Outsourcing AP can reduce costs, but can it improve your service delivery too?

Hans-Peter Sammer, Payment Services Lead EMEADecember 2011

AstraZeneca’s BPO journey

We employ over 61,000 people, 47% in Europe, 30% in the Americas, 23% in Asia, Africa and Australasia

In 2010, our worldwide sales totalled $33.3 billion, with operating profit of $11.5 billion.

We invest over $4 billion in R&D each year and have over 15,500 people in our R&D organisationA 70-year track record of innovation that includes the introduction of many world-leading medicines.

Global Pharmaceutical Company14 major R&D sites in 8 countries, 23 supply and manufacturing sites in 16 countries

AstraZeneca context

AGENDA

3

AGENDA

4

Our industry faces significant challenges...and opportunities

•AstraZeneca is a global, innovation-driven, integrated biopharmaceutical company.

•Our mission is to make the most meaningful difference to health through great medicines that bring benefit for patients and add value for our stakeholders and society

5

Finance Operating Model was complex…

NAM MedimmuneR&D Operations ISMO

Functions

MarketsPlantSites

2

304

CFO

10 175

81

16 31

23

Regions

4 52

66

Regions

Areas

28

91

195

Specialist Finance

Transactional Finance

132 37 42

2215 4185

13

2 20

5

5 382 11

5

1

12

3

1

1

Canada1

3

9

22

4

Business Partners Business Analysts / ‘Controllers’

34

32

CEO

161

324* * ~250 in SSC for W-Europe

….and needed to be simpler

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Issues in Accounts Payable

8

Slow to adapt to change

Average cost to process an invoice (Europe):2010: 4.50 USD

Payment On Time (Europe): Q3 2010: 77%

Customer Service (Europe):Service rated “acceptable or above”: 54% in 2010

Various levels of specialist AP knowledge in Functions across the Regions

AGENDA

9

10

From Local Units to Shared Services in 2½ Years !

GTF NAM

GTF APBS

GTF LATAM

Genpact AZ,Guatemala

Genpact AZ,Sao Paolo

Genpact AZ,Rabat

Genpact AZ, Lublin

GTF EMEA & Central

Genpact AZ,Delhi

Genpact AZ, Cluj

Building a new Global Organisation

Global Visibility of Service and Process Performance

Implementing Bridge

A centre for Transactional Finance

Consolidating onto SAP

Transition Approach: Accounts Payable

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Accounts Payable Activities in Scope- Before BPO

12

Sort invoices, statementsExpenses

Scanning Office –Separate PO Box

Emails -Helpdesk

AZ-Special invoices

Exception Resolution

ReceiveInvoices

Sort/OCR/Validation

Invoice Processing

Disbursement & Payment/

Rejects

Miscellaneous Activities

Helpdesk

AZ

Scope

Data Extracted through OCR

Scanning Provider

Validation of OCR extracted data

Validate and Approve invoices

Posting of invoices

Arrival Checks/ STP

Verify Invoice Volumes

Follow-up problems

Escalate problems

Chasing resolution

Verify problems

Release Payments

Cancel payments

Verify payment rejects

Run Payment proposal

Debit Balance

Reporting/ KPI’s

Vendor Reconciliation

Payment queries

Coordination with 2nd Line support

Queries

Forward invoices to Scanning

Supplier Set Up

New Vendor Set up

Vendor changes

Vendor Master clean up

Approval –Vendor Master Form

AZ Banking

Accounts Payable Activities in Scope- After BPO

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Sort invoices, statements Expenses

ScanningOffice –Separate PO Box

Emails -Helpdesk

AZ-Special invoices

Exception Resolution

ReceiveInvoices

Sort/OCR/Validation

Invoice Processing

Disbursement & Payment/

Rejects

Miscellaneous Activities

Helpdesk

Genpact

Scope

Data Extracted through OCR

Scanning Provider

Validation of OCR extracted data

Validate and Approve invoices

Posting of invoices

Arrival Checks/ STP

Verify Invoice Volumes

Follow-up problems

Escalate problems

Chasing resolution

Verify problems

Release Payments

Cancel payments

Verify payment rejects

Run Payment proposal

Debit Balance

Reporting/ KPI’s

Vendor Reconciliation

Payment queries

Coordination with 2nd Line support

Queries

Forward invoices to Scanning

Supplier Set Up

New Vendor Set up

Vendor changes

Vendor Master clean up

Approval –Vendor Master Form

Genpact Banking

Impacts on Accounts Payable after BPO

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Centralised processing enables increased flexibility

Average cost to process an invoice (Europe):2010: 4.50 USD2011: 2.56 USD

Payment On Time (Europe): Q3 2010: 77% Q3 2011: 86%

Customer Service:Service rated “acceptable or above”: 54% in 2010

70% 2011 H185% 2011

H2

Import of best practices

AGENDA

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Governance Bodies – A Clear Escalation RouteWe have put in place a clear BAU governance structure………

……..this model is mirrored from transition.

Operating Principles – BAU

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• Minimum Disruption… Expectations Met• Complete Transparency & Control• Comprehensive Risk Mitigation • Transfer of Process/Operations Capability

AGENDA

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Its not what we do, it is the way that we do it….

Do Differently…• Pay more attention to the IS Solution

• Remove ‘problem’ people earlier

•Clarify personal position of those who will lead change ASAP

•Don’t assume the best – you can only be disappointed

•Listen even more for ‘weak signals’

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Do again….•Clear Executive Sponsorship and senior buy-in

•Personal visibility by senior team members

•Tell people what you can, when you can

•AZ team primarily in-house (supplemented by specific external experts) and core team consistent through project

•Project run at regional / country level

•Look for “doers” with a strong network of contacts

•Choose a Provider that is a good cultural fit and build a partnership

•Use proven solutions wherever possible

•IS - Have a plan B (and C and D…)

•Set and closely manage to a budget -strong discipline

What is next for AP?

Next Steps – Transformational Change►Customer-focused, continuous

improvement culture►High-quality process standardisation►Further exploiting technology and process

opportunities►Challenging the status quo in a structured

way

Time

migration

Stabilisation

Drive for optimisation

Reducethe pain

Cos

t Effi

cien

cy /

Per

form

ance

Lev

el

We are here

GTF

Process Roadmaps

Initial focus – Process Lift & Shift►Operational savings from BPO ►Ongoing changes to ensure stable and

effective service

Summary

AstraZeneca is a global, innovation-driven, integrated biopharmaceutical company.

Our mission is to make the most meaningful difference to health through great medicines that bring benefit for patients and add value for our stakeholders and society

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