How To Develop A Business Case For FSCM

Developing a Business Case

Jessica ButlerPrincipal

Attain Consulting [email protected]

February 2011

SAP FSCM Seminar

Agenda

• Introduction

• Identify the Opportunities/Improvements

• Quantify the Opportunities/Improvements

• Develop the Return on Investment (ROI)

• Sample Business Case

Attain Consulting Group 2011 – Developing a Business Case

Introduction

What is a Business Case?


IntroductionDefinition

A business case captures the reasoning for initiating a project

or task. It is often presented in a well-structured written

document, but may also sometimes come in the form of a

short verbal argument or presentation

Contains 3 Key Components

• Identify the Opportunities/Improvements (What am I going to get?)

• Quantify the Opportunities/Improvements (What is it going to cost?)

• Develop the Return on Investment (What is my Payback?)


Identify the Opportunities/Improvements

Identify the Opportunities/Improvements

How do you know what opportunities or improvements are

available?


• Internally driven: Identified need or pain point – search

for solution

• Externally initiated: Hear about a solution – creates a

previously unknown opportunity

Identify the Opportunities/ImprovementsDeduction management automation


TOPIC

Deduction Processing

Cash Application / Remittance Processing

Sales Agreements



TOPIC AREA OF POTENTIAL IMPROVEMENT


Managing Pre-Deduction Notification Information

Gathering Supporting Documentation

Preparing Customer Correspondence

Credit / Debit Memo Matching

Credit Memo Approval

Cross Functional Workflow & Collaboration




Cash Application /

Remittance Processing

Use of Bank Lockbox Services

Manipulation of Remittance Info. Prior to Posting

Reason Code Mapping




Sales Agreements

Importance of Program / Claim Validation

Validation Drivers

Validation Process











Cash Application /




Reason Code Mapping

Sales Agreements


Validation Drivers

Validation Process











Cash Application /




Reason Code Mapping

Sales Agreements


Validation Drivers

Validation Process

Identify the Opportunities/ImprovementsRemittance processing

Improvement Area:

Manipulation of remittance information prior to posting

Common Situation:

• Customer’s remittance information needs manual processing prior to

posting deductions in ERP. For example:

– Deleting / adding columns

– Changing column signs

– Removing prefixes/suffixes from invoice numbers associated with

deductions

• Hours are spent manipulating unique formats and logic associated with

remittance information


Identify the Opportunities/ImprovementsRemittance processing

Automation Opportunity:

• Rules based engines

• Allows customer specific automated pre-processing

• Increases on-invoice hit rate / decreases manual remittance processing

• Offered as SaaS (software as a service)

– Minimal IT involvement

– Avoid in-house EDI mapping












Cash Application /




Reason Code Mapping

Sales Agreements


Validation Drivers

Validation Process

Identify the Opportunities/ImprovementsSales agreement validation

Improvement Area:

Validation of Trade Promotion Claims

Common Situation:

• Customers take deductions with minimal program reference

• Matching & retrieving program documentation is labor intensive

– May be maintained in internal system

– May be available on customer vendor portals

• Programs may require Sell Through or Sell In information for validation

• Validation may required “clicking through” numerous screens and

supporting documentation may need to be manually analyzed for

validation


Identify the Opportunities/ImprovementsSales agreement validation


• POS information can be routinely extracted from key customers and

customer reports generated using SaaS solution

• Claim documents and deal sheets maintained on customer vendor

portals can be automatically retrieved and pasted within ERP using

Web Aggregation technology

• Internal source documents can be:

– Retrieved and attached within dispute case

– Calculations can be performed automatically to streamline validation

processing












Cash Application /




Reason Code Mapping

Sales Agreements


Validation Drivers

Validation Process

Identify the Opportunities/ImprovementsDeduction processing

Improvement Area:


Common Situation:

• External supporting documents require significant manual effort to

retrieve (e.g., PODs, claim copies)

• Internal supporting documents are stored throughout multiple systems

• Preparing customer correspondence (e.g., denial letters and dispute forms)

is labor intensive

• Credit memo approval process is multi-step process

• Limited cross-functional workflow & collaboration


Identify the Opportunities/ImprovementsDeduction processing


• Retrieval of supporting documentation, such as PODs and customer

claims can be can be automated using Web Aggregation technology

• Paper documents, such as customer claims, BOL can scanned and

indexed (using OCR technology)

• Internal source documents can be automatically attached to dispute

case eliminating need to manually retrieve

• Customer dispute forms can be auto-populated

• Workflow engine can be used to streamline & automate manual

processes:

– Credit memo approval process

– Deduction research by reason code


Quantify the Opportunities/Improvements

RoleDepart. / Division FTE Salary

Benefits Markup

Number of Resources

% of Resources

on ProcessFull Time FTE

Equivalent Total Amount

Quantify the Opportunities/ImprovementsCurrent Costs

1. Calculate Current Operational Cost


Task/Sub-Process% of Time

# Resources

FTE Equiv

FTE Amt

Min Automation

Max Automation

Min FTE Savings

Max FTE Savings

Avg FTE Savings

2. Estimate Min/Max Savings

Quantify the Opportunities/ImprovementsEstimate savings


Develop the ROI

Calculate the ROI

Estimated SavingsMinimum Maximum Average

OPERATIONAL EXPENSES

TOTAL VALUE CAPTURE

Implementation Costs

IMPLEMENTATION COSTS Provider Internal TotalFirst YearSecond Years onwards (Annual Recurring)

Return on InvestmentMinimum Maximum Average

NET YEARLY SAVINGSFirst Year savingsSecond Year and Ongoing Savings


Sample Business Case


Identify Key Processes

Break into Sub-Processes

Identify Improvement Opportunities

Model Potential Benefits

Summarize Results






Summarize Results



Sample Business CaseIdentify Sub-Processes

Process # Deduction Sub-Processes

1 Gather Supporting Documentation

2 Prepare Customer Correspondence

3 Credit Memo Approval

4 Cross Functional Workflow & Collaboration

#Deduction Sub-

ProcessImprovement Opportunities

1Gather Supporting

Documentation

A % of backup can be automated via Web Aggregation, scanning/indexing etc and automatically attached to Dispute Case so Analyst does not have to retrieve manually. Relevant SAP transactions such as Sales Order, Delivery Invoice, Return Credits can be linked to Dispute Case

- Automatically retrieve and attach BOL or POD from carrier websites- Automatically retrieve and attach debit memos from customer websites- Automatically retrieve check and remittance backup from bank lockbox- Scan / index mailed documentation & attach to dispute via matching rules- SAP A/R documents are automatically linked- SAP SD transactions can be linked using the standard SD document flow logic

2Preparing Customer

Correspondence

Standardized Repay package can be created in SAP via SmartForms including Cover letter and Denial Form that can be automatically populated and generated. Backup documentation such as Invoice Copy, Claim Copy and POD Copy can be automatically included in package based on reason codes etc.

3Credit Memo

Approval

Convert complete credit memo approval process to electronic within SAP- Analyst/Manager approval/reject process can be orchestrated within SAP workflow- Eliminates need for offline email, printing & approval process- Automatically release credit memo and clear deduction upon approval

4Cross Functional

Collaboration

All communication via email/fax/mail between various departments & analysts regarding Dispute Cases will be orchestrated via SAP Workflow so a user can "Forward" the Dispute Case within SAP.

- Most offline email communication can be eliminated brought into SAP within Dispute Case- Eliminate need for scanning or manually attaching back up documentation- Eliminate need tor searching through email communication to review history

Sample Business CaseIdentify Improvement Opportunities






Summarize Results



Quantify the Opportunities/ImprovementsCurrent operational costs

Input - Resources

Role Division FTE SalaryBenefits markup

# of Resources

% on Related Activities

FT FTE Equiv. Total Amount

Deduction Analyst Division 1 $ 55,000.00 $ 68,750.00 12 100% 12 $825,000.00

Deduction Specialist Division 1 $ 35,000.00 $ 43,750.00 4 100% 4 $175,000.00






Customer Service Rep Division 4 $ 60,000.00 $ 75,000.00 1 100% 1 $75,000.00

Customer Service Rep Division 4 $ 60,000.00 $ 75,000.00 1 100% 1 $75,000.00

Total 40 40 $2,368,750.00


Quantify the Opportunities/ImprovementsQuantify savings

Sub - Process

% of

Time

# of

Resources

FTE

Equiv. FTE Amount Min

Automation

Max

Automation

Min FTE

Savings

Max FTE

Savings

Avg FTE

SavingsSupporting

Documentation Gathering 20.0% 12 2.40 $165,000.00 50% 70% $82,500.00 $115,500.00 $99,000.00

Customer

Correspondence 20.0% 12 2.40 $165,000.00 35% 50% $57,750.00 $82,500.00 $70,125.00

Credit Memo Approval2.0% 12 0.24 $16,500.00 20% 30% $3,300.00 $4,950.00 $4,125.00

Credit Debit Matching1.5% 12 0.18 $12,375.00 50% 80% $6,187.50 $9,900.00 $8,043.75

Inter-Departmental

Workflow & Collaboration 5.0% 12 0.60 $41,250.00 20% 30% $8,250.00 $12,375.00 $10,312.50

Supporting

Documentation Gathering 90.0% 4 3.60 $157,500.00 20% 50% $31,500.00 $78,750.00 $55,125.00

Customer

Correspondence 0.0% 4 - $0.00 10% 30% $0.00 $0.00 $0.00

Credit Memo Approval0.0% 4 - $0.00 10% 30% $0.00 $0.00 $0.00

Credit Debit Matching0.0% 4 - $0.00 50% 80% $0.00 $0.00 $0.00

Inter-Departmental

Workflow & Collaboration 5.0% 4 0.20 $8,750.00 20% 30% $1,750.00 $2,625.00 $2,187.50

9.62 $566,375.00 $157,987.50 $225,225.00 $191,606.25

Division 1


Quantify the Opportunities/ImprovementsQuantify savings

Role Sub - Process Automation Rational

Deduction

Analyst

Supporting Documentation

Gathering

Division 1 operations comprised of 85% deductions & 15%

invoice collections. On the higher-end we are assuming 70%

Automation of Debit Memos and 80% automation of PODs. Max

Automation = (0.7 x .85 + 0.8 x 0.15) = 70%

Deduction

Analyst

Customer Correspondence

Deductions: Auto-generate coversheet, customer sepcific claim

denial form, invoices, debit memo & POD copies etc.

Collection: Auto-generate collection letters, invoice copies and

POD copies. 70% of automation above

Deduction

AnalystCredit Memo Approval

Productivity increase by converting the complete credit memo

approval process to electronic within SAP. Currently paper copies

are printed for approval or reports are reviewed manually

Deduction

Analyst

Inter-Departmental Workflow

& Collaboration

Productivity increase due to orchestrating the deduction

resolution process within SAP workflow eliminating offline

collaboration via email, scanning documents etc






Summarize Results



Quantify the Opportunities/ImprovementsCalculate ROI

Estimated Savings Minimum Maximum Average

OPERATIONAL EXPENSES

Division 1 $ 157,987.50 $ 225,225.00 $ 191,606.25

Division 2 $ 164,500.00 $ 234,937.50 $ 199,718.75

Division 3 $ 223,234.38 $ 326,125.00 $ 274,679.69 TOTAL VALUE CAPTURE $ 545,721.88 $786,287.50 $666,004.69

Implementation Costs

IMPLEMENTATION COSTS HighRadius Internal Total

First Year $ 580,614.80 $ 76,428.00 $657,042.80

Second Years onwards (Annual Recurring) $ 74,400.00 $ - $ 74,400.00

Return on Investment Minimum Maximum Average

NET YEARLY SAVINGS

First Year savings $(111,320.93) $129,244.70 $ 8,961.89

Second Year and Ongoing Savings $ 471,321.88 $711,887.50 $591,604.69


Conclusion

“The vast majority of unsuccessful projects fail not because

of poor project management, but because of poor decisions

with respect to the choice of projects. A good business case

helps to make right decisions and avoid horrible waste.”

Ilya BogoradPrincipal of Bizvortex Consulting Group

“The sole role of a business case is that of a

communication tool, composed in a language that the

target audience understands and with enough detail to

facilitate decision making on his or her part.”


Questions?

Jessica Butler

(201) 280-4773

[email protected]

Documents

How To Develop A Business Case For FSCM