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Corporate Overview May 2011 1 Global Spend Reporting Amsterdam, May 2012 Michael Url, Manager Procurement Process & Technologies, Sappi Fine Paper Europe

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Page 1: Global Spend Reporting

Corporate Overview May 2011 1

Global Spend Reporting Amsterdam, May 2012

Michael Url, Manager Procurement Process & Technologies,

Sappi Fine Paper Europe

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• Introducing Sappi

• Why Spend Analysis

• Getting the Master Data right

• Applying best suited Technology

• Measuring the speed and effectiveness of Operational Procurement • Summary & Take Aways ...

Agenda: Global Spend Reporting

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Sappi Limited - who are we today?

• We are the world’s leading producer of high quality coated fine paper used in printing everything from art books to quality magazines to wine labels. (USA, Europe, South Africa, China JV)

• We also produce a range of business paper, coated and uncoated speciality paper and casting release paper (USA, Europe, SA)

• We are the largest and lowest cost producer of the chemical cellulose pulp used to produce viscose fiber (SA – 100% export)

• We employ over 15,600 people and achieved an annual turnover of US$6,572 million (2010)

• We are listed on the stock exchanges of Johannesburg and New York.

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Geographic diversification Global presence enables Sappi to take advantage of opportunities where markets are strong

3 Paper Mills 4 Sales Offices

1 Sales Office

1 Sales Office

6 Pulp and Paper Mills 1 Chemical Cellulose Mill 10 Sales Offices 541,000ha Forests

1 Sales Office

8 Paper Mills 16 Sales Offices

1 Fine Paper Mill (JV) 4 Sales Offices

1 Sales Office

Sales By Destination1 (US$) Sales By Source1 (US$)

North America

Europe

Southern Africa

Asia & other 21%

55%24%

22%

48%

13%

17%

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Fine paper mills in Europe

Total fine paper capacity in EU4,210,000 tons/year in 2010

Maastricht Mill The Netherlands

280,000 tons coated fine paper

Gratkorn Mill Austria

950,000 tons coated fine paper and

255,000 tons pulp

Ehingen Mill Germany

250,000 tons coated fine paper and

135,000 tons pulp

Stockstadt Mill Germany

430,000 tons coated and uncoated fine

paper and 150,000 tons pulp

Alfeld Mill Germany

330,000 tons coated woodfree and

uncoated speciality and 125,000 tons

pulp

Lanaken Mill Belgium

500,000 tons coated mechanical paper and

180,000 tons pulp

Nijmegen Mill The Netherlands

240,000 tons coated fine paper

Biberist Mill Switzerland

500,000 tons coated and uncoated fine

paper

Kirkniemi Mill Finland

730,000 tons coated fine paper and

330,000 tons pulp

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Spend Analysis - what surveys say…

• Only 29% of all enterprises have enterprise-level visibility into spend – despite the market-proven impact that spend visibility can have.

Ardent Partners: CPO Rising 2011 „The State of Spend Analysis“ (survey base: 250 companies)

• Organisations have poor spend visibility and accuracy to support effective sourcing: only one in three organisations captures the item level details that is required for effective procurement.

same A.T. Kearney study

• Almost 60% of study respondents said that spend analysis was crucial for effective sourcing.

A.T. Kearney: „European Indirect Spend Management Study 2011” (survey base: 162 large and mid-sized companies)

• 80% of procurement professionals agree that the quality of masterdata is the key factor for spend transparency.

Dun&Bradstreet Germany: Survey at BME-Symposium 2010 (survey base: 200 participants)

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Spend Analysis - why bother ?

Not knowing what and where you're spending means not knowing where you can save.

You cannot manage what you cannot see.

Spend Analysis enables Spend Management:

• Increased visibility into spend levels across the entire enterprise • Faster identification of sourcing opportunities and negotiating leverage

with suppliers • Enhanced monitoring of contract “leakage” and “maverick” buying • Enhanced benchmarking and performance capabilities

ROI ?

• According to a US-survey: new cost savings on an annual basis of 0,25% - 1,00% of total spend

• It’s hard to proof which part of a new saving is due to enhanced visibility

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The classical 5 steps for Spend Analysis

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Special Guest at Procurement Strategy Meeting ?

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Don’t ignore the Data Elephant in the room !

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How big is the Data Elephant ?

Annually for Sappi Europe (2010):

212.000 invoices (including credit / debit notes)

76.000 without purchase order reference 136.000 with purchase order reference

87.000 purchase orders with 183.000 purchase order items and 308.000 related goods receipt items (delivery items) 13.000 vendor masters used as Invoicing partner (of possible 42.000)

37.000 material masters referenced to in Invoices (of possible 310.000)

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Why do we need to eat the Data Elephant ?

Benefits • trustworthy segmentation and accuracy of spend analysis • better material / vendor search possibility ( less search time) • elimination of known duplicates • opportunity to share strategic spares between mills

Steps taken at Sappi • seek senior management buy-in and get the resources • make allies: accounting/finance as well as IT department • establish central function “Master Data Management” • cleanse efficiently with own people (our choice) or with external data

services • keep clean with master data workflow (material, vendor)

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How do you eat an elephant standing in your path ?

Remember that Sappi is an acronym for South African Pulp and Paper Industries. An old African proverb says: “The only way to eat an elephant is one bite at a time.”

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Master data cleansing: one bite at a time

Online Workflow for new Master Data

Mandatory bites for Spend Analysis

Restrict system

authorisations for

create/change Master Data

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How is Spend without PO assigned to Material Groups and Parent Material Groups 142 Sappi Material Groups the determination sequence is as follows:

1. from Material Master, if there is none then 2. from Purchase Order, if there is none then 3. from a mapping table “GL-Account ( /Vendor ) to Material Group”

17 Sappi Parent Material Groups each Material Group is assigned to one Parent Material Group:

1 Wood and Chips 2 Pulp 3 Non-Fibre Rawmaterials 4 Logistics, Warehouse, Transport 5 Energy, Utilities, Water 6 Industrial Services 7 MRO Spares 8 Capital Equipment 9 Machine Clothing 10 Consumables 11 Packaging, Shipping Supplies 12 G&A, Insurance, HR 13 Marketing, Rebates, Trials 14 IT, Telcom 15 Travel 16 Non net-spend (VAT, Taxes, Intercompany, Grants, Suspense, Interest) 17 Release Paper

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Material Master Cleansing: the 2 phases at Sappi • “Commercial” Cleansing (this “phase 1” completed in Mar 2011)

Sappi Material Number 5051280 Short Text in language English BEARING:BALL;ANNULAR GE40KRRB YEL208 eOTD Concept Identifier 0161-1-01-006687 UNSPSC code UNSP-31171504 Ball Bearings Commodity Code (Intrastat Nr) 84828000 Balls, needles and rollers for bearings Sappi Product Hierarchy 010991-01 Ball Bearings Sappi Material Group 010991 Bearings & Supplies Sappi Parent Material Group 7 MRO Spares

• Enrichment with Technical Attributes (“phase 2” not started in EU ) Deliverable (example):

From these attributes, a “Material Master Longtext” is generated Software used: „Refresh“ by Fresh International

Bearing: Ball; Annular

Property Description Value UOM

Inner Diameter 85 mm

Outer Diameter 180 mm

Width 41 mm

Number of Rows 1

Sealing Type Open

Load Rating 3.5 KN

Speed Rating 5000 rpm

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Material Master Cleansing at Sappi: 284.000 records cleansed (“phase 1”)

Cleansing 6 old mills

completed by Nov 2009

(except for product

hierarchy)

Cleansing 3 new mills ( another 99.000

Materials) completed by

Mar 2011 (including product

hierarchy)

Acquisition of 4 mills

from M-Real

Average speed: 335 material masters /

manday

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Vendor Master Cleansing at Sappi

• business information was bought from Dun&Bradstreet • …for 71% of records (agreed hit-rate):

- ownership structure, DUNS-Nr, out-of-business, duplicates • rework / completion was done by Sappi • no annual updates bought

• “Parent Vendor” grouping introduced for top 1.000 supplier

• covering 97% of total spend and now containing 6.199 single vendor records

• parents shared between Sappi Europe, Sappi North America, Sappi South Africa

• blocking of vendor records (minus 17%) • out of business • not used for 7 years

• elimination of duplicates

• 42.000 records remain

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Technology Approaches for Spend Analysis

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Approaches for Spend Analysis

Manual - useful as proof of concept or due to lack of budget - issues: lack of scale, not easy to repeat, inconsistent … Outsourced Service:

- Software Provider: typically self-service with customer categorizes (effort!) - Procurement Service Provider: buy categorization expertize and sourcing

expertize In-house Software:

- Packaged Solution for Spend Reporting e.g. SAP Business Objects Spend Performance Management (BO SPM) - Adjust a Visualisation Software to the needs of Spend Reporting

e.g. SAP Business Objects Explorer

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Suppliers of Business Intelligence Plattforms

2005 – 2010: large brands acquire best-of-breed products - Oracle: Siebel and Hyperion - IBM: Cognos - SAP: Business Objects

2011: trend continues to strategic purchases that expand market opportunity

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BI Platforms include various Tools for Specific Purposes Example: SAP Business Objects

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Sappi Global Spend Reporting: Data collection and Reporting Software

• All invoices/supplier payments are covered by 2 ERP systems

• Data is extracted daily from 2 ERP systems (Europe/North America, South

Africa, both SAP ERP 6.0) into one BI system (SAP BW 7.0)

• SAP Business Objects Explorer is used as interactive visualisation tool for analysis. – all European buyers and some finance managers have access – user-friendly, fast and very good user acceptance

• SAP BEx Analyser (MS Excel integrated) remains available for use by system experts (with same data content + some more fields)

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Sappi Global Spend Reporting: Content

• allows for spend reporting and analysis at a Sappi global level, as well as for

local ad-hoc analysis

• based on invoiced values includes invoices with PO and without PO, but singles-out the “non-

net-spend” (VAT, taxes, intercompany, suspense, interest...) also includes all debit and credit notes, as well as credit card spend net value (cash discount is deducted) at invoice date with currency conversion at that date’s rate aggregations possible for both, Sappi fiscal periods and calendar

months in case “without PO”, the Material Group is derived from the General

Ledger Account

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Sappi Global Spend Reporting: Available Data Spend for what?

Parent Material Group Material Group Product hierarchy (only available if there is a Material Number) Text Information (= invoice text, inherited from the PO short text, if PO exists ) Material

Spend to which suppliers? Vendor’s Industry (e.g. all energy suppliers) Parent Vendor (e.g. all “Siemens” companies accumulated) Vendor

Spend where within Sappi? Operational Division (e.g. Europe) Company Code Group (= all companies at one location e.g. at “Maastricht”) Company Code

Performance indicators “Spend under Control”: with PO, credit-note process w/o PO, other control, no control “PO with contract”: Yes/No (the referenced PO is a contract call-off) “PO with catalog”: Yes/No (the referenced PO is from an online supplier catalog)

Other details Payment terms General Ledger Account Invoice Number Invoiced quantity

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Sappi Global Spend Reporting: Default view after starting the report

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Example „spend via online catalogs at one location“

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Procurement Europe manages around 2 billion € annual spend

• Raw Materials and Energy (“direct spend”) encounters for

• 73% of total spend • 11% of transactional efforts (# invoice items) • 10 % of the (active) supplier base

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KPIs Procurement Operations: the average does not give the full picture

• the KPIs vary a lot • per mill • per category

• “No SAP purchase order” does not necessarily mean maverick spend (e.g. credit note process, VMI/consignment, electricity,...)

• “No SAP contract” does not necessarily mean no written long term agreement

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Summary &

Take Aways

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• Free-text POs: Relying on user entered classifications

• Efforts continue to raise % of POs with coded description (= with material/service master)

• Spend without PO: Some GL-accounts are used for very different categories – assignment to material groups via vendor

• Payments without accounts payable (small amount): discuss with Finance department to stop or add AP posting (e.g. bank collection for leasing)

• Parent Vendors: keep up-to date with mergers/acquisitions

• Ensure global agreements on standards (supplier, material) are adhered to in other Sappi regions, too (South Africa, North America)

Sappi Spend Analysis: remaining challenges

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One bite at a time • collect data from all sources (ERP,…) • cleanse & enrich master data • choose & deploy spend analysis software

The human factor • get buy-in from senior management • ally with IT and AP • don't assume that software can do the data cleansing (it can help) • make sure that software is easy-to-use for the buyers

Some decisions must be taken • in-house solution vs. outsourced service • analysis software: tailor-made visualisation vs. packaged solution • masterdata cleansing: - internal vs. external resources - internal vs. external standards

Focus on + correct&complete data content + a flexible, user friendly analysis tool - not on colorful dashboards with static reports

Summary

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| [Presentation title] | [Client Name] | 21 May 2012 33

www.sappi.com

Thank you.

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Back-Up Slides

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IT Systems Landscape for procure-to-pay process at Sappi: high level of integration, same at all EU locations

Function Description System

ERP

Purchasing, Inventory Management, Invoice Verification.

Beside MM also FI, CO, PS, PM, APO... SAP ERP 6.0 SRM Supplier Relationship Management SAP SRM 7.0 Catalog Supplier Catalog SAP CCM 2.0 and Punch-Out B2B System to System (Supplier) SAP OCI, Sterling Integrator

OCR Optical Character Recognition for

Scanning of Invoice & Delivery Notes ReadSoft Process Director

Planning Rawmaterial Planning and Recipe

System RRS (Sappi System) BW Enterprise Datawarehouse SAP BW 7.0 BW Reporting Surface SAP BusinessObjects Explorer 3.1 Portal Access to SAP Systems, single-sign on SAP EP 7.3 Portal Sappi Intranet Microsoft SharePoint

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Performance Management with KPIs in Procurement Operations ( without working capital KPIs and fixed cost KPIs)

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Systems • enhanced contract upload tool - go-live March • SRM roll-out Stockstadt/Kirkniemi - go-live May • support mills to improve KPIs (new catalogs, contracts, Auto-PO, EDI)

MRO Stock optimisation • material master enrichment for selected groups continues • seek approval for stock-sharing concept at Maintenance Managers meeting

Reporting • enhanced BOE Spend Report (quantities, vendor industry) - go-live April • new BOE Stock&Consumption Report - go-live May? Lean Projects • Pallet ordering - first wave done, implementation ongoing • Raw material price maintenance - done, follow-up with KPIs • 5S Sappinet for Procurement Europe - until May

Current Initiatives ...

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The Journey Continues...

• One Purchase Requisition Workflow for all type of PReqs/Shopping Carts • decision expected in Sept 2012

• Single SAP system SA - EUNA • go-live July 2013 • no business process / reporting harmonisation included • no master data alignment included

• evaluate new functionalities and deploy if worth the effort • Contract Management tool • Dashboard for KPIs (crystal reports?) • Supplier Portal (SAP SUS or MS Sharepoint) • online Bidding (SRM) • online Supplier Evaluation • electronic invoicing enhancements