Electronic invoicing: P&G's market-by-market strategy

Barbara Hodge
Posted: 09/18/2012

How does one of the world’s biggest consumer brands manage the global implementation of the latest phase of electronic invoicing and paperless solutions? Through a three-pronged approach: OCR and PDF invoice processing; electronic invoicing; and working with its solution provider HP, on the back end of the system.

Interview with Paul Harold, head of global e-invoicing project at Procter & Gamble

Paul, you head purchase-to-pay operations at Procter & Gamble, for Western Europe. What does that involve?

I’ve actually just moved into a new assignment within the company. In my previous role I wore two hats: I had an operational role, which covered the beauty and grooming business for the region – so, 40-50 manufacturing locations and distribution centres; and I was also the P2P Leader for Western Europe. My team took care of invoice troubleshooting – we dealt with somewhere in the region of 150,000 invoices a month. Typically, that would involve escalations or dealing with some of our key suppliers on process change, linking in with our purchasing and procurement organisations, and providing the link to enable joint action planning internally. So, while I was functionally in the finance organisation, I was very closely linked with procurement and have also previously worked in product, supply and purchasing within the company; it was a natural fit to pick up that role.

As of August 1, I have moved into a new role, which is in our financial solutions organisation. This is a global programme management role that manages the implementation of the latest phase of electronic invoicing and paperless solutions for P&G globally. There are three projects within the programme: One is looking at OCR and PDF invoices receipts and processing; another is looking at the whole electronic invoicing sphere; and the third is linked in with HP, our solution providers, looking at the back end of the system. The latter takes in all these inputs from PDF, OCR and e-invoicing, and rolls it all into SAP, which is our global finance system.

So, you’re now effectively responsible for promoting electronic invoicing across P&G’s global operations?

Yes, that’s correct.

What’s your goal in terms of results?

Within P&G, we’re big into paperless solutions, but this has translated into different approaches in different parts of the world, with no overall coordinated strategy. What’s different now is that we’re in the middle of implementing a global phased strategy – we’ve identified lead markets for implementation, and also some key suppliers. We expect to be fully implemented by April-May of next year. By the time I present at your P2P conference in October, I expect we’ll be full steam ahead. I’ll be right in the thick of things then, and I’ll be able to talk about what we’re experiencing as we travel down that road…

How have you defined lead markets, and lead suppliers, for implementation?

We want to get a mixture of global markets, with both developed and developing markets in that mix, so we’re including North America, our biggest market, but also Mexico and Brazil, where there are different needs and where we’re getting a lot of push from government agencies to move to paperless solutions. They are quite forceful about addressing this issue with large companies; they expect us to deliver a paperless solution in pretty much breakneck speed.

In Europe, we’re dealing with some of the major markets – France and Germany – as lead markets, but also Belgium. France is a special case. As anyone who has worked across Europe will know, invoice legislation is tight in France. They introduced default payment terms last year, meaning if you don’t have a contract in place you are on 30 days’ payment terms, whether you like it or not.

Other locations, like Italy, offer challenges from an archiving and reporting point of view and have very stringent regulations for tax. Russia is a case unto it itself. We’re not rolling it in right now, because of the very specific needs the country has in terms of control and archiving and invoice requirements. Russia is operating as a satellite centre of the regional GBS headquarters in Europe for now. For a global implementation, there would be no benefit for us to bring Russia in because everything has to be done differently there. So, we’ll work on that separately for now.

What about Asia? How are you approaching China, India and Japan?

We’re targeting about 19 lead markets in total, for phase one, In Asia at this stage we’re only looking at Malaysia and Singapore. Singapore, because it’s a fairly standard market from a P&G point of view; Malaysia, because it has some unusual tax treatment going on; a bit like the US, they have sales tax instead of VAT, and they have some different legislation which we need to consider.

We know the growth of the business in China and India is significant, potentially, and we know how important it is, but we don’t see that we can move into those countries in the initial wave, or phase.

In terms of the implementation, are you choosing some of the more challenging markets as "leads" to then leverage learnings into other markets?

We’re looking for the biggest return over the shortest timescale. So, we’re not going to go after some of the smaller geographical areas where there’s high complexity during phase one, or even phase two. We’ll leave those till the end.

In Europe, we decided to work with just about 120 lead vendors for this project, which are our bigger vendors. These companies work across geographical boundaries quite a lot with us. So, although we’ve identified key markets to go after, we will inevitably be working with our key vendors across a number of geographical locations. We’re going to try to focus on vendors that we know we do the majority of our business with in the lead markets, but we don’t want them to have to deal with two different solutions, because that’s just going to cause havoc. So, we’re trying to keep it as clear as possible from the vendors’ point of view. From P&G’s point of view, we want to make sure that we have the most effective impact we can, without having huge complexity built into the process.

How are you prioritizing lead vendors, other than just by size?

Take for example, Hewlett Packard, our solution provider. Now they partner with OB10, so they have an existing relationship with OB10. Obviously one of the vendor suppliers we’ll use is going to be OB10. So, we’ll then be looking at existing vendors of P&G’s who are already using OB10. They represent kind of low hanging fruit, because we might have slightly different specifications that we’re going to ask them to provide, but they’re certainly familiar with the process, their comfortable with it, so we’re not asking them to make massive changes – that’s part of the strategy for existing vendors. On top of that, we have really high profile vendors or vendors that we consider to be strategic that we work with on a different kind of level. For example, take BASF, who we work with regularly. We are looking at the total electronic solution with BASF direct. I don’t think it will be a third-party provider that provides that solution; it’s something that we will work directly with BASF on, to make sure the specification works for them because they are a strategic supplier. So, the criticality of the relationship drives the approach that we take.

How will you handle exceptions?

It’ll be done in collaboration with our suppliers. We’re not going to try to impose something on them. We’ll have individual discussions and a sort of "shopping list," on the basis of which we’ll come up with the right solution. If they’re a smaller vendor and they want to go with a PDF solution, or if OCR is the only option that’s open to them and they want to stay with paper invoices – that’s fine. If they’re in a position where they’ve been looking at and exploring third-party vendors like OB10, then we already have a solution that fits. And if they are a large, strategic supplier like BASF and we want to develop something specifically for them, then we have the capability to do that, too. So, we’re taking a multi-tiered approach to this, rather than a one-size-fits-all.

Do you have a lot of large strategic suppliers, like BASF? In other words: are you investing significant resources to come up with a tailored invoicing solution for these VIP clients?

No, they’re be in the minority. I would think there are probably a handful of global suppliers that we work with on that kind of level.

What about technology options other than OB10? Are you open to using multiple tools?

In terms of phase one of this work, which is underway right now, that’s fairly well-defined. But as this is still a developing marketplace, or a developing business space if you like, I think it’s important to not limit yourself to one solution only. So whilst OB10 are a partner of HP, they don’t have global coverage for some parts of the world, and there are companies that seem to be more representative of what’s going on in that space. So, we are talking to two or three names for specific regions.

This is obviously an enormously intensive programme you’ve embarked on. What’s the core business case justification for this?

The cost of this work over the next year is significant, but we'll be saving more than double the initial costs per year - assuming that we move to something like an 80% paperless coverage, across global markets. But if we get close to that, which we should, then the annual savings would be more than double the cost of the implementation.

Thank you, Paul.

Barbara Hodge
Posted: 09/18/2012

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