Transcript Physical Through Financial Supply Chain – Bumper Sticker

PPL’s Pursuit of an Integrated
Physical Through Financial Supply Chain
Jim Abel
Vice President-Finance and Treasurer
PPL Corporation
January 28, 2008
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Topics to be Covered
• Review of the Traditional Physical/Financial Supply
Chain model
• Current best practices and PPL’s progress to date
• Future best practices - the Supply Chain Hub
• Upping the “ante” with a settlement Hub and PPL’s
progress to date
• Closing thoughts – Predictions of the future state and
how we will get there
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Overview of the Traditional Physical/Financial
Supply Chain Model
• A complex process involving multiple departments and systems internally,
and numerous contact points with external suppliers
Buyer
Bank
Products /
Services
Requisition
Change
Orders
Accounting
Ship
Acknowled
gement
Invoice
Monitoring
Controls
Exception
Handling
Dynamic
Discount
WorkFlow
/ Approval
1099
Reporting
Contract/
Order
Receive
Products or
Services
Physical Supply Chain
Payable
Financial Settlement
Financial Supply Chain
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Overview of the Traditional Physical/Financial
Supply Chain Model
• As the diagram is expanded to include the Seller, it’s easy to see the
opportunities for mistakes, errors and disagreements: plus, just the countless
“touch points” where verifications are required
Seller
Physical Supply Chain
Contract/
Order
WorkFlow
/ Approval
Ship Products
or Services
Change
Orders
Financial Supply Chain
Receivable
Financial Settlement
Ship
Notice
Exception
Handling
Products /
Services
Requisition
Accounting
Bill
Monitoring
Controls
Dynamic
Discount
Bank
Products /
Services
Requisition
Change
Orders
Accounting
Invoice
Ship
Acknowled
gement
Monitoring
Controls
Exception
Handling
Dynamic
Discount
WorkFlow
/ Approval
1099
Reporting
Contract/
Order
Receive
Products or
Services
Payable
Physical Supply Chain
Financial Settlement
Financial Supply Chain
Buyer
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Improving the Traditional Model
The types of improvements many of us have focused on in recent years
regarding the Traditional Model can be lumped into two broad
categories:
• Internally focused process improvements such as:
– Interfacing (or even integrating) purchase order software with work management,
accounting, cash forecasting, and disbursement systems
– Moving help desks and accounts payable functions into the Supply Chain group.
– Improving the management of supplier payment terms
– Centralizing invoice processing and using OCR technology to capture invoice
data
• Buyer/Seller interface improvement such as:
– Utilizing E-Market place providers to facilitate “many-to one-to many” interfaces
for: on-line auctions; PO’s; SO’s; change orders; shipping and receiving notices;
etc.
– Continuing to address all the above as “one-off” solutions by replacing paper with
electronic one-to-one communications
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PPL’s Progress to Date on Improving the
Traditional Model
PPL has improved its internal processes in recent years in several
ways:
• We’ve established a single point of contact for vendor calls by consolidating
the Help Desk within Supply Chain
• We followed up by moving all remaining Accounts Payable functions into the
Supply Chain
• We’ve eliminated “maverick” spend with strict policies around contract
documentation, corporate card use, etc.
PPL has also made substantial improvements in its buyer/seller
interfaces through the use of an E-Marketplace provider:
• Fully transitioned from one-to-one EDI interfaces to XML
– E-enabled 32% of “high volume” PO suppliers and are targeting 85%
– E-enabled 45% of total PO transactions and are targeting 80%
• Developing e-RFQ bidding functionality
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PPL’s Progress to Date on Improving the
Traditional Model
Estimated savings:
• 1 hour of processing time for every 10 E-invoices
• 25-30% reduction in total costs of supporting the physical through
financial Supply Chain by 2009
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Future Best Practices Will be Driven by the Use of
a Single Supply Chain “Hub”
• One “version of the truth” facilitated by an independent marketplace
• Elimination of company maintained contract managers, procurement systems, etc.
Information
Information
Supply Chain Hub
Shipping/
Receiving
Financial
Obligation
Financial Settlement
Bank
Information
Information
Contract/
Order
Transaction Initiation
Product/
Service
Transaction Initiation
Seller
Buyer
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Benefits of a Supply Chain Hub
• One version of the truth (one record) facilitated by an independent
E Market place provider
– Companies dedicated to this pursuit will drive the development of fully
integrated and sophisticated “Physical through Financial” software
• The contract (implied or real) becomes the “traffic director” for all
downstream commerce activity.
– Establishes standards for all required data through settlement
• Straight-thru transaction processing and information flow for
majority of transactions from order thru settlement
• Exceptions identified electronically, HUB proactively alerts both
parties of disputes through a single work flow process
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Upping the “ante” with a Settlement Hub
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Making the Case for a Settlement Hub
While Supply Chain Hubs have yet to fully materialize, PPL
is currently developing and implementing a Settlement Hub
• The evolution of various so called ERP Systems over the
years for different front office needs has resulted in
“settlement silos” within virtually every major corporation
– The Supply Chain represents one settlement silo – for goods
and services
– Other silos can include payroll, dividends and interest,
miscellaneous billing systems, and other front offices such as
energy trading and marketing
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Making the Case for a Settlement Hub
SILOS – The Traditional Back-Office Settlement Model
Payment obligations
processed within various
front-office silos
Goods & Services Payments
Payroll
Interest & Dividends
Create back-office “hay
piles” – i.e. siloed data
bases and settlement
instructions
With Treasurers manually
”bailing the hay” to create:
•Patchwork corporate
data bases
•Last minute cash
forecasts & disbursements
•Multiple settlement
processes & related
controls
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Treasurer
Making the Case for a Settlement Hub
Problems resulting from settlement silos include:
• Needless duplication of typically inefficient settlement procedures
– Multiple check, wire, ACH solutions tied to different ERP solutions
• Multiple (and different) exception processing procedures for resolving
disputes, check returns, etc.
• Multiple controls to implement, monitor and evidence (for SarbanesOxley)
• Lack of an integrated data base for pending or completed financial
settlements
– Inability to effectively forecast cash flows, ensure discounts
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Settlement Hubs
A Settlement Hub yields a fully integrated, single solution for all internal
corporate settlements– both receipts and disbursements
Key components of the value realized include:
•
Centralized receipt in Treasury of all billing and payable information with an
immediate conversion to digital data (no paper)
– Significantly improved working capital management including improved cash
forecasts and discount “monitoring”
•
Single data repository and “processing center” for all corporate payment
obligations and receipts — i.e. All front offices feed into one single back
office
– Significant improvement in processing efficiency, quality monitoring, etc.
•
Single settlement system rather than multiple siloed settlement systems
– One set of bank interfaces for wires, ACH, etc.
•
Consolidated and simplified operational, compliance and financial reporting
including SOX controls
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Settlement Hub
A detailed picture of PPL’s planned Settlement Hub looks like this:
Legend:
Investor
Activities
Employee
Activities
Interest/
Dividends,
etc.
Payroll
Payables
Invoices &
Receivables
Payables/
Receivables
Other
Payables/
Receivables
Treasury Back Office
"E" Commerce
Data
Receivables/
Payables
Paper Invoices
Check Remittances
U.S. Post Office
Settled
Electronic
Bills
Receipts/
Disbursements
Wires/ACHs
Digital
Mailroom
Paper Bills
Electronic
Receipts
Vendor
Payables
Checks
Electronic
Invoices
Other PPL
Front Offices
Payables
Electronic Invoices
Electronic Receipts
External
Material/
Service
Supplier
Activities
Invoices
Treasury Back Office
Payables
Front Office
Including
ARC
Deposits
Bank
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It Serves as a Single Back-Office Supporting the Commerce
Settlement Process for ALL Front-Office Needs
Supply Chain Hub
Human Resources
(Payroll)
Contract
Supplier
Product/
Service
(DeliveryReceipt)
Settlement
Amount/Terms
Financial (Dividends/Interest)
Contract
Customer
Customer
Employer
Product/
Service
(DeliveryReceipt)
Contract
Contract
Employee
Security
Issuer
Settlement
Amount/Terms
Product/
Service
(DeliveryReceipt)
Settlement
Amount/Terms
Other Front-Offices
Investor
Product/
Service
(DeliveryReceipt)
Settlement
Amount/Terms
Settlement
Settlement Hub
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PPL’s Progress to Date on Implementing a
Settlement Hub
Accomplishments to Date:
• Business Model & IT Design were completed in 2007
– Includes business friendly “rules engine” that allows Treasury to change
work flow rules in real time
• Digital mailroom actuated in 2007 with OCR data capture
• Settlement Hub activated for miscellaneous bill issuance in January,
2008
Yet to Be Achieved:
• Settlement Hub software scheduled for final completion in April,
2008
• Phased in final implementation complete by 1st Quarter, 2009
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Closing Thoughts, Observations and Predictions
• Within 10 years Supply Chain business will be facilitated by a few
“winning” National platform Hub providers.
– Beware the imposters – most currently offer solutions that pave the cow
paths
– Successful players must offer a comprehensive software package
• Effective contract Management Modules will help determine the
winners from the losers
• Banks are an interesting “wild card” – if they can figure out your
business, they’d love to provide a comprehensive Supply Chain Hub
solution
– Banks can offer comprehensive netting and Credit Risk Management
solutions
Your role is to think revolution, not evolution--and then
maybe these predictions have a fighting chance!
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