Offshore Drilling Firm Finds Major Savings Through Source-To-Pay Assessment, Spend Analysis, Category Management

Based in Houston, Texas, this client is a leading oilfield services company, serving customers around the globe. The client understood the limitations caused by its source-to-pay (S2P) processes and recognized there was room for improvement. The client had recently transitioned to a shared service center for buyers and accounts payable, replacing legacy local full-time employees, which created service and knowledge level gaps. Its ERP system was highly customized, which provided value-add automation, but the organization had experienced past challenges with system integrations and master data integrity. Spend data was analyzed manually with limited automated reporting — which created functional silos and pain points throughout the organization. Externally, most suppliers were managed at a transactional level rather than strategic supplier management and category segmentation.

Protiviti was initially engaged to assess S2P processes and systems to identify the root causes of these issues and develop recommendations for improvement.  Based on the assessment's success, Protiviti was then asked to lead the implementation of spend analysis capabilities, leveraging a third-party application and developing a category management program, as well as lead sourcing events for selected categories.

What was working well

We partnered with the company’s Vice President of Supply Chain, Head of Shared Services, and the Vice President of Strategy and Sustainability throughout the project. The company was well positioned with a highly customized ERP system that drove high PO automation rates.  However, there was room for improvement in how well procurement worked with its operational stakeholders and strategically managed spend.   For example, supply chain and operations were not always aligned when discussing commercial terms that can impact business agility and cost, particularly for Tier 1 suppliers.  The overarching objective of the engagement was to allow for supply chain and procurement to align, giving the company a competitive advantage over industry peers by leveraging high transaction automation rates while also providing in depth and automated spend reporting and analysis across a custom spend taxonomy, developing a robust category management program to identify and drive sustainable cost savings, improve supplier performance, and enhance insights and value provided to the business.

What needed improvement

Knowing there was a solid foundation in place, the project team focused on identified opportunities for improvement:

• The company had limited visibility to all spending and limited differentiation in how suppliers were managed, resulting in transactional processing rather than focusing on critical vendors and categories.
• Deviations from standard processes significantly increased S2P cycle time.
• Inefficiencies, combined with a high volume of transactions, led to constant firefighting and major effort being required to complete daily tasks.
• A support/service level and knowledge gap existed with internal resources.
• An inefficient onboarding process plus limited formal communication with suppliers and lack of supplier-owned updates to vendor information (e.g., banking info) and no vendor self-service (e.g., PO status, invoice status).

Identifying possible solutions

The initial assessment included inputs from several aspects including interviews and process walk throughs, process mining and transaction analysis, leading practices gap analysis, peer benchmarking and capability maturity rating.  We also conducted a technology fit gap analysis to identify how the existing ERP supported current and future state requirements. Highlights identified through process mining and benchmarking included high volume of invoices below $1,000 (58 percent of invoices representing 1.7 percent of total spend), 37 percent of PO lines followed 3,649 process variants with average cycle time of 368 hours, and 34 percent of PO line items required rework (55,000 out of 162,000 PO lines).  Through this assessment, the Protiviti team defined 17 discrete recommendations prioritized across seven implementation workstreams and summarized into an implementation roadmap with a cost-benefit model to quantify anticipated benefits and implementation payback period.

Value delivered

Phase one delivered a comprehensive and prioritized roadmap and implementation plan for improvements was developed with quantification of performance improvement relative to the organizations peers to support the business case for change. Recommendations and fit-gap analysis provided on technology improvements allowed the company to see both quick wins and long-term solutions.

Phase two resulted in implementation of high value items to improve immediate visibility of spend, cost drivers, savings levers, process improvements, key supplier relationships and segmentation strategy.  This included implementing a leading third-party spend analysis solution. Supported strategic sourcing across four categories to achieve in-year savings and identified annual savings potential of $20 million.  Protiviti also delivered a leading category management program and playbook, including methodology, tools/templates, category research/profiles, market intelligence, savings tracker, and training program.

Impact by the Numbers: