One of Australia’s largest industrial conglomerates, Orica, implemented the ReadSoft Accounts Payable (AP) automation solution across separate SAP platforms within the group. The solution was instrumental in transforming the AP function and shifting Shared Services into a “centre of excellence with agility”, with benefits extending to other parts of the business as the flow-on effect of automation infiltrated the organisation. The success of phase 1 sees Orica rolling the ReadSoft solution out to operations on a global basis. Watch this space…
Background
Orica’s Shared Services Centre receives on average 1400 manual paper invoices on a daily basis. This, together with a further 2100 electronic format invoices presents a combined total of 850,000 invoices per year for this busy department to process. Orica recognised that automation of their processing activities would provide improved accuracy, stronger audit and risk governance and more importantly, superior data and analysis visibility of the invoice life cycle, critical to identifying operational inefficiencies. They focused on improving the 40 per cent manual invoice process as opposed to the EDI electronic volumes received, as this would present greater impact on the AP department’s efficiency whilst offering the best return on investment. It was estimated that it would take five years to move 70 per cent of the supplier base onto EDI and they would never be able to get them all on. With such a large supplier base, having 40 per cent processed manually created enormous delays in turnaround time, with data accuracy consistently being compromised.
The solution
Looking for the best AP solution, research was undertaken over a period of eight months by Ciaran Mara, invoice processing manager for Orica. During this time, Mara reviewed 31 local, national and international AP automation providers and interviewed many companies about their experiences.
“It was made quite clear in the initial stages that outsourcing was not the path Orica wanted to take. However, I did have to research this option to validate my business case. My findings provided me with a very clear vision for an automated system that could fit in with any strategic company decision,” says Mara.
“This included the ability to operate under a shared service environment or stand-alone, locally, nationally or off-shore which meant that licensing splits needed to be flexible. In essence I was looking for a solution we could own and that would change as we changed with little or no cost for the change. It was also important that we selected a ‘veteran’ solution, one that was tried and tested. The ReadSoft solution filled all our requirements and more. I visited a number of ReadSoft sites to view the software in action and discussed the solution features, benefits and issues at length with AP and IT departmental managers before making a final decision.
“A big tick for the ReadSoft software was the flexibility that the solution allows for our Shared Services Centre setup. For instance, we are able to scan an invoice at one site, have it verified at another, and processed at a third site. This allows us to decentralise any part of our AP department and still be fully functional, with the ability to provide extra processing resources in times of high volume to different SAP platforms. What’s more, if ever something did prevent us from scanning or the server was down, AP can still process the old manual way through SAP. The freedom to scan and attach documents post-processing strengthened this solution.” Orica now has an average of 1400 invoices a day scanned on 1-2 Kodak i420 scanners within the Orica Shared Service Centre AP department with a third i420 located at another site. These invoices are then passed through an Optical Character Recognition process at which point the data is verified for the correct platform and transferred to that relative SAP system. Any supporting documentation received as an attachment to the invoice is scanned as well, so that a comprehensive set is available for viewing in digital image format at any time. ReadSoft’s solution performs automatic three-way matching before their workflow module, electronically routes these invoices to relevant authorities for coding and final approval if required.
AP staff are able to electronically direct ‘unmatched’ invoices out to the requisitioner, the purchase order (PO) creator or, if relevant, goods receipting staff, for discrepancy resolution and/or coding before final approval. The roll-out of the solution was in three stages, starting with Mining as the pilot site. “As we were installing three solutions, the strategy was to implement the solution with the smallest volume of invoices first, with the widest variety and most technically difficult invoices for processing. This would provide us with a platform and pilot system which would identify any additional customisation from the initial user acceptance testing before go-live and then any further customisation requirements after the first couple of weeks of go-live.” “By adopting this strategy, we were able to greatly reduce the time and cost of implementation for the second and third solutions on the other SAP platforms because we installed all the customisations (whether needed or not) made to the Mining scanning solution.”
“My approach was a staggered roll-out for a number of reasons. Some of these reasons actually provided greater comfort (especially with our IT) that we had chosen the right solution. At the time of our implementation, we had one SAP platform on ECC6 and Unicode and two systems still on SAP 4.6, with one due for upgrade during go-live and another due for upgrade four months after we had gone live with ReadSoft. People resource management from both sides was critical and in the end, well-managed. I don’t think we could have chosen a harder time to do these implementations, but to the credit of all involved, it was delivered.”
The benefits
“There are so many benefits to automating the supplier invoice process and we are already experiencing significant improvement in a number of areas in the organisation, not only in the AP department,” adds Mara. “With Orica having such large invoice volumes coming through from suppliers, OCR scanning eliminates the tedious data entry task and removes the human error factor to provide a phenomenal 98 per cent accuracy rate. Furthermore, although the benefits of the electronic workflow are mostly intangible, we have realised significant benefit in time savings in processes (mail, invoice response times), paper reduction (good Green policy), and strong risk governance enhancements (audits, duplicate and error payments). “The solution provides clear visibility of the scanned image which is instantly available to the greater audience of the business. This reduces incoming queries from the business and frees up AP resources to focus on other functions.From the time an invoice is scanned to the time it is paid, there is a clear documentation trail into every action that is taken during the process.
This provides very strong risk governance and eliminates the risk of paying third parties and having to claim back error payments.“Another plus point was that the ReadSoft solution runs seamlessly within the SAP environment (SAP Certified), adopting all the security parameters of the MIRO, FB60 and 65 SAP standard processing screens and user profiles. This created some familiarity for operators and was a definite advantage when delivering training to staff members. “Orica is already seeing the cost benefit from moving to an automated solution. The difference in cost for scanning continues to come down as the ReadSoft scanning software learns and improves on itself and the people that use it become more fluent,” says Mara. “Companies should not expect to see an immediate drop in cost or the ability to reallocate resources from processing when they go live. The system and business needs to learn and adapt to increased performance output.
“Based on a very easy to use but comprehensive ROI tool, I was able to form a strong business case and map out future points in time where scanning benefits and targets would be reached. We have been right on target with still more unexpected gains in the pipeline. The Trade Working Capital benefit of AP automation, depending on the dollar value of your accounts payable, can be well into the millions,” says Mara.
This case study is sponsored by ReadSoft.
This article was first published in Inside SAP Yearbook 2012 (published in September, 2011).
