Global pharmaceutical company
Business need addressed:
- Following M&A-led growth, the as-is Source to pay (S2P) infrastructure was inconsistent and fragmented
- Significant cost overruns, value leakages, and unpredictable results across global locations due to fragmented systems
Reengineer S2P processes to leverage inter-linkages and synergies:
- e-Sourcing to increase sourcing process effectiveness
- e-Procurement and catalog buying to implement a comprehensive process for purchase orders
- e-Invoicing and optical character recognition (OCR) for improved accounts payable effectiveness
Reduced total cost of ownership and identified business impact potential of $40 million over five years.
Following M&A-led growth, a global pharmaceutical company was looking to drive post-merger consolidation of fragmented S2P infrastructure across the globe. The existing processes and systems were fragmented across geographies, had low managed spend, and did not comply with transaction processes and contracts. The Genpact solution helped reduce the total cost of ownership and identified business impact potential of $40 million over five years.
The client was present in multiple countries with a large number of stakeholders in the S2P process (more than 100 stakeholders in leadership, sourcing, finance, and business across four countries), resulting in scope creep and diverse priorities. The key process challenges as identified by senior management were as follows:
- Merger issues with recently acquired companies
- Disparate systems, practices, and siloed processes resulting in inconsistent behavior across geographies
- Low spend under management and limited visibility of budgets
- Low compliance with transactional process and contracts
Genpact partnered with the client to conduct a Smart Enterprise Processes (SEPSM) diagnostic of the existing S2P infrastructure.
SEPSM diagnostics employs granular data analysis, sophisticated analytics, and cross-functional benchmarks to identify opportunities to maximize process effectiveness and harness the power of digital technology within organizations.
The SEPSM diagnostic identified the following areas of improvement in the existing S2P infrastructure:
- Contract management gaps: Sample audits conducted at the operator level revealed that the majority of vendors had incorrect or incomplete information in the system, leading to an inefficient procurement process. In addition, there was a lack of disciplined performance management systems for the vendors, resulting in late deliveries of goods and services in more than 50% of delivery orders across multiple entities
- Unplanned spending: Due to a reactive sourcing process, actual spend was higher than the planned spend
- Inefficient payables process: The absence of electronic invoice processing techniques with a high volume of low-value invoices that required manual intervention led to errors and delays in payment processing
- Compliance gaps: There was a high degree of variation between payment terms as reflected in the vendor master and in the final invoice, thus leading to controllership and compliance gaps
The transformation roadmap was identified, and focused on the following improvement areas to build smarter processes:
- Sourcing: The sourcing process was optimized by increased use of e-sourcing; increasing sourcing process effectiveness resulted in increasing spend under management to 80% from the previous 55–60%
- Procurement: E-procurement techniques were introduced with catalog buying to usher in the concept of preferred vendors and implement a comprehensive process for purchase orders
- Accounts payable: Increased e-invoicing and use of technology, such as optical character recognition, was recommended to reduce manual intervention and delay in payment processing
Over the next five years, the following business impact levers were identified for action:
- $16–17 million by increasing spend under management and tactical buying and deploying e-sourcing platforms and e-auctions
- $8–12 million through robust contract management systems and increasing contract coverage and visibility
- $7–8 million through increasing procurement transactional efficiencies
- $6–7 million through improving payables operational efficiencies, payment term rationalization, and discount penetration