Procure to Pay Shared Services End to End Optimization 21108

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Procure to Pay Shared ServicesEnd to End
Optimization2/11/08
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Who is MeadWestvaco?

Packaging 5.0 BN
Consumer Office Products 1.1 BN

• Large growing market
• Profitable niches
• Leadership positions in a number of markets

75
18
7
Specialty Chemicals Specialty Papers 0.6 BN
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Packaging is our Major Business
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MeadWestvaco is Positioned in Growing Markets
Fragrance
Food Beverage
Media Entertainment
Healthcare
Healthcare
Cosmetics Personal Care
Home Garden
Tobacco
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Branded Consumer Products Customers
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Global Capabilities
Majority of sales outside the United States
Worldwide Employees U.S. 14,000 Global 10,000
Growing Presence in China and Russia
6 Paperboard mills in the U.S. and Brazil
Customers in 100 Countries
50 Converting Facilities in 17 Countries
Operations in 30 countries
Expanding business in India
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MeadWestvaco Transformation Model

• Shared Business Support (SBS) provides
  specialized or technical services utilizing a
  shared resource model
• Human Resources
• Communications
• Safety, Health Environment
• Sourcing
• Legal
• Tax
• Global Business Services (GBS) provides services
  in a shared environment
• Shared Services Hire to Retire, Procure to Pay,
  Invoice to Cash, Record to Report, Supply
  Chain/Logistics
• Enterprise Information Technology (EIS)
• Program Management Office (PMO)

• Why the Change?
• GA cost reduction
• Restructure for growth
• Optimize the delivery of services, leverages
  scale and focuses on low cost, high volume
  processing of standardized, transaction-based
  processes.
• End to end process alignment will enable issues
  that start upstream to be caught and corrected
  before they impact downstream activities

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Procure to Pay Transition
Sourcing (SBS)

• Develop and implement global sourcing strategies
  and contract negotiations for MWV
• Communicate strategies that align with BU goals
• Knowledge of emerging supply chain technologies
  and best practices
• Optimize global supply chain process through
  leadership and value added services
• Facilitate supply chain process mapping, modeling
  and benchmarking

Exception Handling (GBS)
Accounts Payable (GBS)
PO Transactions (GBS)

• ORGANIZED BY VENDOR
• Invoice processing
• Interface with supplier/BU on problem resolution
• Payment runs
• Payment reconciliation
• 1099 and year end

• ORGANIZED BY COMMODITY
• Timely execution of purchase orders
• Liaison between BU and suppliers
• Negotiations for small spend categories (cost
  savings/avoidance)
• Contract compliance try to redirect
  requisitions to contract suppliers
• Late order follow-up and expediting
• Business Unit Call duty
• PIR and Source List

• ORGANIZED BY VENDOR
• GR/IR and blocked invoices
• Research supplier inquiries and complex invoice
  and supplier invoices
• Void checks
• Call Center
• 1099
• Duplicate invoice research and reclaim
• TE / P-card administration and audit

Supply Manager (SBS)

• Key communication hub among the SBS, GBS and BU
• Facilitate BU efforts in reducing total costs
• Measure BU performance against key business
  objectives
• Manage supplier performance with a one company
  mindset.
• Identify and manage process improvement
  opportunities in the supply chain
• Identify and facilitate BU training programs in
  the procurement process

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The Change Required Effective Internal Business
Partnerships and Change in Roles to Achieve
Success

• Lead Sourcing process
• Establish procurement strategies
• Identifying opportunities and vendors
• Perform risk analyst/business case
• Negotiate/Contract
• Ensuring BU needs are met

Sourcing (SBS)

• Define operational and market needs
• Requisition Creation
• RM MRP Planning
• Inventory Management
• Forecasting Demand

Supply Manager (SBS)

• PO Verification/Conversion
• Spot sourcing/negotiations
• Cost savings capture on supplier pricing changes
• Expediting and late order follow-up
• Exception Processing
• Invoice processing/Payment

BU
PO Transaction/AP (GBS)

• Identifies/quantified BU needs
• Manages local supplier relationships
• Ongoing BU issues
• Identifies improvement opportunities
• Lead contract implementation at BU
• Liaison between GBS, SBS, BU

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Taking a Holistic View to Implementing Shared
Services will enable a smooth transition

• Centralize work to leverage resources and volumes
  PO transactions and invoice processing
• Redefine staffing skill needs
• Managed Workload

• Standard Process Design
• Organization Design
• Operational Design
• System Assessment

• Electronic Payments
• Pricing Accuracy
• Auto Source
• Electronic Invoicing
• Challenge NVA Work
• Contract Compliance/Savings

• Knowledge transfer
• Detailed Deployment Plan
• Agree on work to transfer
• Identify Gaps and change management impact

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Benefits Achieved to Date

• Benefits Achieved
• 2.4M or 37 savings associated with lower
  staffing needs
• Support pay terms initiative to achieve 40MM
  working capital gains
• 20 of purchase requisitions spot bid by GBS
  buyers for savings approx 200,000 savings per
  buyer
• Implemented policy change requiring ACH
  (electronic payment) for all new suppliers -
  20K/yr
• Operational Successes and Accomplishments
• Migrated 9 business units with 21 locations in 11
  months
• Handle PO creation, invoice processing and
  payment in three (3) systems to date
• Stabilized workload, staff and learning curve
  99 new to MWV
• Established formal P2P Policy and Procedure
  Manuals for all systems
• Standardize all GBS P2P Request forms (check
  request, wire request, void)
• Developed Service Level Agreements alignment with
  all business units
• Performance scorecards enable monthly reviews and
  discussions
• Formulated zero-based chargeback model focused on
  key cost drivers
• Beginning to realize benefits of end-to-end
  operation

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Procure to Pay - Snapshot of Progress
Cost per PO
Disbursement Methods
Cost per vendor invoice
MWV 2005
GBS YE07
WC
Invoices per FTE
POs per FTE
AutoSource
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Challenges Encountered Key Learnings

• Document assumptions and plan for contingencies
  (e.g. legacy systems)
• MWV timeline for transition very aggressive
  allow time to adjust for learnings
• More subtle and difficult challenges involved
  political and emotional issues
• Determine current performance baseline and
  expectations minimizes we did it better
• Process band-aids removed focus on the
  positives of this
• Continuously revisit roles and responsibilities
  early on
• Learning in hiring decisions - new organization
  may require different skill sets and adjustment
  to shared service or transaction based culture
• Goals alignment difficult and require regular
  interaction to be successful GBS and SBS offer
  different value propositions thus initiatives can
  be in conflict

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Critical to Success

• Decisive leadership
• Unequivocal support for the strategy, issue
  resolution and change leadership throughout the
  journey
• Clear sponsorship, accountability and alignment
  from Senior Executives
• Robust approach, methodology and disciplined
  implementation plans
• Define to be process, identify change for each
  BU, manage the risk
• Thorough project plan and focus on Details
  Details - Details
• Work with BU to clarify and define expectations
  and develop SLA
• Hire the right leaders skill set willing to
  take risks passion for the value add
• Business Unit Engagement and Commitment to
  Results
• Clear support to ensure cultural transformation
  and plans for FTE transition
• Staff who do the work engaged in design and
  implementation
• Assign accountability and set targets,
  performance measures
• Create incentives and cost accountability across
  entire organization

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Guiding Principles To Operate a GBS
The primary guiding principle is to add value to
the businesses in order to create shareholder
value for the company.

• Secondary Principles
• Ensure you have the right leaders in place
• Align with the businesses we are here to
  support them
• Key Enablers
• Managed performance with SLA and operating
  reviews
• Cost Transparency, continuous improvement and
  cost cutting
• Strong business collaboration
• Best Sourcing centralize, offshore,
• Execute, Execute, Execute
• Hire strong performers to fill gaps
• Culture and mindset
• Customer Service
• Understand and drive business and financial value
• Results oriented..

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Tools for Success Metrics and Scorecards

• Metrics Evolution
• Eliminated BU metrics such as priority orders,
  rejects action didnt impact cost
• Added more to understand exception work
• Changed focus of call center resolution rates
  rather than answering the phone quickly
• The detail below the metrics was most helpful in
  identifying process issues resulting in cost

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Whats Next in 2008

• The Centralized Global Business Services has
  enabled platform for driving change that can
  impact costs through effectiveness and
  efficiencies
• Successful implementation of e-invoicing
  initiative goal of 70 invoice volume
  electronic within two years resulting in cost
  savings of over 600,000/year. Phase 1 go-live
  is 3/7/08
• Focus on eliminating exceptions work
  opportunity area is 35 of cost. Utilize six
  sigma and project resources
• Establish European and Asia/Pacific shared
  service centers leverage what done/learned in
  US
• Establish role in vendor master ownership and
  gatekeeper to ensure data integrity
• Continued gatekeeper to ensure new supplier
  contracts utilized to ensure Sourcing savings
  achieved