Continuous Roi In Procurement And Payables
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Continuous Improvement Means Continuous ROI in Procurement and Payables Session #33460
Presenter: David Downey Director Enterprise Services CherryRoad Technologies Inc.
Today’s Agenda 1. Overview 2. Managements challenge 3. Technology is a tool 4. Breaking down silos 5. Continuous improvement 6. Goals of measurement 7. Designing meaningful measures 8. The value of measurement 9. ROI
2
Overview One of the largest transportation networks in the world. – In 3 days, it moves more people than Amtrak does in one full year. – In 11 weeks, it moves more people than fly with our nation’s airlines in one year. Subways, buses, and railroads provide more than two billion trips each year. Bridges and tunnels carry more than 300 million vehicles each year. Serves a population of more than 14 million people in a 5,000 square mile area.
3
Public Perception "Out of Control" Cooked Books, Hid $500 Million – Riders want "Heads on Sticks“. Comptrollers and Advocates call for May 4th fare hike to be delayed “(Agency) hid half a billion dollars in 2002 budget, Fare increase based on Misleading Information” – Two Financial Plans: One Public, One Secret • State Comptroller “Finances and operations are not available for public inspection” “An accounting degree is required to analyze their annual financial statement” 4
Revenues vs. Ridership
5
Expenses vs. Ridership
6
Board Policy
In July of 2003, the Board mandated the identification and implementation of an integrated budget and financial system that provides accurate, reliable and timely information for financial decision-making and enhanced public understanding of the Authorities’ finances.
7
Headquarters Overview Headquarters is chartered to provide consolidated financial management and reporting for the operating agencies. – $28 billion dollar in investment and debt obligations management. – $8 billion dollar operations expense budget.
8
Management Goals Improve the business processes and technical ability to support consolidated financial reporting of all business entities. Improve the business processes and technical ability to support financial and human resource management functions. Standardize and integrate the information systems used to support financial and human resource management business processes. Create a standard information system platform and architecture to support integrated financial management of all agencies. 9
Oracle/PeopleSoft Enterprise Solution FMS – General Ledger • Commitment Control • Combo Edits • Allocations
– Project Costing – Cash/Deal Management – eProcurement • Workflow
– Accounts Payable •
EPM – Budgeting – Global Consolidations • Financial Plan
HCM – Administer Workforce • Position Management • Labor Relations
– Recruit Workforce • eRecruit
– Pension Administration – Benefits • Benefit Accruals
– Payroll – Time & Labor • Police & Union
IT – Enterprise Portal – Disaster Recovery Plan 10
Project Overview We are here 2004/2005 and 2006/2007 Deliverables Jan 04
Apr 04
Jul 04
Oct 04
Jan 05
Apr 05
Jul 05
Oct 05
Jan 06
Apr 06
Jul 06
Oct 06
Jan 07
Apr 07
Jul 07
Oct 07
Jan 08
Infrastructure & Enterprise Portal Initiatives Infrastructure Configuration & Support
EPM Upgrade
Go-Live 1/3/05
Financial & EPM Initiatives Global Financial Consolidations and Financial Plan General Ledger, Treasury, Accounts Payable, Procurement & Project Costing
Go-Live 1/3/06
Civil Rights& Compliance Procurement Integration
Go-Live 1/3/05
Budgeting
Go-Live 10/1/05
HRMS Initiatives HRMS, Recruiting, Position Management, Benefits Payroll and Time & Labor
Training Administration
Go-Live 12/21/04
Pension Administration
Go-Live 3/16/07
Continuous Improvement Initial BPO Recommendations
Formation of MTA managed Continuous Improvement Team
Organizational Assessment
Procure to Pay Analytics and Process Improvements
Continuous Improvement Team Wed @ 2pm - Board 40 identified
Enterprise-wide Analytics and Dashboard Agency Shared Service Initiative
11
Technology versus BPO • Implementing technology alone results in an ROI of only 22% of potential. • This figure improves to 70% when people, processes, and technology are addressed independent of each other. • ROI can reach 100% when projects address people, process, and technology at the same time. Simultaneously addresses people, process improvements and technology
Total ROI
People, process improvements and technology addressed independently
100% 70%
22% NonTechnology Coordinated Coordinated Only Strategy Strategy Source: The Hackett Group 2002
12
Process Initiatives
Initial Business Process Analysis Formation of Cross Functional team Business Process Optimization Organizational Assessment Formation of Continuous Improvement Team SOP Initiatives begin Board 40 Process improvements identified Shared Service Assessment Procure to Pay Measurements and BPO Shared Services Phase 1 Enterprise Analytics & Dashboard
Feb. – April 2004 April 2004 April – Dec. 2004 Oct. – Dec. 2004 Jan. 2005 – Present Jan. 2005 July 2006 Oct. 2006 Jan. – Dec. 2006 Oct. 06 - July 2007 TBD
13
Continuous Improvement… …is NOT fighting fires! – When we take a problem solving approach, we often never get to the root causes because our main goal is to put out the fire. – Its goal is NOT to blame people for problems or failures! When we engage in process improvement, we seek to learn what causes things to happen and then use this knowledge to remove activities that have no value to the organization.
14
Continuous Process Improvement Quality is a never ending quest… Continuous Process Improvement (CPI) is a never ending effort to discover and eliminate the root causes of problems. – CPI accomplishes this by using small-step improvements, as opposed to implementing one huge improvement
15
Continuous Improvement Team
Financial Management
Administration
Procurement
CFT
Accounts Payable
Treasury
CFT
CFT
General Accounting
CFT
Continuous EITG
Budgets
MTAHQ Budgeting
Gl obal Consol.
CFT
CFT
Legend
Improvement
FIN CFT New Role
CFT HR CFT
CFT Police Time & Labor
CFT
CFT
HRIS
Payroll
Direct Reporting Relationship
New Tasks to Existing Role
MatrixReporting Relationship
HR Organization
Other Orgs
CFT Benefits Administration
Police
Human Resources
FIN & HR Functional Areas In Scope for PS Initiative
16
Axioms of Performance Measurement 1. The goal of measurement is not to measure, but to improve business performance. 2. You must know what you want to measure and why before you worry about how. 3. Strategic clarity must precede measurement. 4. Processes are the key inflection point of an organization.
17
A measurement has value only when it is… 1. Accurate Reliably expresses phenomenon being measured 2. Objective Not subject to interpretation and/or dispute 3. Easy Inexpensive and convenient to compute 4. Timely Readily available data source 5. Harmless Does not induce inappropriate behavior
18
Requisition Cycle Time: All Requisitions • 39% of all requisitions in 2005 took more than 12 days to go through approval workflow • 46% of all requisitions in 2005 took more than 12 days to have the PO dispatched • Need to drill down on the requisition type in order to better understand the data (seen on following pages) Requisition Cycle Time
Requisition Cycle Time
# Days from Req Date to Req Approval Date for ALL Requisitions
# Days from Req Approval Date to PO Dispatch Date for ALL Requisitions
45%
50% 39%
40%
40%
35%
35%
30%
30%
25% 20% 20%
25%
20%
20%
15%
16%
15% 8%
10% 5% 5%
46%
45%
5%
10%
3%
5%
5%
1%
0%
10%
8%
6%
4%
5%
7-9
10-12
0% 0
1
2
3
4-6 Days
7-9
10-12
>12
0
1
2
3
4-6
>12
Days
19
Axioms of Performance Measurement
#1 - The goal of measurement is not to measure, but to improve business performance.
20
Requisition Submitted to Approval Cycle Time (Operating ♦) & Number of Requisitions Approved 30.0 25.0 # of Days
100
148 146
140
70
97 82
20.0
124
B 88
15.0
50
118
98
10.0
19
5.0 E
0.0 J
F
M
A
M
J
J
A
S
O
N
D
J
21
Axioms of Performance Measurement #2 - You must know what you want to measure and why before you worry about how.
22
Requisition Approval to PO Entry ▲ & PO Entry to PO Dispatch ■ Cycle Times & Number of Purchase Orders Dispatched 80.0 70.0
# of Days
60.0
272
50.0 40.0
B
84
30.0 20.0
103
10.0
101
62
39
79
55 52
63
176 122
70
0.0 J
F
M
A
M
J
J
A
S
O
N
D
J
23
Axioms of Performance Measurement
#3 - Strategic clarity must precede measurement.
24
Invoice Receipt to Payment Date Cycle Time (Operating ♦) & Number of Vouchers Paid 40.0 35.0
# of Days
30.0
E 1,586
1,743
25.0
2,385 1,351
20.0 15.0
2,535
2,265
B 2,489
10.0
2,053
2,378
1,584 2,340 2,126
5.0
1,366
0.0 J F M A M J
J A S O N D J
25
Invoice Receipt to Payment Date Cycle Time (Capital ■) & Number of Vouchers Paid 40.0 35.0
1,825
1,960
1,915
1,605
2,039
E
30.0 # of Days
1,653
B
25.0
2,182
20.0 15.0
1,915 1,734
1,466
1,813
1,943 1,757
10.0 5.0 0.0 J F M A M J
J A S O N D J
26
Axioms of Performance Measurement
#4 - Processes are the key inflection point of an organization.
27
Requisition to Payment Cycle Time (Operating ♦)& Number of PO Vouchers Paid
180.0 1,351
160.0 140.0 1,58 6
# of Days
120.0
1,743 2,489
100.0
2,535
2,265 2,053
B
2,340
80.0 2 ,378
60.0
2,126 1,584
40.0
1,9 84
1,3 66
20.0 E
0.0 J
F
M
A
M
J
J
A
S
O
N
D
J
9. Requisition to Payment Date Cycle Time (Roll-up CT for PO Vouchers Chart 1 + 2 + 8 "Operating Only ♦" ) & Number of PO Vouchers Paid
28
Return on Investment Significant drop in AP Interest liability and increased yield on cash via “just in time” prompt payment. Consolidate $21 Billion Debt and Investment Portfolio enhancing control and eliminated multiple manual activities, improved efficiency and cash flow management. Pension calculation refinements resulting in less potential for incorrect Plan Valuation feed to the Actuary. Significant intangible returns enabling more accurate, reliable and timely information for financial decision-making and enhanced public understanding of the Authorities’ finances.
29
30
CIT Accomplishments Streamlined operations. Eliminated non-value activities. Improved cycle time. Identified metrics to measure process improvements. Allowed for a process to base strategic decisions on real-time information. Enhanced the bank account reconciliation process by Automating Bank Reconciliation Reporting for a majority of bank accounts. Reduced journal entry preparation on a monthly basis through automated standard journal creation in the General Ledger for every month/quarter in respect of recurring transactions. 31
CIT Accomplishments (cont’d.) System and process design to enhance reporting ability across all modules based on custom reporting ‘tree hierarchies’. Improved cash management process and control by implementing the ability for dependant agencies to request/initiate wires to headquarters directly from PeopleSoft Cash Management system. Increased customer satisfaction regarding requisition process. Reduced Interest Liability by implementing metrics and process controls regarding the payment of invoices to ensure compliance with prompt payment laws.
32
CIT Accomplishments (cont’d.) Improved the business processes and technical ability to support consolidated financial reporting of all business entities. Improved the business processes and technical ability to support financial and human resource management functions. Standardized and integrated the information systems used to support financial and human resource management business processes. Create a standard information system platform and architecture to support integrated financial management of all agencies.
33
34
Questions?
35
Presenter: David Downey Director Enterprise Services CherryRoad Technologies Inc.
Today’s Agenda 1. Overview 2. Managements challenge 3. Technology is a tool 4. Breaking down silos 5. Continuous improvement 6. Goals of measurement 7. Designing meaningful measures 8. The value of measurement 9. ROI
2
Overview One of the largest transportation networks in the world. – In 3 days, it moves more people than Amtrak does in one full year. – In 11 weeks, it moves more people than fly with our nation’s airlines in one year. Subways, buses, and railroads provide more than two billion trips each year. Bridges and tunnels carry more than 300 million vehicles each year. Serves a population of more than 14 million people in a 5,000 square mile area.
3
Public Perception "Out of Control" Cooked Books, Hid $500 Million – Riders want "Heads on Sticks“. Comptrollers and Advocates call for May 4th fare hike to be delayed “(Agency) hid half a billion dollars in 2002 budget, Fare increase based on Misleading Information” – Two Financial Plans: One Public, One Secret • State Comptroller “Finances and operations are not available for public inspection” “An accounting degree is required to analyze their annual financial statement” 4
Revenues vs. Ridership
5
Expenses vs. Ridership
6
Board Policy
In July of 2003, the Board mandated the identification and implementation of an integrated budget and financial system that provides accurate, reliable and timely information for financial decision-making and enhanced public understanding of the Authorities’ finances.
7
Headquarters Overview Headquarters is chartered to provide consolidated financial management and reporting for the operating agencies. – $28 billion dollar in investment and debt obligations management. – $8 billion dollar operations expense budget.
8
Management Goals Improve the business processes and technical ability to support consolidated financial reporting of all business entities. Improve the business processes and technical ability to support financial and human resource management functions. Standardize and integrate the information systems used to support financial and human resource management business processes. Create a standard information system platform and architecture to support integrated financial management of all agencies. 9
Oracle/PeopleSoft Enterprise Solution FMS – General Ledger • Commitment Control • Combo Edits • Allocations
– Project Costing – Cash/Deal Management – eProcurement • Workflow
– Accounts Payable •
EPM – Budgeting – Global Consolidations • Financial Plan
HCM – Administer Workforce • Position Management • Labor Relations
– Recruit Workforce • eRecruit
– Pension Administration – Benefits • Benefit Accruals
– Payroll – Time & Labor • Police & Union
IT – Enterprise Portal – Disaster Recovery Plan 10
Project Overview We are here 2004/2005 and 2006/2007 Deliverables Jan 04
Apr 04
Jul 04
Oct 04
Jan 05
Apr 05
Jul 05
Oct 05
Jan 06
Apr 06
Jul 06
Oct 06
Jan 07
Apr 07
Jul 07
Oct 07
Jan 08
Infrastructure & Enterprise Portal Initiatives Infrastructure Configuration & Support
EPM Upgrade
Go-Live 1/3/05
Financial & EPM Initiatives Global Financial Consolidations and Financial Plan General Ledger, Treasury, Accounts Payable, Procurement & Project Costing
Go-Live 1/3/06
Civil Rights& Compliance Procurement Integration
Go-Live 1/3/05
Budgeting
Go-Live 10/1/05
HRMS Initiatives HRMS, Recruiting, Position Management, Benefits Payroll and Time & Labor
Training Administration
Go-Live 12/21/04
Pension Administration
Go-Live 3/16/07
Continuous Improvement Initial BPO Recommendations
Formation of MTA managed Continuous Improvement Team
Organizational Assessment
Procure to Pay Analytics and Process Improvements
Continuous Improvement Team Wed @ 2pm - Board 40 identified
Enterprise-wide Analytics and Dashboard Agency Shared Service Initiative
11
Technology versus BPO • Implementing technology alone results in an ROI of only 22% of potential. • This figure improves to 70% when people, processes, and technology are addressed independent of each other. • ROI can reach 100% when projects address people, process, and technology at the same time. Simultaneously addresses people, process improvements and technology
Total ROI
People, process improvements and technology addressed independently
100% 70%
22% NonTechnology Coordinated Coordinated Only Strategy Strategy Source: The Hackett Group 2002
12
Process Initiatives
Initial Business Process Analysis Formation of Cross Functional team Business Process Optimization Organizational Assessment Formation of Continuous Improvement Team SOP Initiatives begin Board 40 Process improvements identified Shared Service Assessment Procure to Pay Measurements and BPO Shared Services Phase 1 Enterprise Analytics & Dashboard
Feb. – April 2004 April 2004 April – Dec. 2004 Oct. – Dec. 2004 Jan. 2005 – Present Jan. 2005 July 2006 Oct. 2006 Jan. – Dec. 2006 Oct. 06 - July 2007 TBD
13
Continuous Improvement… …is NOT fighting fires! – When we take a problem solving approach, we often never get to the root causes because our main goal is to put out the fire. – Its goal is NOT to blame people for problems or failures! When we engage in process improvement, we seek to learn what causes things to happen and then use this knowledge to remove activities that have no value to the organization.
14
Continuous Process Improvement Quality is a never ending quest… Continuous Process Improvement (CPI) is a never ending effort to discover and eliminate the root causes of problems. – CPI accomplishes this by using small-step improvements, as opposed to implementing one huge improvement
15
Continuous Improvement Team
Financial Management
Administration
Procurement
CFT
Accounts Payable
Treasury
CFT
CFT
General Accounting
CFT
Continuous EITG
Budgets
MTAHQ Budgeting
Gl obal Consol.
CFT
CFT
Legend
Improvement
FIN CFT New Role
CFT HR CFT
CFT Police Time & Labor
CFT
CFT
HRIS
Payroll
Direct Reporting Relationship
New Tasks to Existing Role
MatrixReporting Relationship
HR Organization
Other Orgs
CFT Benefits Administration
Police
Human Resources
FIN & HR Functional Areas In Scope for PS Initiative
16
Axioms of Performance Measurement 1. The goal of measurement is not to measure, but to improve business performance. 2. You must know what you want to measure and why before you worry about how. 3. Strategic clarity must precede measurement. 4. Processes are the key inflection point of an organization.
17
A measurement has value only when it is… 1. Accurate Reliably expresses phenomenon being measured 2. Objective Not subject to interpretation and/or dispute 3. Easy Inexpensive and convenient to compute 4. Timely Readily available data source 5. Harmless Does not induce inappropriate behavior
18
Requisition Cycle Time: All Requisitions • 39% of all requisitions in 2005 took more than 12 days to go through approval workflow • 46% of all requisitions in 2005 took more than 12 days to have the PO dispatched • Need to drill down on the requisition type in order to better understand the data (seen on following pages) Requisition Cycle Time
Requisition Cycle Time
# Days from Req Date to Req Approval Date for ALL Requisitions
# Days from Req Approval Date to PO Dispatch Date for ALL Requisitions
45%
50% 39%
40%
40%
35%
35%
30%
30%
25% 20% 20%
25%
20%
20%
15%
16%
15% 8%
10% 5% 5%
46%
45%
5%
10%
3%
5%
5%
1%
0%
10%
8%
6%
4%
5%
7-9
10-12
0% 0
1
2
3
4-6 Days
7-9
10-12
>12
0
1
2
3
4-6
>12
Days
19
Axioms of Performance Measurement
#1 - The goal of measurement is not to measure, but to improve business performance.
20
Requisition Submitted to Approval Cycle Time (Operating ♦) & Number of Requisitions Approved 30.0 25.0 # of Days
100
148 146
140
70
97 82
20.0
124
B 88
15.0
50
118
98
10.0
19
5.0 E
0.0 J
F
M
A
M
J
J
A
S
O
N
D
J
21
Axioms of Performance Measurement #2 - You must know what you want to measure and why before you worry about how.
22
Requisition Approval to PO Entry ▲ & PO Entry to PO Dispatch ■ Cycle Times & Number of Purchase Orders Dispatched 80.0 70.0
# of Days
60.0
272
50.0 40.0
B
84
30.0 20.0
103
10.0
101
62
39
79
55 52
63
176 122
70
0.0 J
F
M
A
M
J
J
A
S
O
N
D
J
23
Axioms of Performance Measurement
#3 - Strategic clarity must precede measurement.
24
Invoice Receipt to Payment Date Cycle Time (Operating ♦) & Number of Vouchers Paid 40.0 35.0
# of Days
30.0
E 1,586
1,743
25.0
2,385 1,351
20.0 15.0
2,535
2,265
B 2,489
10.0
2,053
2,378
1,584 2,340 2,126
5.0
1,366
0.0 J F M A M J
J A S O N D J
25
Invoice Receipt to Payment Date Cycle Time (Capital ■) & Number of Vouchers Paid 40.0 35.0
1,825
1,960
1,915
1,605
2,039
E
30.0 # of Days
1,653
B
25.0
2,182
20.0 15.0
1,915 1,734
1,466
1,813
1,943 1,757
10.0 5.0 0.0 J F M A M J
J A S O N D J
26
Axioms of Performance Measurement
#4 - Processes are the key inflection point of an organization.
27
Requisition to Payment Cycle Time (Operating ♦)& Number of PO Vouchers Paid
180.0 1,351
160.0 140.0 1,58 6
# of Days
120.0
1,743 2,489
100.0
2,535
2,265 2,053
B
2,340
80.0 2 ,378
60.0
2,126 1,584
40.0
1,9 84
1,3 66
20.0 E
0.0 J
F
M
A
M
J
J
A
S
O
N
D
J
9. Requisition to Payment Date Cycle Time (Roll-up CT for PO Vouchers Chart 1 + 2 + 8 "Operating Only ♦" ) & Number of PO Vouchers Paid
28
Return on Investment Significant drop in AP Interest liability and increased yield on cash via “just in time” prompt payment. Consolidate $21 Billion Debt and Investment Portfolio enhancing control and eliminated multiple manual activities, improved efficiency and cash flow management. Pension calculation refinements resulting in less potential for incorrect Plan Valuation feed to the Actuary. Significant intangible returns enabling more accurate, reliable and timely information for financial decision-making and enhanced public understanding of the Authorities’ finances.
29
30
CIT Accomplishments Streamlined operations. Eliminated non-value activities. Improved cycle time. Identified metrics to measure process improvements. Allowed for a process to base strategic decisions on real-time information. Enhanced the bank account reconciliation process by Automating Bank Reconciliation Reporting for a majority of bank accounts. Reduced journal entry preparation on a monthly basis through automated standard journal creation in the General Ledger for every month/quarter in respect of recurring transactions. 31
CIT Accomplishments (cont’d.) System and process design to enhance reporting ability across all modules based on custom reporting ‘tree hierarchies’. Improved cash management process and control by implementing the ability for dependant agencies to request/initiate wires to headquarters directly from PeopleSoft Cash Management system. Increased customer satisfaction regarding requisition process. Reduced Interest Liability by implementing metrics and process controls regarding the payment of invoices to ensure compliance with prompt payment laws.
32
CIT Accomplishments (cont’d.) Improved the business processes and technical ability to support consolidated financial reporting of all business entities. Improved the business processes and technical ability to support financial and human resource management functions. Standardized and integrated the information systems used to support financial and human resource management business processes. Create a standard information system platform and architecture to support integrated financial management of all agencies.
33
34
Questions?
35
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