutions were implemented and launched by engaging the larger enterprise throughout the entire process to ensure its voice was incorporated in the new system and processes. Mark felt this strategy was extraordinarily successful and provided ownership of the new process to a large group of stakeholders and he specifically credited this strategy and the Ariba suite in enabling DB to rapidly expand its purchase order (PO) coverage from below 10% to more than 70%. DB was also able to leverage the Ariba network to achieve 70% level for electronic invoices from suppliers.
The automation was critical to driving efficiencies and enabling successful performance of group SLAs (which covered things like straight-through processing and on-time payment levels), but it also helped to communicate to the larger enterprise that the team could execute and deliver value so that the team could establish credibility and begin to engage the business on strategic topics like category management and how to support key business initiatives. With the Ariba system in place, DB was also able to standardize processes and set policies at the global level. Next it would look to improve strategic sourcing.
The Journey – Phase III (2013 – onwards): With its P2P operations running smoothly, DB shifted its focus to strategic sourcing and decided that it would deploy Ariba’s cloud-based Sourcing suite, starting first with eSourcing and then continuing with Contracts. In selecting Ariba’s cloud-based suite, DB has taken a ‘hybrid’ approach with their solution strategy with some of their solutions installed and others in the cloud. It was clear from Mark’s presentation that DB has been impressed with the both the speed of innovation and time to deploy that cloud solutions can enable and it has begun to rethink its installed strategy and noted that Italy, one of its primary markets, has just gone live with a full S2P suite in the cloud. It also recently launched Ariba’s Services Procurement solution.
From Mark’s perspective, the S2P team and solutions have been a key enabler of many corporate priorities including:
- Corporate Values and Beliefs – driving culture change and supporting key values like integrity, sustainability, and a strong customer focus
- Regulatory Challenges – supported with better contract compliance and supply risk management
- Cost Controls – savings and spend visibility, higher compliance rates
- Operational Excellence – driving 4.5 billion Euros in sustainable savings and helping the DB align its workforce and departments to its strategy
The S2P journey also included the creation of a “Global Purchasing and Cost Management Organization” which was the union of a cost management (or procurement organization) and part of a traditional finance team. The new group has a primary goal of understanding where “costs are incurred across the bank and then managing those costs effectively.” Functionally, the team has five duties:
- Financial Planning which includes forecasting, budgeting, and setting policies
- Cost Management which manages sourcing and vendor management
- Source-to-Pay Process which drives procurement, AP, and T&E operations
- Account & Report which manages all accounting and reporting and, according to Mark, “ensures that the company is working off of one set of numbers.”
- Business Partnership which manages stakeholders and manages demand
As the team matured on its journey, DB’s S2P team realized that although it had been focusing on 7 billion Euro in spend, the actual third-party spend was 10 billion Euro, so the team needed to expand its scope of operations. It also realized that while it had dramatically increased its PO spend percentage, it now needed to become more effective managers of the spend, making sure that the spend was flowing through the proper channel and was truly compliant. When this next level of analysis was done, DB realized that although 70% of its transactions were PO-based, only about 40% of the transactions were actually compliant. In this vein and building on the CFO’s mantra to spend corporate money like it was your own, Mark’s team extended its “No PO, No Pay” policy backwards to ensure that the proper approvals were in place and that money was flowing properly, hence the new policy: “No Budget, No PO, No Pay.”
The new policy mapped perfectly with the design (and goals) of the new organization by ensuring that a cost management or category plan was in place for all significant budget items before POs are cut. With this new organization, focus, policy (and a corporate mandate), PO compliance has risen to 75% and Mark’s team has a stretch goal to get that to 95% by year end.
To achieve this goal, Mark’s team is delivering scorecard to each member of the operating committee to show how each group is performing, It also benefits from a strong corporate mandate and, with such a high percentage of complex services spend (70% of total spend), Mark says that Ariba’s Services Procurement solution will be critical to the team meeting its compliance goal.
Looking ahead, the DB team will continue to refine its technology strategy including the continued advancement of its hybrid cloud/installed strategy to ensure that it continues to “leverage the best functionality available in Ariba” and a plan to improve its vendor master that will better help it manage the global contracts it has in its 70 operating markets. It will also double down on its efforts to better manage its complex services spend.
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Tagged in: Case Study, Chief Procurement Officer, CPO, CPO Shop Talk, P2P, Source-to-Settle
