September 2007 - Bristol-Myers Squibb is in the midst of globally rolling out a new electronic procure-to-pay process for non-employee travelers in an effort to increase efficiency and reduce errors.
The pharmaceutical giant is eliminating paper invoicing for travelers who don't hold corporate cards, relying instead on integrating its Ariba expense management system and SAP enterprise resource planning tool with the processes of its travel management company, Carlson Wagonlit Travel, and payment card American Express.
The process starts with Ariba's "Easy Req" request for travel, which sends an order to CWT, which then triggers a charge through Amex and then monthly reconciliation back through Ariba and on to SAP.
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Company:
Bristol-Myers Squibb, $18 billion New York-based global pharmaceutical firm that manages travel in 56 countries |
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Volume:
$95 million in 2006 air spend across four regions: Asia-Pacific, Latin America, North America, and Europe, Middle East and Africa |
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Challenge:
Streamline and reduce errors in manual procure-to-pay process for non-employee travel buying |
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Approach:
Leverage existing procurement processes with Ariba and SAP, and align interests and processes of card provider American Express and travel management company Carlson Wagonlit Travel |
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Solution:
Automate data communications between e-purchasing system, suppliers and enterprise resource planning tool |
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After about 18 months in development, the new process was implemented in France early this year and is expanding to 20 European countries before rolling out next year in the United States, according to corporate travel services director Lisa Jacobsen.
BMS in 2006 spent about $25 million in Europe and North America on non-employee and group air travel, while its companywide employee air spend was about $95 million. Non-employee travel often involves external consultants, customers, partners or job candidates.
"Non-employee spend does not go through the traditional employee process of corporate card and hitting the back office in terms of the expense reporting system, etc.," Jacobsen said in May at an Association of Corporate Travel Executives conference. "We wanted to focus on this because it represented a win-win for everyone by improving our processes, which were primarily hard-paper invoicing that was extremely time-consuming and riddled with errors."
The previous process involved a variety of invoicing elements that "never really evolved significantly over time to be able to handle the kind of volume we wanted to process and the level of speed and efficiency we demand," said Jacobsen. "It was based on raising a traditional SAP order number, which was communicated on the phone or via an agent to the travel management company. The TMC had to quote that purchase order number on their invoices submitted to accounts payable, and AP had to match that invoice to payment."
Procure-to-pay proponents contend that adoption of best practices can help companies save millions of dollars. A Visa study published in 2003 cited savings of "$1.8 million to $8.3 million in annual, indirect transaction processing costs--with the possibility of additional cost savings from vendor discounts and front-end processing efficiencies."
Jacobsen said the company's roughly 10-year-old, global procurement culture calls for process simplification, productivity increases and cost reduction. Key principles also include maximizing existing resources, whether internal or external, and deeply involving suppliers in program implementations.
In reinventing its non-employee travel purchasing and payment, BMS aimed to increase efficiency, standardize processes, improve payment cycle times, reduce data inconsistencies, eliminate TMC invoicing, improve reporting and increase the volume processed by its corporate travel card.
"By having this air spend on the corporate card, we not only got the [negotiating] benefit from it, but it's a way of providing free insurance coverage," said Jacobsen. Also, "getting this payment process for non-employees ... helped leverage that side objective and bring in that additional volume--around $7 million in Europe--into our current TMC."
She said U.S.-based Bristol-Myers started this process in Europe for "no other particular reason than my team there was really motivated to do it, which really helps." France is the company's largest market in terms of non-employee spend, providing "good buy-in."
In the Bristol-Myers procure-to-pay process, the user raises a request in Ariba, triggering an order to the travel management company (Carlson Wagonlit Travel), which inputs purchasing code information in an American Express system. American Express pays the TMC about three days later. Amex also provides an electronic file to Ariba, which automatically reconciles with SAP.
Source: Bristol-Myers Squibb
What also helped was the fact that BMS already had developed a purchasing card process involving Ariba and SAP, so roping in Carlson Wagonlit Travel and American Express represented less of a challenge than it otherwise might have. Those travel suppliers stood to enjoy the benefits of quicker payment processing (down to three days for CWT) and higher volume, but the complicated program ran into some hurdles.
"It took longer than expected [to develop] for a host of reasons," said Jacobsen, listing competing resources in the IT group; other travel-related deployments; an Ariba software upgrade; unexpected compliance requirements related to Sarbanes-Oxley and travel purchasing for healthcare professionals; and a conservative approach by the sourcing and finance groups.
Jacobsen's tips for other firms included clearly defining roles, securing senior management support, aligning the interests of internal groups and suppliers, establishing internal standard operating procedures and creating external service level agreements.
