Case Study

How standardizing AP led to working capital and EBIT improvement for a Fortune 500 CPG company

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Client:
A Fortune 500 health and hygiene product company

Industry:
Consumer goods

Business need addressed:
Free up working capital and reduce cost-to-serve through accounts payable (AP) process standardization and optimization

Genpact solution:
Leveraged SEPSM to define, benchmark, identify, and implement improvement opportunities globall

Business impact:
Global standardized AP process resulted in US$135 million working capital optimization and an EBIT increase of US$15 million


Business challenge

The client wanted to drive additional cash flow and reduce working capital tied up in the AP process. However, they didn’t have end-to-end visibility on process performance across various geographies.

Genpact has been a long-term partner for the client providing services across multiple domains and was brought in to help with the following:

  • Compare regional AP processes across KPIs
  • Provide industry benchmarking to define the global “best-in-class” AP process and metrics
  • Identify process improvement opportunities with a clear link to the key business outcomes
  • Build a road map to reach the optimized process performance

Genpact solution

Genpact deployed SEPSM, a scientific process management framework, to do an in-depth assessment of the complete AP cycle and in the process defined, benchmarked, identified, and built a transformation road map.

Key takeaways from the assessment included:

  • High variation in process performance across geographies. For example, best-in-class Days Payment Outstanding (DPO) was 75–90, which was achieved by Europe and Latin America, but in geographies like North America (60), Australia and New Zealand (46), and South Korea (47), the DPO days were far behind. Similarly, the invoice receipts cycle time ranged from 0 to 12 days

Genpact made the following recommendations:

  • Standardize policy through rationalizing payment terms, harmonizing AP and AR terms, and optimizing due dates
  • Improve processes in areas such as vendor master setup, p-card implementation, and decrease in post-facto POs
  • Optimize IT by implementing e-invoicing, improving OCR accuracy, and integrating the workflow and ERP

Business impact

  • Improved top line and bottom line: $135 million working capital optimization and $15 million EBIT impact
  • Improved AP process effectiveness by driving standardization globally with clear visibility into current and best-in-class performance

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