Global Direct Material Procure to Pay Optimizing the Value of Global Commerce Management

Transcription

1 Global Direct Material Procure to Pay Optimizing the Value of Global Commerce Management A 3rdwave GCM White Paper

2 Executive Overview The procure-to-pay (P2P) environment has quickly become a major challenge to companies that have adopted global sourcing and distribution as a strategic component of their business. Trade is more global, tastes more eclectic, raw material sourcing more international, and labor more mobile. The rate of acceleration of global trade has shifted the competitive environment within and across national boundaries from a focus on manufacturing efficiency to global supply chain network efficiency and effectiveness. For many companies, a major -- if not the major -- challenge and opportunity lies not only in how well they control their manufacturing environments but in how well they control their global supply chains. Manufacturing is a key component, but not the only important component to consider. For a company that has committed itself to global sourcing and distribution, this seismic shift in operations means it must create flexible and adaptable processes and systems to seamlessly source, move and finance product from anywhere to anywhere around the globe while maintaining high levels of customer service, optimal levels of inventory, complete cost control, and minimal business risk exposure. Research is constantly being presented on the inadequacy of current corporate information systems to manage this new global environment. Management is increasingly aware that the huge investments that it has made in ERP and legacy systems to support its national manufacturing-oriented environment have significant gaps in the global P2P capabilities. The enterprise systems lack the information infrastructure and workflow design necessary to support the processes and people to manage and execute the highly complex and intricate global supply chain networks that they depend on to deliver products to their factories, customers and consumers. Within complex global supply chains, items often move multiple times to many international manufacturing or transformation facilities prior to arriving at the final destination for consumption. Global supply chains are in a constant state of flux because of events beyond the organization s control. Orchestrating the players in the supply chain to synchronize their activities requires tools that enable the organization to collaborate and move proactively to mitigate any problems that will result from a meaningful distribution and financial deviation to plan. A comprehensive P2P solution must integrate and synchronize operation execution, activity monitoring and reporting, cost management, compliance management, financial control, network analysis (supply chain metrics) and benchmarking. This white paper examines the current P2P gaps in global commerce management solutions and highlights why the current solutions have not delivered the expected results. The paper outlines what a comprehensive solution must deliver to insure optimal P2P capabilities. Finally, it presents 3rdwave GCM as the solution that addresses the P2P gap, delivers superior results, and is a highly viable alternative global trade management solution. Table of Contents Executive Overview...2 Global Direct Material Procure-to-Pay (P2P)...3 The P2P Gap...4 The Solution...6 The 3rdwave GCM P2P Solution...7 The Value Proposition of 3rdwave GCM P2P Solutions...9 3rdwave GCM by Blinco Systems Inc

3 Global Direct Material Procure-to-Pay (P2P) P2P at a global level includes those activities, documents and supporting services that must be executed from the time a purchase contract/order is issued until the item arrives at the final point of manufacture, receipt into a warehouse or distribution center, or is delivered directly to a customer. These activities broadly include purchase order management, shipment planning, international logistics planning and management, import execution, inland drayage and delivery. Attached to these physical activities are the supporting requirements of document management, total landed cost management, business and regulatory compliance, event management, workflow, visibility, and analysis and reporting. In some instances, the P2P requirements are extended to include demand planning, sourcing execution, and request for quotation (RFQ) management. Often the enterprise has systems that independently address these issues or have integrated 3rd party solutions to support these functions. In a simple global P2P environment, there are often upwards of eight physical hand-offs and 15 events that require monitoring and execution (Figure 1). However, in most organizations global supply chains are rarely that simple. In reality, the environment is made up of global supply networks that are composed of interdependent point-to-point supply chains. The complexity of global P2P is geometrically increased by the number of linkages that occur within global supply networks and the significant increase in the number of hand-offs, events and resulting communications. Further compounding global P2P manageability is the sheer volume of shipments that are in motion at any given time. Figure 1 Seller/Supplier Origin Inland Carrier CY / CFS Origin POL Air/ Ocean Carrier POD US Global Supply Chain CY / CFS Deconsolidator Land/Rail Carrier Manufacturer DC Customer Any company engaged in global trade deals with this complexity - for better or worse. The long-term payoff however, is achieved in the efficient management of the complexity and the resulting financial benefits delivered to the bottom line of the organization. Managing the global P2P gap effectively results in: Reduced financial and operation risk. Integrated P2P insures rapid detection and understanding of supply chain disruptions. Regardless of the reason for supply chain disruption, the early detection and resolution of a disruptive supply chain event can dramatically mitigate the negative impact on the company from a customer, financial and public relations perspective. As several major university studies have shown: Supply chain disruptions have been found to negatively impact shareholder value by as much as 8-10%, and are amplified in time-sensitive environments where early market introduction is critical to success. (A Managerial Framework for Reducing the Impact of Disruptions to the Supply Chain: Robert B. Handfield, PhD, North Carolina State University, Jennifer Blackhurst, PhD North Carolina State University, Christopher W. Craighead, PhD Auburn University, Debra Elkins, PhD General Motors R&D Center [2006])

4 Leaner organizations. Integrated P2P enhances the optimal employment of the physical and financial assets. The physical assets mainly inventory and warehouse space - are reduced because buffer inventory can be removed at virtually all levels of the supply chain. The financial assets are more efficiently employed because cash flow is more effectively managed and cash is conserved. Greater business compliance. Integrated P2P delivers increased visibility, adherence to and enforcement of business terms, conditions and Service Level Agreements (SLA s). Total landed cost management. Integrated P2P insures that all costs are managed and control from budgeting to actual validation, payment authorization and reconciled cost analysis and reports. Increased operational efficiency. Integrated P2P provides infrastructure for synchronized cross-functional information flow resulting in streamlined workflow and enhanced decision support. Accurate analysis, benchmarking and reporting. Integrated P2P delivers accurate, synchronized information of all supply chain events across the entire P2P network and enables timely analysis, measurement, alerting and reporting. Comprehensive management oversight. Integrated P2P provides managers with comprehensive visibility of all global P2P activities and the upstream and downstream impact on supply chain fulfillment and cost implication. Reduced costs. Integrated P2P significantly reduces costs related to supply chain performance and regulatory penalties. Integrated event visibility and management at all key milestone across the global supply network coupled with greater regulatory compliance management improved document control and accuracy and timeliness in regulatory filings which enables cost reductions in supply chain and related financial penalties. Optimizing global direct materials P2P processes depends on the creation of an environment of people, processes and technologies that operate seamlessly, responsively and flexibly regardless of the organizational silos. The current technology offerings have made significant strides in filling parts of the global P2P process, but there are very few that provide a comprehensive, integrated and synchronized end-to-end solution that actually improves the workflow, fills the information gaps that exist in resident enterprise solutions, and delivers risk mitigation and financial benefits to the organization. The P2P Gap What is the P2P gap? Simply stated the P2P gap exists in the information solutions of an organization from purchase order release until the goods are received at the warehouse and entered into the enterprise system. Any organization that manages procurement and the inbound flow of products, whether raw materials, components or finished goods, has a physical infrastructure executing the activities required to move the goods from source to destination. The physical activities are managed by internal operations or external outsourced providers or a combination of both. Invariably the physical infrastructure affects finance. The gap exists because of the lack of information infrastructure to enable the organization to execute and manage their unique global supply chain environments efficiently. Where is the P2P gap most evident? The P2P gap is most pronounced in the area of global outsourcing. As the world economy grows more rapidly and larger in real terms than the domestic economy, the global P2P gap becomes more important because of the increased importance of global sourcing and the impact that supply chain disruptions has on the financial well being of the organization. In most organizations, the P2P gap exists between the release of the purchase contract/order and the receipt of the goods at its designated location - the final manufacturing, distribution or customer facility. Current enterprise systems were not designed to support the interaction and indirect management of remote suppliers, logistics providers, regulatory agencies or import/export customs agencies. The enterprise systems were designed to support the efficient planning and management of resources in support of manufacturing within the four walls in a national/domestic market. Initially, the enterprise systems augmented their solutions with independent domestic supply chain solutions to support the relatively quick sourcing and replenishment of goods from suppliers to their own facilities. Today, many ERP vendors provide similar supply chain functionality within their own solutions.

5 Figure 2 Global Carriers Raw Material 3PLs Suppliers Freight Forwarders Export Global Carriers Manufacturing 3PLs Facilities Freight Forwarders Import Import Export Manufacturing Facilities Distribution Center Most supply chain solutions are designed to handle domestic supply chains that are comparatively simple when compared to a global counterpart. This does not mean that domestic supply chain management is easy or the solutions are simple. It is only meant to point out that compared to global supply chains - with the complexities involved with remoteness, cultural differences, order lead time, total transit time, multiple compliance regimes, documentation requirements, trade regulations, myriad cost components, and large number of supply chain partners - domestic supply chains are comparatively simple. (Figure 2.) The inherent complexity of global supply chains requires solutions designed to support the execution and management of the physical activities regardless of the actors. Why does the P2P gap exist? In most instances, the gap exists because enterprise systems cannot follow the flow of an item from the time it issues the purchase order to a global manufacturing facility until it arrives at the designated facility. In the domestic environment, visibility is simplistic: pick up the freight, haul the freight, deliver the freight; with all this taking place over a day or two, or in rare instances a week. International shipments can easily consume days, or more, and with the significantly greater number of hand-offs, there is much greater propensity for delays and errors. Brooks A. Bentz, Partner Supply Chain Management, Accenture LLP World Trade Magazine, January 2008 The enterprise systems generally lack a centralized information repository and infrastructure to capture detailed information from many disparate supplier and global logistics sources and accurately contextualize it. This results in work and information being executed in off-system solutions. Today there are solutions that fill components of the P2P gap. These solutions are most often offered as Software as a Service (SaaS) by Lead Logistics Providers (LLPs), 3PLs, GTM Portals, Carriers, etc., which provide various elements of visibility into the movement of an item, estimated total landed cost, and compliance information. Yet whether the solutions are a traditional license or SaaS model, they still fail to provide one view of the entire global supply chain and a synchronized view of the physical and financial supply chains. There are very few instances (if any) where only one provider is positioned to deliver comprehensive and competitive one-stop service in global sourcing and distribution. Because the environment has multiple and often diverse information providers, it is highly problematic to effectively and efficiently support remote management of suppliers and service providers at a global level without a comprehensive information infrastructure. The key reason for the P2P gap is that enterprise solutions lack a central repository to capture and provide the information required to support the execution of and 360-degree visibility into the status of a product through its sourcing and inbound life-cycle. Without a centralized universal data repository, it is virtually impossible to integrate and synchronize total landed cost, compliance requirements at both the regulatory and business level, financial execution and resolution, and the necessary analysis and reports into a comprehensive P2P solution.

6 What are the implications for the organization when it fails to fully manage its global P2P processes? Much of the popular research by organizations like Aberdeen, ARC, Deloitte, TEC and others conclude that poor or limited P2P competence results in increased buffer inventory across the global supply chain, sub-optimal sales/customer fulfillment, increased operating costs, and amplified financial and regulatory compliance risk. The Solution To achieve full global P2P value, companies must implement a comprehensive strategy to manage remote and non-related suppliers and service providers. Achieving high levels of global P2P control depends heavily on alignment of people, processes and technology for the efficient flow of information and collaborative problem solving across functional work units and between external business partners. Automating the cross-functional and cross-organizational alignment of information is important because the volume that confronts individuals in global P2P on a daily basis is impossible to manage within the limited people and financial resources available. In order to be effective an effective global P2P, solution systems must: deliver an execution platform to support operators work processes infrastructure; provide access to timely global P2P information; increase information sharing - upstream and downstream - within the organization; and support quick collaborative problem resolution by internal and external stakeholders. To accomplish these four fundamental musts, the global P2P solution must not only show visibility into the position of an item within the logistics supply chain but it must augment this information with tools that enable operators to influence vendors and service providers to work more effectively. It is not enough for a system to provide visibility, total landed cost budgeting capability and compliance information, but it must support fully-integrated downstream cost auditing, analysis and validation; regulatory compliance; and financial settlement. Ultimately, a world-class global P2P solution must deliver a continuous 360 degree view of the company s global P2P universe by providing context on supply availability and its implications for manufacturing or customer fulfillment, financial impact and bottom-line results. A key element in global P2P excellence is integration of information and synchronization of workflow. Whether a company outsources the management of its global supply chain or manages it within its own operations, the ability to see what is happening against the operational plan is vital. Since there is virtually no global supply chain that is self-contained, monitoring the activities of 3rd parties is necessary to insure successful execution. A key component of a comprehensive P2P solution is that it has a powerful, central data infrastructure. Monitoring suppliers and service providers across the entire global supply chain requires: 1. the integration of disparate information from a multitude of sources across the network; 2. the synchronization of the information across the application; and 3. the contextualization of that information so that operators and managers responsible for the supply chain activities have views, analysis and reports necessary to make the appropriate decisions. Today, almost all global organizations lack a central data repository for comprehensive global supply chain information and depend on their suppliers and service providers to store this information and provide them with access to their own information. In many instances, a company relies on its 3rd party contractors to monitor and report on its own performance. This is much like having the proverbial fox in charge of the chicken coop. A central repository that captures, aggregates and provides all global supply chain information frees the organization from its reliance on its 3rd party contractors for its visibility, reports and analysis. It has the major benefit of insuring that the organization always has access to the information -- regardless of its future network design and partnerships. Most critically, a central repository fills the information gap by interfacing this critical information into the enterprise systems, thereby insuring the organization has a comprehensive view of an item located anywhere across its entire global network, as well as a complete history of the item s global supply chain activity. A global P2P solution must: a. support the current and future business processes; b. be designed in such as way as to flex according to the changing global business dynamics and the resulting changes in business processes;

7 c. provide the organization with the flexibility to quickly and regularly align its internal workflow to its physical supply chain configuration while providing total control over the activities being executed. Organizations need the flexibility to rapidly reconfigure their supply networks, restructure their supply chain execution capacity and insure continuity of information as their business environment undergoes change; d. enable on demand analysis of a supply chain activity, partner or service provider; e. insure comprehensive total landed cost management; f. insure regulatory and business compliance at all levels of global commerce transactions; and g. support financial planning, financial settlements, and financial analysis and reporting. As global commerce continues to mature, how an organization constructs, optimizes and financially leverages its global supply chain s capabilities will have a profound effect on how well it succeeds against its competition. The 3rdwave GCM P2P Solution The 3rdwave GCM solution provides a complete toolbox to fill the obvious and not-so-obvious gaps in a company s P2P solutions. Built on a powerful global data repository and configurable component-based architecture, 3rdwave GCM P2P provides the opportunity for organizations to augment their current enterprise systems and 3rd party providers information with comprehensive solutions that support their global supply chain activities at virtually every level (Figure 3). Figure 3 3rdwave GCM P2P Portal and Execution Layer PO Budgeting, Monitoring & Status Shipment Planning, Costing, Monitoring & Status Shipment Consolidation, Execution, Monitoring, & Status Import Execution, Monitoring % Status FTZ, Deconsolidation, Inland drayage Cost Validation, Reconciliation, Authorization 3rdwave GCM P2P Data Repository Supplier Records Product Records Carrier Rates and Routes HTS Records Compliance Rulings Service Providers Rates Aggregator Portal layer Seller/Supplier Origin Inland Carrier CY / CFS Origin POL Air/ Ocean Carrier POD US Global Supply Chain CY / CFS Deconsolidator Land/Rail Carrier Manufacturer DC Customer P2P solutions must deliver to operators and managers views of the supply chain from their own perspectives. A P2P solution must contextualize the supply chain information so that operators and managers can accurately assess what is happening across their field of operations. 3rdwave GCM P2P provides a unified view of the entire global supply chain. This unified view insures the broadest field of vision of a global supply chain at all levels of work execution, departmental management and corporate oversight. 3rdwave GCM also provide operators and managers with integrated visibility - both upstream and downstream - across the various operating silos and departments within an organization. 3rdwave GCM s P2P solution provides the ability to manage all players in the global supply chain through one integrated and synchronized platform. The solution brings together all the requisite execution and visibility components supported by sophisticated reporting tools specifically designed for effective global commerce management. The result is an exceptional opportunity to optimize global supply chain networks based on real-time, fully-integrated and synchronized supply chain information that is not only accurate, highly accessible, and within the control of the organization, but is also contextualized to support critical or ad hoc decision-making.

8 3rdwave GCM s Global Data Repository 3rdwave GCM P2P s solid foundation is built on its highly granular global data repository. Designed to be independent from the source of its information, the 3rdwave GCM P2P global data repository provides an organization with the ability to automate the capture information from suppliers, service providers, content brokers and enterprise solutions and make that information not only coherent but also universally available. With the gaps that exist in current enterprise systems, much of the information related to an item in its P2P cycle is either not visible or is captured and maintained outside of its systems. 3rdwave GCM s global data repository provides multi-tier capability that insures that all global supply chain information is captured within one environment. Since the information is integrated, synchronized and centralized, it supports global supply chain collaboration, execution and management across the organization and among its trading partners. Data Capture: The 3rdwave GCM P2P global data repository captures supplier and service level provider details, product enriched information, logistics and customs entry data, inventory details, landed cost elements, and compliance information that insures that all global business and regulatory compliance is visible and managed. Electronic feeds from enterprise systems, suppliers, service providers or content brokers, in the form of EDI, XML, FTP or flat files (spreadsheets) are easily mapped into the 3rdwave GCM P2P global data repository. Where electronic feeds are not possible, 3rdwave GCM P2P delivers web portals so that information can be entered by suppliers, service providers or operators quickly and efficiently. Data Integration and Synchronization: 3rdwave GCM P2P s data repository is a one-entry system with full reconciliation support that insures that all data will be fully validated against budgets, plans and execution. Data entered into the 3rdwave GCM data repository is immediately posted into the central repository and contextualized for advanced queries and reports. Analysis, Reporting and Benchmarking: Critically important to managing the global supply chain is understanding how suppliers and service providers execute their activities. 3rdwave GCM s global data repository captures supply chain event activity, analyzes them, reports it and provides the ability to benchmark its partners and itself against the plan. 3rdwave GCM Global Supply Chain Business Process Optimization Managing a global supply chain requires much more than visibility and compliance. While these capabilities are important, they deliver sub-optimal performance if they fail to provide significant context to the information they describe. 3rdwave GCM P2P solutions provide the execution infrastructure that fully enables operators and managers to do the work necessary to make sure that the entire supply chain can be optimally managed. Meaningful/Actionable Information: To optimize global business processes, people need tools to capture data and present information in a way that is meaningful to their business goals. They need information that is timely, accurate, and in context so that they can take responsible action. Visibility and alerting of events do not provide context. 3rdwave GCM P2P solutions provide dynamic and contextual graphical perspectives on events anywhere in the global supply chain so that operators and managers constantly understand the implications of the supply side action and can take action to optimize the supply chain performance. Business Process Improvement: Collaboration and feedback are vital to business process improvement across the global supply chain. 3rdwave GCM P2P analytics ensure that a company has the performance measurements needed to collaborate with their suppliers and service providers and support constant business process improvement at all levels of their global supply chain. With the optional 3rdwave Collaboration Station module, collaborative interaction with all global supply chain partners is dramatically improved.

9 The Value Proposition of 3rdwave GCM P2P Solutions Benefit Opportunities Optimize supplier performance Optimize 3 rd party service provider performance 360 degree global supply chain visibility from one portal Increased operational efficiency - Integrated global supply chain execution platform Comprehensive Total Cost Control Integrated Cross Organizational Compliance Extended global financial planning and control Global Supply Chain Cost Reduction 3rdwave GCM P2P Deliverables Accurate Purchase Order positioning. Purchase Order event management and alerting. Shipment planning execution and visibility. Full logistics visibility through event management and alerting. Accuracy in matching shipment plans to ASN information. One view of the global supply chain from a user s desktop, reports. Uniform operator execution platform. Simplified global supply chain information management. Fully integrated budget, estimate and actual landed cost management. Repository for business and regulatory compliance rulings associated with the applicable item, supplier, country, etc. International visibility to payment obligations, settlement and status. Full cost visibility, analysis and validation. Cost and profitability metrics. Integrated execution platform increases operational efficiency. Integrated global supply chain visibility reduces global inventory buffer stock. Total cost management lowers total landed cost. 3rdwave GCM P2P Value PO event management insures increased supplier shipment performance based on planned activity. Shipment planning enables high level of flexibility in matching supply to demand. Logistics monitoring and visibility improves carrier, pier, and customs execution. Improves warehouse receipt and yard planning. Increases logistics flexibility. Greater supply chain visibility. Increased decision support. Crossfunctional information sharing. Collaboration. One solution for complete global supply chain execution. Reduced operator learning curve. Synchronized business process support. Increased operator efficiency. Low total cost of operations Improved procurement and logistics planning, contracting and execution based on accurate cost metrics, analytics and reports. Increased operational conformance. Reduced or eliminated regulatory errors, omissions, and penalty exposure and charges. Regulatory risk mitigation. Increased control over cash flow and payment management. Full AP audit execution. Reduced errors in payment settlement and dispute resolution. Improved communications with operations. Global supply chain operation efficiency increases 30% to > 100%. Buffer stock reduction at any locations of 10% to 50%. Total landed cost reduction of 0.5% to >2.0%. Department Logistics, Imports Logistics, Imports, Warehouse, Finance, Sales Logistics, Imports, Warehouse, Finance, Sales Logistics, Imports, Finance Logistics, Imports, Finance Logistics, Imports Finance, Logistics, Imports Logistics, Imports, Finance

10 3rdwave GCM by Blinco Systems Inc. Since 1988, Blinco Systems Inc. ( BSI ) has been a leading developer and solutions provider in Global Commerce Management and synchronized global supply chain execution. BSI has provided extensive and comprehensive consulting services to companies involved in global trade and commerce. BSI s clients range from global sourcing subsidiaries and divisions of multi-billion dollar companies to SME s global sourcing, distribution and brand management companies. BSI s 3rdwave GCM solutions fully support our client ' s unique business processes. Our solutions insure that our clients can execute, manage and control their global environment while they constantly improve their available-to-ship/available-to-deliver capabilities at the lowest possible cost and optimize their inventory levels. BSI uses services-oriented architecture (SOA) and spiral development methodology to deliver integrated solutions that can be rolled out incrementally or as an allencompassing global commerce management solution. BSI provides the highest levels of integrated supply chain information infrastructure extending and leveraging existing systems. No other solution currently available is able to deliver the depth and range of integrated global solutions inherent in 3rdwave GCM. BSI consultants support clients in developing strategic approaches for global commerce management and improvement in their business processes and delivering substantive ways to increase corporate value. BSI s consultative experiences include working with senior management in global companies to support their global commerce business design, business process design and implementation, information systems design supporting global commerce management processes, global logistics management, and inventory management control.