Kennametal and Amex = Payables Success

Quick, when I say Latrobe, PA, what comes to mind? If you thought of Rolling Rock, I'm very sorry for you, as you're drinking a beer which I would not even touch when I was in college (Yuengling, a great and inexpensive local PA lager, represented a far better Spend Management drinking value in my book). However, if your mind did not conjure up that green bottle when you visualized an outpost in the hinterland of Pennsylvania between Pittsburgh and Philadelphia which James Carville once referred in not-so-affectionate terms, you might have thought of Latrobe-based Kennametal, a global diversified manufacturer, which happens to have its headquarters in the same city as said mediocre brewery. Enough talk about beer. Let's talk about savings. Payment savings.

I had the chance to catch up with Dean Hoffman of Kennametal earlier this summer to talk about their successful implementation of the Harbor Payments (now American Express) payment solution (for another summary of what Kennametal is doing on the EIPP front, read Tim Minahan's post on the subject as well). Dean shared with me that Kennemetal is in a somewhat unique IT situation, running a single instance of SAP across their operations. But SAP alone could not solve all of their payment needs, so Kennametal selected Harbor's A/P Connect solution to convert all vendor invoices into a standard format. Prior to implementing the Amex solution, Kennametal's cost to process a vendor invoice was $4.64 (and prior to SAP, it was $8.00). But today, individual invoice processing costs have dropped 60% to $1.32.

In addition, vendors can now self-convert from check to ACH payment which tightens compliance controls and reduces costs further. Previously, Kennametal was nearly exclusive a "check house" with a cost to process a single payment of 87 cents. Today, ACH costs them 9 cents per payment, providing significant savings. Of course savings and benefits like this do not come overnight. And all new software implementations certainly have their moments. But Kennametal was able to convert 18,000 vendors during the roll-out process to this online system, facing only 211 problem cases. In addition, only 2 suppliers pushed back on the process, refusing to play payment ball (and these organizations are no longer doing business with Kennametal). Still despite high success numbers like this, Dean suggested that "they still underestimated the need for assisting suppliers in the process." But Dean and his team caught this early on, and "tripled the size of their support team" after a month to help suppliers with the process.

Today, Kennametal is bringing suppliers from 21 foreign countries on-board with the same system, factoring into account multiple currencies and languages. And they're doing more with less. Today, in the US and Canada, Dean has been able to reduce the headcount of the team directly responsible for this area from 14 to 5, providing big recurring savings. And when Kennametal closes new acquisitions, they've put in place a process to convert all suppliers within 30 days of a deal close. That's right. 30 days. Going forward, Kennametal is working on rolling out PO Flip automation capabilities. And I suspect if their past deployment experience is any indication of what to expect going forward, that they'll be more than satisfied with the outcome.

Jason Busch

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