SOURCE-TO-PAY ASSESSMENT & TRANSFORMATION

Without detailed data, a natural category hierarchy, visibility, and insight into the existing spend with suppliers across categories, how can an organization make informed decisions on category management, optimize sourcing strategies, leverage spend power and manage suppliers?

The answer to the question is simple – they can’t.

The good news is Nitor has enabled many global and national organizations to address these issues in Spend Analysis. This groundwork paves the way for Nitor’s remaining seven elements and the foundation supporting a best-in-class Procurement organization.

Many organizations don’t see the true opportunity as they have poor visibility into supplier spend caused by:

• • Lack of line level information to make the spend data useful
  • No single natural category hierarchy/taxonomy to correctly classify spend
  • Technology solutions not being fully utilized to aid dynamic review of spend
  • Errors in the vendor master causing multiple instances of the same supplier
  • Poor training on methodology of how to analyze spend

Poorly managed master data can create unnecessary risk and put significant savings out of reach. Bad data in disparate systems in several purchasing departments affects business operations and requires high manual effort to even make it partially usable.

Nitor has 5 key building blocks to enable visibility:

• • Master Data Management and Governance
  • Data Cleanse/Enrichment
  • Data Classification
  • Spend Review & Reporting
  • Opportunity Analysis

In order to assess where the organization should focus its time and effort, a cross-category prioritization is developed through assessing each category’s opportunity score/value based on:

• • Savings/value – which initiatives will produce the highest return
  • Business need – which initiatives are urgent and which can be planned forward
  • Risk/complexity – how complicated is the execution of the opportunity
  • Time-to-implement – the time and effort needed to execute the opportunity

Many organizations source spend, but the first word is often forgotten, Strategic. Nitor transforms Strategic Sourcing into a Best-in-Class operation through developing process, tools, technology and training around:

• Stakeholder Alignment
• Development of a TCO Baseline
• Insightful Category Analysis
• Strategic Approach to the Market

Nitor’s Six Sigma-based strategic sourcing process provides a holistic approach to sourcing, driving much needed cost savings but also aligning with business needs and improving performance across Delivery, Quality, Service and Innovation. We do not “scorch the earth” and negatively impact the non-costs aspects of a category. Our holistic approach drives business stakeholder buy-in, ensures sustainable value is delivered and enables knowledge transfer on world class sourcing.

Strategic Sourcing has been a popular procurement practice for years and many organizations believe they are practicing Strategic Sourcing. In reality what they are doing is more aligned with conducting tactical buying or reactive resourcing. There is not a tie-in to an overarching Category Strategy or thinking strategically and the end result is typically not optimized. Nitor’s Strategic Sourcing process, tools and playbook utilizes 5 stages based on a Six Sigma methodology that will help execute your true Strategic Sourcing vision.

Effective Contract Management addresses all aspects of the contracting process, beginning with the development of the contract terms, negotiation to secure agreement, operationalizing the contract through technology, and ongoing protection of category terms and conditions with suppliers. Our approach combines both process and technology to provide a scalable program to effectively manage contracts.

Organizations unable to actively enforce the terms and conditions that were established in the contract typically lose up to 30% of the value delivered from Strategic Sourcing projects. Nitor assesses the following four areas to establish the current state and move forward ensuring full value delivery:

• Standard contracts templates and approvals
• Terms Awareness
• Compliance Management
• Repository and how contracts are stored and accessed

Once key gaps are identified, a transformation program to drive change is created and enabled. Key performance targets to measure success are set.

Delivering value through Category Management and Strategic Sourcing is very visible and therefore success is often celebrated and rewarded. However, the real challenge is finishing the job and realizing the value created from these efforts. Robust Contract Management is one of the key components to securing the value created, yet it is often an afterthought in many Procurement organizations. With the right processes, technology and people seeing the task through to the end and contracting and managing suppliers in an efficient way – the value created will be realized.

Robust Supplier Management ensures the value achieved through effective Category Management and Strategic Sourcing is delivered and ongoing performance is actively managed.  Effective Supplier Management ensures that suppliers that are critical to operations are identified, classified, assessed and appropriate plans are developed to manage risk, performance and relationships.

Nitor helps clients become more effective at Supplier Management through a number of work streams:

1. Develop process, tools and technology – To improve and drive consistency in how an organization manages suppliers, there needs to be a methodology/process, tools and training and enablement through user-friendly technology.
2. Segment the supply base – Segmenting suppliers to ensure resources, time and effort are leveraged to manage key relationships.
3. Review and manage supplier performance – Measure supplier performance against agreed requirements/KPI’s resulting from the Category Management, Strategic Sourcing and Contract outputs.  A supplier performance scorecard is developed to measure and monitor supplier performance and identify deficiencies in performance.
4. Understand and manage risk – Organizations with joint risk mitigation plans are able to more quickly recover from issues than those without plans – especially for the high risk/high impact areas.  While risk can never be eliminated, it can certainly be assessed, mitigated and managed.
5. Develop relationships with suppliers – In addition to managing performance and risk, effective Supplier Management involves managing relationships.  A common mistake is that organizations forget to focus on the “people” aspect of Supplier Management.
6. Manage Organizational Change – Do not under estimate the importance of Change Management.  Anytime an organization is being requested to do things differently it is critical to drive awareness, collaboration and buy-in.

Organizations are beginning to see there is a better way to approach managing suppliers and are investing time and effort to make this change happen

The efficiencies gained from strategic sourcing and contract negotiation must be fully operationalized within your procurement process and strategy. We’ll strengthen the role eProcurement plays in your organization through:

• Agile-based transaction efficiency
• Elimination of process latency
• Review and formal implementation of procurement policies

Like any consumer-based business, the primary principle of eProcurement is to make life simple and easy for our customers. Nitor applies that same “run it like a business approach” to ensure your front lines are focused on customer satisfaction while ensuring compliance.

Over the last decade, the adoption of eProcurement solutions has highlighted the need for automation within Accounts Payable. Nitor has responded to this need and successfully led numerous A/P automation projects within Fortune 500 companies. As a result, we bring expertise in all A/P functions and a practical approach to transforming Accounts Payable. Our key skill sets include:

INVOICE AUTOMATION

From invoice submission through processing and payment, leading organizations are driving towards fully electronic transactions. We’ve worked with all of the major supplier networks and have a deep understanding of cXML and EDI. As a result, our customers are collectively processing millions of electronic invoices each year.

We also know it’s naïve to think that paper invoices will completely disappear overnight so it’s important to have a plan to automate the submission, tracking, and processing of paper invoices. Nitor’s A/P automation playbook includes proven strategies for implementing invoice imaging, OCR technology, and supplier portals.

SALES AND USE TAX AUTOMATION

Today, most companies pay too much sales tax on certain invoices and underpay tax on other invoices because they can’t calculate sales and use tax through real-time integration with a sales and use tax engine. Through automation of sales and use tax calculation, Nitor customers have ensured the accurate calculation of tax. In turn, our customers have eliminated exposure to tax auditors and associated penalties. Nitor recommends real-time tax integration, and we’ve successfully integrated different tax solutions as part of our A/P automation projects.

Often, the most debated topic in an organization is how to “prove out” the full procurement value proposition. Procurement savings can’t always be linked directly to the bottom line, and this is only one of several important metrics that should be considered. Nitor has helped dozens of clients develop and implement a balanced score card to fully measure procurement’s impact. You’ll get a holistic view of your procurement ROI, including:

• Savings methodology that works for the CFO, the business, and procurement
• Metrics on risk avoidance, quality, delivery, service and innovation
• Benchmarking on key procurement performance measures
• Customer satisfaction metrics including incentives to partner with the business
• ROI calculated on both an accrual and run rate basis
• Develop robust policies and procedures to promote and control Procurement across the organization

Savings alone is a short-term view of procurement effectiveness. Our approach is to build a single dashboard that accounts for the entire value proposition made to the organization.