Steen shared that "he would not be where he was today" without the system Sievo provides. In his words, the "information at the aggregate level" when it comes to identifying, implementing and tracking savings is second to none. The application has given Steen and his team access to drive the necessary changes to implement identified sourcing savings while also managing through volatile commodity periods. As background, CHR Hansen has around 15 manufacturing facilities -- most running SAP -- around the world. What Sievo enabled, after a "3-4 month deployment time frame focused on integrating with all of the SAP systems" was the ability to get an "x-ray into all the spend" CHR Hansen has on a global basis beyond solely send analysis. With Sievo, Steen's team has been able to "identify common products" and "track the true impact we're having on the business."
The application allows the procurement and finance team to see, based on frequent uploads from source systems, if savings have actually hit the bottom line. It does this by "going in and taking the data out of the invoice and related systems using real-time information, based on actual volume, to show what we've bought." Peitersen adds: the system shows "what price and at what standard cost" direct and indirect spending information to drive "the real-time value of the purchasing department." It also crates a common language with the finance department and allows procurement and lines of business to verify information with the CFO. Steen notes "If he [our CFO] does not say go for it, then we don't have a valid savings number."
CHR Hansen's savings validation and verification process is very similar to closing the books on the general ledger. Yet it's truly a "close" on the procurement books. On a monthly basis, procurement reports detailed metrics to finance across a range of areas including (but not limited to) spending and savings. They also consider payment terms, for example, and network working capital impact as a component of this reporting process, factoring in additional areas such as prices, debits, inventory levels, etc.
Sievo has also enabled Steen and the procurement organization to take over responsibility for reporting on and stewarding payment term administration by connecting finance and procurement. Sievo provides CHR Hansen with a dashboard that enables visibility down to the vendor level to see how payments are tracking. By showing when an invoice is actually paid versus the term, this gives procurement an ability to work closely with finance to improve net working capital while balancing the need for regional supplier management nuances. For example, the system enables procurement and finance to see, based on the top 80% of suppliers, whether payment terms are in line with country target norms (e.g., 90 days in Italy, 60 days in Denmark, etc.). It also enables direct comparisons by region, country, etc.
As a direct result of the tool, the procurement and finance organization has been able to reduce the number of different payment terms from 280 to 50, in part by discovering cases where payment terms have not been updated or where local finance departments have overridden corporate targets. In essence, Sievo is providing a master data management approach to payment information, allowing for the central management and decentralized execution of core processes.
Stay tuned for Part 2 of this post. We'd also like to thank Steen Peitersen for having such a candid dialogue with us.
Jason Busch and Peter Smith