Transcript Slide 1
Session 6
Leveraging Productivity through Outsourcing
About the Speaker
Phil Binkow
CEO Financial Operations Networks Phil is founder and CEO of The Accounts Payable Network (TAPN) – the leading resource for individuals with management and oversight responsibility for accounts payable operations. Before starting TAPN, Phil founded and served as CEO of PayTECH, an electronic payables processing, disbursements and information services provider serving Fortune 1000 companies. Phil holds a B.A. in economics from Stetson University and an MBA in operations research from the University of Florida. He serves on the Board of Directors of the Specialized Information Publishers Association, the SIPA Foundation and as president of the Board of Trustees of Friends of North Springs High School, a non-profit 501(c)(3) foundation.
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Accounts Payable
… the last control point before up to 60% of your revenue goes out the door
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Increased Scrutiny
• Sarbanes Oxley • Invoice processing cost • Compliance mandates • Cost reduction initiatives Slide 4 ©2010 Financial Operations Networks LLC
Scarce Resources
• More work • Less time • Staff cuts • Budget constraints Slide 5 ©2010 Financial Operations Networks LLC
Perception of Feasibility
Functionality/Effectiveness Cost/ Resources Low Functionality High Cost High Functionality High Cost Low Functionality Low Cost High Functionality Low Cost Cost/ Resources Functionality/Effectiveness
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Why Outsource?
• Reduce / control costs • Economies of scale • Identify & address broken processes • Focus on core business • Conserve capital • Implement new technologies • Draw on special expertise • Data utilization Slide 7 ©2010 Financial Operations Networks LLC
Issues
• People • Current level of internal optimization • Vendor selection • Contract and service level agreements (Win-Win) Slide 8 ©2010 Financial Operations Networks LLC
Why Not Outsource?
• Loss of control over own destiny • Confidentiality • Loss of expertise internally • Provider risks • Process complexity that affects quality • Timeliness, time zone differentials • Language barriers • Management availability and ability Slide 9 ©2010 Financial Operations Networks LLC
What is Usually Outsourced?
• Selected transactions • Disbursements • Document management • Specialized functions Slide 10 ©2010 Financial Operations Networks LLC
Objectives
• Control • Accuracy • Minimized transaction cost • Information Slide 11 ©2010 Financial Operations Networks LLC
Control
• Process • Separation of duties • Staff • Positive pay • Check stock • Timely payment Slide 12 ©2010 Financial Operations Networks LLC
Separation of Duties
• Incoming mail • Audit • Coding • Data entry • Disbursement • Outgoing mail • Reviews • New vendor set up • VMF maintenance Slide 13 ©2010 Financial Operations Networks LLC
Staff
• Aptitude • Experience • Background checks • Training • Supervision • Performance management Slide 14 ©2010 Financial Operations Networks LLC
Accuracy
• Process • Payment • Coding • Reporting Slide 15 ©2010 Financial Operations Networks LLC
Minimized Transaction Cost
• Staff • I.T. – yours and theirs • Process efficiency • Cost per transaction ― Manual ― Electronic ― Combination ― Type or vendor specific Slide 16 ©2010 Financial Operations Networks LLC
Managing Outsourced Processes
• Set up and implementation • Pre/post audits • Operational audits • Coding and charge-back • Invoice processing procedures • Mail processing • Electronic invoice file processing • Stakeholder report cards ― Vendor relationship managers ― Vendors Slide 17 ©2010 Financial Operations Networks LLC
Managing Outsourced Processes
(Cont’d.)
• Uncashed checks reporting • Unapplied cash analysis • Positive pay • Check stock security features • Disbursement controls • Separation of duties • Historical archiving and retrieval procedures Slide 18 ©2010 Financial Operations Networks LLC
Contract Checklist
• Third party fidelity and E/O coverage • Protection and liability for errors • Right to audit • Separate bank accounts, no co-mingling • Ownership and right to data • No hidden or undocumented fees • References Slide 19 ©2010 Financial Operations Networks LLC
Contract Checklist
(Cont’d.)
• Contract language specifying ― Permitted use of funds ― Payment cycle • Supplier verification of timely payment • Creditors’ waiver of creditors’ right to offset providers’ deposit accounts • Feasibility of making your own disbursements and/or using your check stock • Positive pay Slide 20 ©2010 Financial Operations Networks LLC
Resources
• The Accounts Payable Network ― Outsourcing Requests for Proposals ― Internal Control Checklists ― Outsourcing Best Practices Section ― Process flowcharts ― Outsourcing case studies • The Accounts Payable Certification Programs Training Material Slide 21 ©2010 Financial Operations Networks LLC
Questions
To ask a question, please press *1 on your phone or submit your question using the chat function within the Webinar interface.
If you have further questions, please e-mail them to [email protected]
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About the Speaker
Tom Brewer
Vice President, Shared Services Michaels Stores Inc.
Tom joined the company in 2008 as Vice President Shared Services with responsibility for Accounts Payable, Payroll and the Non-merchandise Procurement Team. Since joining Michaels, Tom has been instrumental in the outsource review and selection of BPO outsourcing. Michaels is early into the transition of activities to the outsource partner with Accounts Payable being the first area to be transitioned.
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Michaels Co-Sourcing
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Michaels Stores
• Over 1,000 stores in U.S. and Canada - 1,026 Michaels stores - 155 Aaron Brothers • 40,000+ SKUs across a variety of general & kids crafts, art supplies, framing and seasonal/ décor categories • $3.8 Billion in Revenue
Category Leader in Arts & Crafts
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Michaels Vision & Strategy
Vision
• • •
A World-Class Performer that:
Inspires and enables consumers to experience creativity Leads industry growth & innovation Creates a fun and rewarding place to work that fosters meaningful connections with our communities
Strategic Priorities Co-Sourcing an Enabler and Support for Michaels Overall Strategy
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How It Began For Michaels
• Strong Vision and Sponsorship from CEO • Dedicated Senior Management Resource with Strong Outsourcing Industry Experience to Lead Effort • Clear view of the potential opportunity … Cost plus • Executive-level Involvement from Day 1 • Well-designed O&O Provider Selection Process … involving key decision makers in the organization
Senior-level Commitment Critical for Success
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Co-Sourcing Objectives
1. Optimize & Reduce Business Process costs IT/IS/ BPO Labor Savings Inventory Optimization – Reduction in working capital 2. Improve Process Efficiencies
Productivity Improvement Process Automation Process Re-engineering Recovery Leakages
3. Drive Growth through Transformation Initiatives
Loyalty Social Networking Markdown Optimization
More Than Just Labor Cost ‘Arbitrage’
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Our Selection Process
# of Providers Rough Timing
Preliminary Proposal Business & IT Due Diligence
Portfolio Assessment Offshoring Roadmap 12 5 1-2 mos.
1-2 mos.
Key Steps in Process
• Initial scope of proposed functions • Preliminary proposals • 4-week Due Diligence • Team visits to Indian facilities • Provider Assessments
Detailed Reviews
Business Case Presentation
Final Selection Finalize Contract
2 1 1 1-2 mos.
1 mos.
2 mos • Detailed Portfolio Assessment & Transition Plan • Meetings with other Functional heads to assess potential • Final Proposals with cost, transition approach & timelines • Final visit by CEO to India • MSA and SOWs
Robust Process to assess 3 Cs: Capability, Cost and Commitment
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Transition to Co-Sourcing
• Collaborative Team Effort • Clear and Transparent Communications • Positioned TCS as an extension of internal organization – concept of “Co-Sourcing” • Executives committed to “make it work” • Modularized Portfolio based, Metrics Driven Transition • Early Offsite Readiness Assessment
Collaboration is key!
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Change Management Concerns
Most Widely Stated Concerns
• “
Our process is too broken (or decentralized) today – we need to fix it before we can move it.”
Our Experience
• Broken processes can be transferred just as effectively as good ones. And you may improve your chances of getting them fixed with outsourcing!
• “ • “
We have too many disparate systems / skills being supported by one person.“ Our work is very core to the company & we don’t want to lose our IP to a outsourcer. ”
• Outsourcers plan for restructuring Application portfolios both on functional & technical skills and cross-train people to support multiple systems.
• We really need to re-look at what processes within a function truly gives us competitive advantage & only retain & focus on those roles in-house.
• “
I don’t have enough people in my area to make outsourcing work. ”
• This is partially true if the only opportunity is labor arbitrage – it may not be worth it to save 1-2 FTEs.
• However, there may be an opportunity to upgrade processes and increase the value-add.
Change Management important to capture the opportunity
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Transition Process
Transition Step
• Joint Development of Project Plan & Solution • On-site Process Mapping, Training & Final Process • Off-Shore TCS Training
MIK Timing
4 2 weeks – 6 weeks 4 - 6 weeks • Parallel Processing by Michaels & TCS • Cut-over to TCS 4 – 6 weeks Total = 3 months
Key Success Factors
• • • •
Collaborative Effort Severance Plans Communication Documentation of SOPs
• •
Cultural / Work Integration Effective Hand-off with dual accountability
3 Month Parallel Processing Hand-off
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How Co-Sourcing is Working Today
• One Year from contract signing • Risk Mitigated transition – TCS committed to delivery • Tracking to plan • Focus on continuous improvement for “Steady State” functions
Still early….but tracking well
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What We’d Do Better The Next Time
• Understand the potential “end game” as soon as possible • Integrate & involve the outsourcer’s operations team into the process earlier • Involve mid-level functional leaders in the process earlier • Start documenting processes ASAP • Greater emphasis on upfront planning & PMO – small details matter during the implementation • Key Person Retention / Backup Plans….at Michaels & TCS
Opportunities to accelerate & improve process
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Summary – Lessons Learned
• Potential for much more than labor arbitrage • Opportunity is probably larger than you think … but will need commitment & focus to make it work successfully • Invest in finding the right partner • Over-invest in education & change management along the way
Co-Sourcing is a Collaborative Journey
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Questions
To ask a question, please press *1 on your phone or submit your question using the chat function within the Webinar interface.
If you have further questions, please e-mail them to [email protected]
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For further information on this topic, contact The Accounts Payable Network 2100 RiverEdge Parkway, Suite 380 Atlanta, GA 30328 Contact: [email protected]
866-827-6389 770-984-1184 www.TAPN.com