The role of Procurement has long been transitioning from a pure cost-management function to a strategic partner to the business — and COVID-19 has only accelerated that trend, as companies face down an unstable supplier ecosystem and supply chain disruptions.
But even before the pandemic hit, it wasn’t all roses. Despite multimillion-dollar investments in a wide-range of e-Procurement technologies, productivity and output were — and still are — running far below expectations. In fact, the sheer complexity and rigidity of companies’ growing system landscapes has created inefficiencies that hamper performance.
A. O. Smith, a global provider of energy-efficient water heating and treatment products, was facing similar challenges. With a focus on continuous improvement, they set out to consolidate disparate ERP environments into one centralized SAP system back in 2016. A decision that naturally brings some challenges when it comes to change management.
What is Procurement? The process and KPIs that matter
“These ERP environments have been around for 20 to 30 years. They’ve been heavily customized and people were comfortable with how they operated,” says Matthew Rodgers, Senior Director of Business Solutions at A. O. Smith. In order to get internal stakeholders comfortable with changing the way things had always been done, his team turned to Celonis.
In late 2017, A. O. Smith deployed Celonis to help drive laser-focused optimization initiatives across two key business processes: Order-to-Cash and Purchase-to-Pay. Measuring and analyzing their end-to-end supply chain, Celonis not only saved them thousands of hours of internal Process Mapping workshops, but allowed their dedicated BPMN team to continuously and objectively identify optimization potentials across all business units. “Celonis was very helpful in moving our organization forward towards data-centric, data-driven process improvement,” says Rodgers.
In the case of Procurement, Celonis capabilities like the Vendor Scorecard let A. O. Smith understand how vendors were performing across a wide swath of variables. By sharing this scorecard directly with vendors, A. O. Smith not only showed suppliers how they were performing against their supplier benchmarks but was able to put their best foot forward in supplier negotiations.
The result was lowered costs, improved supplier on-time delivery, and improved supplier relationships.
Before Celonis, when the Procurement team detected variabilities (for instance, when the price on a PO differed from the vendor master data), someone would manually correct the records before contacting the vendor. This was a time-intensive method that kept the team from focusing on high-value work like vendor negotiations.
Today, A. O. Smith is using EMS’ automation engine to automatically highlight and correct discrepancies in the source system. Within three months, A. O. Smith’s Procurement team gained back more than 2,000 hours of manual effort — not bad for a setup that took less than a day to perform.
“Celonis has proved to be a valuable partner for us in achieving Process Excellence, fostering innovation, and staying competitive in a very dynamic, fast-paced environment,” Rodgers says. “The technology helped us improve our decision-making process and add customer value.”
Though not part of the original plan, A. O. Smith realized, early on, that Celonis could help them form cross-functional groups that would further improve processes. By blending the employees who do the day-to-day tasks with managers who are responsible for the metrics and resources that support changes in the system, these new agile teams have been able to share ideas and make iterative changes quickly, while easily measuring impact.
The effect has been the deepening of a culture where everyone within the organization is dedicated to Process Excellence. “When you bring people together around a common cause — and let them see how their work matters — it’s just as important to celebrate that work as it is to move on to the next task,” Rodgers says.
A. O. Smith is currently deploying Celonis within their financial departments to simplify and standardize operations across Accounts Receivable and Accounts Payable. In the near future, A. O. Smith hopes to roll out the EMS company-wide, covering everything from talent management to better understanding variables across multiple manufacturing plants.
Want to know more how Celonis enables breakthrough results in Procurement? Read about how Deutsche Telekom saved €66M across Procure-to-Pay or try our click-through demo.