Beruflich Dokumente
Kultur Dokumente
F-XC A N GE F-XC A N GE
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ADVISORY
KPMG
Objective of presentation
l The objective of the presentation is to highlight the importance of managing a company according to
processes and to give you an overview of process development and analysis, using also examples
from a real case (procurement process), in order for you to utilize these lessons when developing
the operations of your own company.
l CFOs usually have a key role in process definition and development projects because the financial
aspects are a key driver for improving processes.
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 2
Contents
Background
Description of a procurement process and project example
What to analyze and measure defining KPI s
Lessons learned and summary
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 3
1
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F-XC A N GE F-XC A N GE
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Organization
Support processes
l Processes and organization need to be aligned with the overall vision and strategy.
l When the company is managed based on the processes, the personnel understands better its role
in the value chain and how it contributes to the value creation, and the organization s objectives are
aligned with the customer value proposition.
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 4
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 5
l A business process can be defined as "a chain of logical connected, repetitive activities that utilizes
the organization's resources to refine an object for the purpose of achieving specified and
measurable results or products for internal or external customers.
l The generally used SIPOC method for process definition consists of five elements:
l Supplier The suppliers are the individuals, departments, or organizations that provide the
materials, information, or resources that are worked on in the process being analyzed.
l Inputs The inputs are the information or materials provided by the suppliers. Inputs are
transformed, consumed, or otherwise used by the process.
l Process The process is the steps or tasks that transform the inputs into outputs: the final
products or services.
l Outputs The outputs are the products or services that result from the process.
l Customers The customers are the individuals, departments, or organizations that receive the
outputs, the products or services, generated by the process.
Inputs Outputs
Supplier Process Customer
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 6
2
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Invoices
Payment
Yes
Yes 13a. Send copy of
invoice to GL team
SSC Accounts
Payable Team
12. Certify /
approve according
to the approval
rules
Systems
Paper
SAP SAP SAP SAP
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 7
C on rt a ct wi th
Supply continuity
E val uate su pp li er
spen d
requ ri eme nts
Procurement
Mana ge
Val ue
Performance
P la n and
ma ke
Price risk
cycle
Proc ess p urcha se
Quality
Ma ni tain
Pu rcha se
L edg er
Rece vi e
Goo ds &
S ervi ces Regulatory and
compliance
Ma ke Pro cess
Intellectual property
Multiple legacy systems Undefined roles & responsibilities
Lack of integration Insufficient training Sustainability
Skills or experience gap
Fraud
Capability enhancement; building your capability to help deliver long term value from your supply base
Organization and people
Process
Technology
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 8
Steering Group
Interviewees / Reference Group l NN, CFO
l NN, Quality & Process
Depending on the process, if e.g. procurement process development
l NN Partner, KPMG Advisory
l Procurement manager
l Buyers
l Accounts Payable and Cash Management persons Project Group
l Relevant line manager l NN. Project manager
l NN, Manager, KPMG Advisory
l NN, Analyst, KPMG Advisory
Workshop Group
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 9
3
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Contents
Background
Description of a procurement process and project example
What to analyze and measure defining KPI s
Lessons learned and summary
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 10
An optimal multi-tier supply base Best suppliers are selected, optimizing both quality and price
structure is designed
Supplier
Sourcing evaluation A total supply chain vision
Strategy and selection is adopted towards
management of total cost
Evaluate
Contract with
supplier
and value
sp end
requirements
People are
well
trained and Value Plan and Sourcing
aware of Manage
Performance make
Process purchase
their
Quality Purchasing
duties,
specialists
give Receive
centralized Maintain
Purchase
Goods &
Services
support Ledger
Make Process
Payment
Invoices Purchases and receiving are
performed as automatically as
possible
A/P is processed as automatically as possible
No unauthorized or incorrect
No possibility for fraud purchases are made
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 11
Purchase to Pa y
Contract with Supplier Negotiating with short-listed suppliers and making a contract based on the defined supplier selection
criteria
Plan and Make Purchase Identifying a purchasing need, raising a requisition and specification of requirements, obtaining
appropriate approvals, selecting the supplier and making a purchase
Receive Goods & Services Receiving of goods purchased or services rendered, routing of paperwork to designated signatory and
managing exceptions
Process Invoices Receiving and processing invoices, checking against authorizations, solving discrepancies with
unmatched invoices and authorizing invoices in preparation for payment
Make Payment Prepare and confirm payments, make payments, handle requests for special payments, distribute
payments and file documentation
Maintain Purchase Le dger Set up or amend supplier information, maintain information tables, maintain security attributes
Manage Process Define, maintain and communicate the procurement process and respective policies; define measures
for following up of the process performance; report and manage the performance
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 12
4
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Sub-Process Organization & people Process and controls Systems and technology
Contract with Only authori zed personnel Supplier selection process has been Supplier selection is supported by the
Supplier makes contracts with suppliers. defined and documented. purchasing system.
Plan and Make Only authori zed personnel Procurement planning is made in the Procurement planning is supported by
Purchase makes purchases. beginning of the project and regularly the purchasing system.
updated.
Specialist buyers are Purchase orders are made using
responsible for defined Purchases are made primarily from standard tools, e.g. E-catalogues.
purchasing categories. preferred suppliers, based on framework
agreements. Authori zations to make purchase
orders are restricted by the ordering
system.
Receive Goods & Only authori zed personnel Goods are received in a secure location. Goods receipt is matched to the
Services receives goods. purchase order in the system.
Goods are inspected and any necessary
complaints made to the supplier in a timely System supports the follow-up of credit
manner. notes by facilitating the blocking of
Complaint process is followed up to ensure invoices.
resolution.
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 13
Sub-Process Organization & people Process and controls Systems and technology
Process Invoices Invoice processing is centralized Invoices are separately reviewed and Invoices are matched to the purchase
to a shared service center. approved only in case there are deviations orders and goods receipts in the
between purchase order and goods system.
receipt.
For invoice re view and approval,
electronic circulation is used. Review
and approval rights are enforced by the
system.
Maintain Purchase The authority to create or Inactive suppliers are regularly cleaned up A common supplier master file is used
maintain supplier master data is from the supplier register. by purchasing and A/P functions.
Ledger
restricted to persons who do not
record invoices or make
payments.
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 14
Contract with Supplier selection process is not very systematic, principles for tendering Not necessarily the best supplier (regarding price, quality
Supplier of suppliers have not been documented. or delivery accuracy) is selected.
Plan and Make Purchasing planning is often made on too high a level, creating need for The price can be higher and the supplier less reliable than
urgent purchases and making purchasing follow-up difficult. Purchasing if the purchase had been planned and made early enough.
Purchase
authorizations are not restricted. Inappropriate / unnecessary / fraudulent purchases can be
made.
Receive Goods & There is no defined procedure for receiving goods on the construction It is possible that the goods (or services) do not meet the
Services site. Goods inspection can be done months after the receipt of the goods. order criteria (regarding quality or quantity) or e ven
Filing of complaints and follow-up of credit notes is not systematic, completely incorrect materials are accepted.
neither is the follow-up of late deliveries or late invoices. No 3-way match Some credit notes can be missed if their follow-up is not
(matching the purchase order, goods receipt and invoice). systematic.
Goods can be damaged or lost if they are inappropriately
stored after receipt.
Process Invoices Invoice processing is fairly automatic but there is no 3-way match. Without 3-way match, it is possible to approve invoices for
which there is no corresponding purchase order and/or
goods receipt.
Make Payment Payment process is fairly automatic, the risks are related to the wide Inappropriate / erroneous / fraudulent payments can be
authorizations to create payment files and the lack of payment approval made.
before sending the file to the bank.
Maintain Purchase Suppliers are created based on invoice data without separate review or Inappropriate / erroneous / fraudulent supplier master data
Ledger approval. Inactive suppliers are never cleaned up from the invoice can be created.
register. Same persons in the A/P function create and modify supplier
master data, record invoices and create payment files.
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 15
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l The review of Company X s Purchase to Pay process initially focused more on the control aspect
than on the generally efficiency or the performance of the process.
Ø However, often these are linked: a well-controlled process is also efficient as the controls are
automated and responsibilities and authorizations clear.
l From the control perspective, several weaknesses were identified, especially related to the
Goods Receipt and Ledger Maintenance phases of the process.
Ø Control over Goods Receipt, as well as over the whole process, could be significantly
improved if 3-way match was possible.
l In the first phases of the process, Contract with Supplier and Plan & Make Purchase, there are
few real controls; the performance and control of the process depend upon the competence and
diligence of the personnel, especially of the Project Managers.
Ø Process could be improved by clarifying the principles for supplier tendering and selection,
stronger management supervision and wider utilization of the existing purchasing systems.
l Invoice Processing and Payment phases of the process are automated and reasonably well-
controlled, though there are some issues regarding the wide authorizations.
l Better procurement planning would be a key thing to generally improve the process.
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 16
Contents
Background
Description of a procurement process and project example
What to analyze and measure defining KPI s
Lessons learned and summary
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 17
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 18
6
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© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 19
KPI Measurement Maximum availability of systems with recorded incident outages deducted
and Calculation for each sub-system. System availability raw figures are aggregated.
KPI Units of
Percent Uptime of aggregated systems availability
Measure
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 20
Comments XXX
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 21
7
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Number of FTEs for the process Total cost of the process "select suppliers
"develop sourcing strategies" per 1 and develop/maintain contracts" per 1
MEUR purchases/revenue MEUR purchases/revenue
Supplier Percentage of
Number of FTEs for Sourcing e valuation and
purchase orders
the procurement Stra tegy se lection
approved
cycle per 1 MEUR Evaluate Contract electronically.
purchases spend
require ments
with
supplier
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affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 22
lTotalcost of "Supply lAnnual inventory turn lTotal cost of logistics per lTotal sales lTotal cost of
Chain Planning" process rate 1 MEUR of revenue. service process
lSales expense/revenue (%)
(% of revenue)
lScrap and rework lTotal cost / personnel cost lTotalservice
lSales per channel
lTotal cost / personnel costs as a percent of / systems cost of the employee costs
cost / systems cost of sales process "operate lTotal sales process cost
lTotal # of service
the process "plan inbound warehousing" per 1
lFinished product, first lTotal process cost per FTE-s
material flow" per 1 MEUR revenue.
pass quality yield channel
MEUR revenue. lCycle time for
lTotal cost / personnel cost
lManufacturing cycle lTotal # sales FTEs service
l(see also the examples / systems cost of the
time in hours management
on the previous page) process "operate l# FTEs per channel
(e.g., # hours from
lOn-time delivery rate outbound transportation"
lAvg. cost per sales issue reported to
per 1 MEUR revenue.
lLabor turnover rate employee resolution)
as a percentage of lNumber of FTEs in the
lAvg. cost per sales lCustomer
work force process "operate
employee, per channel retention rate.
outbound transportation"
lTotal cost of the
per 1 MEUR revenue. lSystems Cost "Sales" /
Manufacturing
"Channel Management"
process per 1 MEUR lNumber of annual sales
revenue orders filled per "operate lSales forecast accuracy
warehousing" FTE.
lCycle time in for sales (e.g.,
lCustomer order cycle # days / hours from initial
time in days. inquiry to closing the sale)
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 23
Contents
Background
Description of a procurement process and project example
What to analyze and measure defining KPI s
Lessons learned and summary
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 24
8
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F-XC A N GE F-XC A N GE
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l Top management involvement and commitment is essential. Getting the buy-in takes time and
usually several workshops are needed.
l When defining processes, people easily think only functionally (e.g. sales function = sales process,
procurement function = procurement process) but the whole purpose of defining processes is to
think of the cross-functional flows.
l The truth is in the details to really understand the current state of a process, it needs to be analyzed
on a sufficiently detailed level.
l Even if a process is analyzed and developed only from one perspective, e.g. from the control
perspective, typically the improvements cover also the other process objectives, i.e. make the
process faster, less error-prone, and more cost effective.
l Process improvements often require changes in the IT systems and thus take time to implement, but
it is always better to aim at automated processes. However, the process must be quite ready before
automating it.
l Each process needs to have an owner, who takes ongoing responsibility for maintaining and
developing the process. Shared responsibility is no one's responsibility.
l Process responsibilities also need to be aligned with the existing responsibilities, e.g. functional and
business responsibilities.
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 25
Summary
l The best way of delivering the customer value proposition and to achieve internal effectiveness is to
manage a business according to processes, as opposed to only according to organizational functions.
l The process perspective focuses on co-operation, integration and the end-results of doing something.
This way different parties understand better how their work affects the whole, what they need to do,
when and why.
l Developing processes must be based on a thorough understanding of what drives the value (cash
flows) of the company.
l The process perspective enhances internal co-operation between different functions/departments
and people and makes better use of the company s resources.
l Thinking about the entire process makes optimization easier and helps avoid the risk that certain
issues fall between the chairs .
l The main objectives when defining and developing processes are related to: quality (e.g. error-free,
customer perceived), value (e.g. cost efficiency, margin enhancement), time (e.g. speed) and risk
(e.g. sufficient but not excessive risk treatment and control).
l Process objectives and metrics must be prioritized based on their strategic and financial importance
(which change over time).
l Process development and analysis is a modern and effective approach for running any kind of
business (or support functions).
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 26
Contact information
THANK YOU !
Jan Montell
Partner
Advisory
© 2008 KPMG Oy Ab, a Finnish limited liability company and a member firm o f the KPMG ne two rk of independ ent memb er fi rms
affiliated with KPMG In ternational, a Swiss cooperative. All rights reserved. Printed in Finland. 27