Showing posts with label data services. Show all posts
Showing posts with label data services. Show all posts

Monday, November 30, 2020

How Transforming Source-to-Pay Procurement Delivers Agility and Improves Outcomes at Zuellig Pharma

Transcript of a discussion on how to bring agility, resilience, and managed risk to the end-to-end procurement process for significantly better overall business outcomes.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.


Our next intelligent procurement discussion explores the rationales and results when companies transform how they acquire goods and services. By injecting intelligence, automation, and standardization into the source-to-pay process, organizations are supporting even larger digital business transformation efforts.

Stay with us now as we hear from two pioneers in how to bring agility, resilience, and managed risk to the end-to-end procurement process for significantly better overall business outcomes. To show how organizations can embark on such a procurement and sourcing transformation journey, please join me now in welcoming our guests.

We’re here with Victoria Folbigg, Vice President of Procurement at Zuellig Pharma Holdings. Welcome, Victoria.

Victoria Folbigg: Thank you for having me, Dana.

We’re also joined by Baber Farooq, Senior Vice President of Product Strategy for Procurement Solutions at SAP. Welcome, Baber.

Baber Farooq: Thank you for having me, Dana.

Gardner: Baber, what are the top procurement trends and adoption patterns you’re seeing globally? Why is now such an important time to transform how you’re doing your sourcing and procurement?

Efficiency over productivity

Farooq: When we talk about trends in procurement, the macroeconomic factors governing the world -- particularly in this COVID-induced economy -- need to be kept in mind. Not only are we in a very dynamic situation, but the current scenario is impacting the function of the profession. This changing, evolving time presents an opportunity for procurement professionals to impact their businesses company-wide.

Firstly, if you look at the world, some of these trends existed prior to COVID hitting -- but I think they have accelerated. For the past 10 years, we’ve had declining productivity growth across the world. You can slice this by industry or by geography, but in general -- despite the technological advances from cloud computing, mobile technologies, and et cetera -- organizations from a labor productivity perspective are not becoming more-and-more productive.

This trend has existed for 10 to 15 years, but we really started seeing flattening over the past two to three years, particularly in the G7 countries. Now, it’s interesting because that past 10 years or so also correlates with some of the greatest economic expansion that the world has experienced. When things are going well, you can kind of say, “Yeah, productivity may be not necessarily so important.” But now that we’re in this unfortunate recession of remarkable scale, efficiency is going to become more-and-more important.

The second trend is we know that the digital economy has been expanding in this new millennium. It’s been expanding rapidly, and by all indications that trend will further accelerate in this new COVID-normal that everyone is trying to come to grips with. We have seen this in terms of our daily lives being disrupted and how digital tools have helped us to remain functional. Sometimes circumstances in the world that change everything become fuel for transformation. And to a large extent, I think the expansion of the digital economy will end up continuing and accelerating and procurement will play a significant role in that.

The third trend I see is this concept that The Economist has dubbed slowbalisation, which is the idea that despite the past 30 years of increasing globalization -- even prior to COVID, we saw a slowdown in globalization due to trade wars and nationalistic tendencies.

Post-COVID, I think organizations will ask the question, “Hey, this complicated global supply chain that has existed puts me at risk like I never thought of before if there’s something disruptive in the market.”

So, expect more focus on nearshore manufacturing across many industries. It’s going to become more prevalent from a goods perspective when we talk about trade. On the flip-side, from a service’s perspective, digitization will actually allow for more cross-border services to be provided. That includes things we never thought we could do cross-border before.

It will be a very interesting shift to see how the world changes with these trends, and how it impacts procurement. Procurement is going to play a pivotal and central role.

It will be a very interesting shift to see how the world changes with these trends, and how that impacts procurement. It doesn’t take a lot of reflection to see where synergies exist. If organizations are going to operate manufacturing differently than they have before, if supply chains will be structured differently, and if we engage in services procurement differently -- in all of those conversations, procurement is going to play a pivotal and central role.

And how are you going to try to come out of this productivity glut? If the promise of the artificial intelligence (AI) is going to help us come out of this productivity glut, then procurement is going to play a central role in how we use suppliers as key co-innovation partners. It means a very different lens about how you manage a relationship with your supplier base than we’ve done traditionally.

So those are some of the key factors if you look at how procurement is going to evolve over the next five to 10 years. The macroeconomic factors are the driving forces. The more that procurement professionals focus on providing solutions to their organizations around these areas the more impactful they can be. These are very different than the traditional metrics that we’ve had around cost savings. Those are still important, of course, don’t get me wrong. But if I think about how the procurement profession is changing and those trends, I think it’s going to be around these areas.

Medicine thinks globally, supplies locally

Gardner: Victoria, at your organization, Zuellig Pharma, are you also seeing these trends? Tell us about your organization and what you’ve been doing with procurement transformation?

Folbigg: Zuellig Pharma is one of the largest healthcare services groups in Asia. And as a pharma services company we distribute medicine in Asia. We are present in at least 13 countries, or what we call markets, in Asia. We also have clinical trials distribution throughout the world.

We realized pretty early on with all of the distribution capabilities and contact with healthcare professionals across Asia that we have a lot of data about drug purchasing preferences, which we are actively monetizing. We also have a significant role to play in ensuring the right medicines go to the market, which means preventing counterfeits and parallel trades.

Zuellig Pharma is not only enabling improved drug distribution, we also do vaccine distribution. In some of the bigger countries, for example, we take flu vaccines and distribute them to the various state hospitals and schools. It’s now very exciting for us to possibility be at the forefront of COVID-19 vaccines distribution. We are very busy figuring out how to make that possible across Asia.

Building on Baber’s points on globalization, which I found very relevant, there is a clear trend in supply of goods to move away from globalization. We have seen that even with the supply of personal protective equipment (PPE) from China due to people being concerned about buying from China as well as the many custom issues for going in and out. People are naturally now looking for supply sources closer to their countries. We are seeing that as well.

Baber also spoke about the globalization of services. This is fabulous and very exciting, and we are seeing that. For example, when I now negotiate contracts with consulting companies, I begin by telling them there is no need for travel. And so why don’t you put your best team on my project? I don’t even need your team to be in Asia.

And that makes them pull a breath and step back and say, “Oh my God. You know, we had these natural differences between regions and different companies in the servicing industry.” That is breaking down because customers are expecting the best people on the job anywhere. I completely see that in my daily work now.

Gardner: Baber also mentioned the impact of AI, with more data-driven decision-making. While we’re grappling with rapid changes in sourcing and the requirements of rapid vaccination distribution and logistics, for example, how are the latest technologies helping you transform your procurement?

AI for 100 percent reliability

Folbigg: It’s an interesting and complex subject. When I talk to my peers on the manufacturing side -- and again we’re not a manufacturing company – they oversee a lot of direct spend. I see them embracing data-driven, AI-driven procedures and analysis.

With services industries, and with indirect procurement, it is much more difficult, I believe. And hence we are not so much on the forefront of AI thinking. Also because we’re in Asia, I’m wondering whether there is enough databases and rules to be able to draw the right decisions.

Established technologies like RPA and chatbots are filling holes because people need support. The labor force is getting more expensive and so having a robot do a menial task can be more efficient.

For example, if I want to find a different source among suppliers very far away, I would rely normally on a database that would go through millions of sources for a supplier. If the supplier, though, were a local company, I might not find any relevant databases. So the challenges we have in Asia are about getting data that can be analyzed and then draw insights from it.

Other more established technologies like robotic process automation (RPA) and chatbots are filling holes because people need support. As Baber said, the labor force is getting more expensive even in Asia. So having a robot do a menial task can be much better and more efficient than hiring somebody to do it.

Gardner: Baber, how common are these challenges around data and analytics that Zuellig Pharma is grappling with?

Farooq: What Victoria said is so accurate with respect to the challenges that customers are facing in using these technologies. The challenge we have as technology provider is to make sure that we provide access to these technologies in the most beneficial fashion. AI is a very broad topic that means a lot of different things these days.

The ultimate goal of AI is to provide insights and eliminate tasks while effectively focusing on actual business outcomes, and not having so much repetition. When Victoria mentions the, “Hey, we can use a lot of this in the direct materials space,” a lot of those are predictable, repetitive tasks.

In the services space, and for indirect materials purchasing, it’s more difficult to grapple with it because it’s not as predictable and it’s not as rule-oriented as in other areas. That gets to the true heart of the problem with AI across any space, right? The last mile of AI is very hard. You can make it 90 percent effective, but who is going to trust their business with a robotic or computational process that’s 90 percent effective? Making it a 100 percent effective is the real challenge.

This is why we don’t have self-driving cars right now, right? They work great in laboratories. They work great on test tracks. They are driven around deserts. So much advancement and capabilities have happened, but that last mile is still yet to be achieved. And the amount of data needed to make that last mile work is an order of magnitude greater than it is for the first 90 percent of achieving the outcome.

The onus and the burden, frankly, is on companies like SAP to make sure that we can solve this problem for customers like Zuellig so that they can truly trust their business for insights and for the outcome-driven work that they would want the machines to do before they go ahead and say, “Okay, we’re happy with AI.” There were predictions six to seven years ago that dermatologists would not be diagnosing skin cancer anymore because an app would be doing it by taking a photo. That’s not true. It hasn’t happened yet, right? But the potential is still there.

The focus is on the outcomes that professionals are looking for. Let's see if we can use the data from across the world to drive these outcomes in a sustainable and predictable fashion. This work is research-oriented.

For us, the focus is on the outcomes that professionals are looking for. Let’s see if we can use the data from across the world to drive these outcomes in a sustainable and predictable fashion. This work is research-oriented. It requires focus from companies such as SAP to say that this is where we’re going to take the initiative and actually drive toward this outcome.

The reason why we feel that SAP is one of the companies that can do this is we actually have so many data. I mean, if you look at the SAP Business Network and the fact that just on spend and sourcing events we’re carrying $20 to $25 trillion worth of procurement over the past 10 years, we believe we have the data that can start making an impact.

We have to prove it, undoubtedly, especially when it comes to niche economies and emerging markets, like Victoria said. But we have a very strong starting point. And, of course, at the same time, we have to be considerate about privacy concerns and General Data Protection Regulation (GDPR) in all of these things. If you’re going to be mining data and then cross-applying the impacts across customer communities, you have to do it in a responsible manner.

So those are the things that we are grappling with. I clearly see there’s a trend here and you will see AI impacting procurement processes before you see AI driving cars on roads. There’s still a lot of work to be done, and there’s still a lot of data that needs to be mined in order to make sure that we’re building something that’s intelligence- and not just rule-based. You can use RPA, for sure, but that’s still rule-based. That’s not true intelligence, and no business is going to actually go ahead and say, “Hey, we’re happy with the insights that the machine is telling us or we’re happy with the machine doing the work of a human if it’s 90 to 95 percent accurate.” It really, really needs to be 99.9 percent accurate for that to happen.

Gardner: And whether we are doing this with AI or traditional data-driven analytics, what we need to deliver more of now are better agility, resilience, and managed risks.

Victoria, tell us about your journey at Zuellig Pharma and why you’re working toward those fundamental goals. How have you gone about revamping your source-to-pay procurement to attain that agility and resilience, and to managing risks?

Strategic procurement journey

Folbigg: Our real strategic sourcing journey started in 2016. And I like to call the company a 100-year-old startup because Zuellig Pharma is truly 100 years old. The company was, fair to say, in the early stages very decentralized. And then it moved to become more central-to-edge, with the need in Asia with emerging economies for general management to act much faster if there was a risk or opportunity. So these principles still apply.

But the chief executive saw the need for more strategic procurement, with transparency, visibility, and control of spend accountability. He sponsored the need to design and set up a lean procurement function within the Asia region. The first thing we decided to do was put a system in place to better anchor a new, all-encompassing, yet small procurement team. I have been getting this visibility, control, and data through our all-encompassing procurement system, SAP Ariba.

SAP Ariba has also been different because of its ecosystem and because they’re backed by SAP. And it has a support network and already-proven technology across Asia. Because of Asian tax rules, and the variety of Asian languages, we found when we looked at the market back in 2015-2016 that you needed a system that will grow with you. We needed something that’s anchored very strongly within Asia. From that, we gained control and visibility in stage one of our journey.

The next stage focused on process improvement. Our old key performance indicator (KPI) was about how long it takes to pay an invoice. And that you need to make it easier and user friendly but also have controls in place to ensure that you have no fund leakage. So, control and visibility are number one and two, and process improvement is number three. Next, we will be seeking agility and then insights.

But COVID-19 has shown the need for traditional procurement, too. For example, when it came time that we needed a PPE supplier -- everyone needed them. And it wasn’t a system that helped us, unfortunately. It’s more of people knowing people and finding out where there was capacity. That was not done via data-driven insights.

We had to go off system as well because sometimes we didn’t have time to get the supplies through the system. We also didn’t have time to pay the suppliers through the system because it was a supplier’s market: “You can have the shipment of your general masks. You take it or you leave it.”

The traditional kind of robust procurement systems were breaking down for us and exacerbated by the fact that we do not yet have the right kind of data to make these decisions. We still needed to be rather creative in how we found the best sources.

So very often we had to make this decision within an hour. And in some cases, I would come back to the supplier and say, “I’m ready to buy,” and they’re saying, “Sorry, somebody else offered me twice the price.” This was the reality of procurement last spring. It certainly brought us to the forefront because we needed to report to the CEO what we were doing to protect our business. We’re delivering the medicines to the hospitals. We probably needed this PPE for the drivers even more than the hospitals, and we needed to negotiate to buy that.

This is where the traditional kind of robust procurement systems were breaking down for us and exacerbated by the fact that we do not yet have the right amount of data on Asia translated into English to make these decisions as we would like to. That newer method may be strong and prevalent, of course, in the US and in Europe.

So that tested us quite a lot and it’s shown that we still needed to be rather creative in how we found the best sources. There are building blocks to what the systems allow you to do. And now we’re saying, “Okay, well, how can you give us insights? How can you give us this agility?” I think the systems need to evolve to be topical and to be able to address all of these use cases that came to the fore due to the COVID-19 pandemic.

Gardner: Listening to you reminds me of what Baber said about self-driving cars. You had to revert back to manual during the pandemic.

Folbigg: Bicycles even.

Pandemic forces procurement pivot

Farooq: It’s such a great point. One thing I’ve learned is that the technology and business processes we have constructed over the past 15 to 20 years kind of broke down. When you look at a pandemic of this magnitude -- it’s the greatest disruption in the world since World War II. The IMF just estimated how big. When the global financial crisis happened in 2008, the overall global GDP impact, because the emerging economies were not as affected, was a reduction of 0.1 to 0.2 percent in global GDP. This year we’re seeing a 5 percent GDP impact globally. It’s very, very significant.

The scale of the disruption is huge, and you are having these low-probability, high-impact events. Because they don’t happen for a long time, people presume they won’t happen, and they don’t plan for them.

What I’ve learned is, with technology and business processes, you need to keep in mind that one aspect that might have a 2 to 3 percent chance of happening. You can’t Pareto analysis that out of the way and not consider it. So it’s one thing to make sure that, of course, you’re not spending time focused on a problem that has a low chance of happening. But at the same time, you have to keep in mind that, “Hey, if there’s one of these events where if it happens, the results could be a complete breakdown.” You can’t ignore it, right? You need to make sure you have that factored into your technology.

So, emergency payment processes, emergency purchase order (PO) processes. These capabilities need to be built in. You can’t just presume that there’s going to be perfection that’s set up and available for all circumstances, and that’s the only thing you’re designing for, particularly when you talk about industries like life sciences.

Gardner: That’s the very character of agility and resiliency -- being able to have exception management for exceptions that you can’t anticipate. And certainly, we have seen that in the last seven months.

Now that we see how important procurement is for a larger organization during a very tumultuous time -- recognizing that we need to have the agility of working with the manual as well as the automatic -- what does the future portend? What will our systems need to now become in order to provide the new definition of agility and resiliency?

Agile systems preempt problems

Folbigg: We need agile systems, and we need to be able to solve specific use cases in order for these systems to become important, viable, and present within our procurement landscape and many ways of doing business.

It’s not good enough for us when everything reverts back to the system. When there is issue like a pandemic -- or for something that is not necessarily rule-based -- we then need to go off system, and that marginalizes the importance of the system. I honestly don’t know how you enable a search for suppliers that is largely relationship-based. But there are elements that come from the availability of data, data that is presented in a form that’s easily consumed, especially if the data has to be translated and normalized. That is something definitely that the system suppliers can play a role in.

When I look at the system now as the head of procurement, I am not looking at features and functions. I am looking at the problems that I need to solve through a system to enable us to drive the resiliency that the company needs. And if I look at the challenge that we have of enabling the potential like distribution across the world, what we are trying to do is not to be stuck in a situation that we had at the beginning of the year.

What we are looking proactively at is certain key suppliers to partner with to develop the system, to design the supply chain, and this is not transactional. This is a highly strategic activity based on human creativity, human network relationships, and trust between the leadership of different companies. It is a completely different design approach.

Now we are all thinking about preempting. How is the technology going to help me with what I am looking forward to? I need to be able to have the basic explanation at my fingertips fast in order for me and my team to concentrate on the strategic analysis.

Now we are all thinking about preempting. How is the technology going to help me with what I am looking forward to? I need to be able to have the basic explanation at my fingertips fast in order for me and my team to concentrate on the real strategic creative kinds of analysis.

Also, we need systems that can give us a lot of modeling and analysis. If you think about my problem now, I can buy freezers and cold storage for vaccines. But what am I going to do with them in five years’ time? You have supplies for the vaccine distribution. And then what?

I think the vaccine will become part-and-parcel of our cold chain and supply chain going forward because COVID-19 is not going to go away. The vaccines potentially are only going to last for a year or two, and you will have to be re-vaccinated. But, despite of all these high-cost, complex, energy-thirsty capital purchases, how do you do that? Now everything is done on the spur of the moment. A system that holistically can bring this all together for me would be a huge benefit.

Gardner: That point about being holistic, Baber, must be very important to you at SAP because you’ve been building out so many different systems, business capabilities, and data capabilities. It sounds like SAP might be actually in very good position to come to the rescue of somebody like Victoria, given that she has these pressing needs and wants to instantiate relationships into digital interactions. How SAP can help?

Supply chain for vaccine delivery

Farooq: It’s a privileged position because it’s a complicated problem. But it’s a problem that I believe SAP is one of the few companies that can support Zuellig. From our perspective, we want to get companies like Zuellig into a position where they can focus on those strategic elements and those creative elements that only humans can do. Creativity solving these problems is probably is one of the most complicated supply chain problems in recent history. The COVID vaccine distribution problem can only be solved through extensive creativity.

When SAP talks about the intelligent enterprise, that just means two very simple things. It means that I give an organization all of the insights and analytics capabilities at their fingertips so that they have the ability to quickly make decisions and pivot when they need to pivot, and that truly became evident during this pandemic. From our perspective, we have the ability.

If you look at all of the different processes that exist across manufacturing, distribution, sourcing, purchasing, procurement, payment -- all of these processes reside and are impacted by some element of SAP’s footprint. And our perspective is to make sure that all these elements can talk to each other. And by talking to each other, they can actively provide all of the data that’s required by organizations like Zuellig so that they can quickly make the decisions they need and focus on the strategic elements they need to focus on.

We don’t want people at Zuellig to be worried about how the POs are going to get raised and what are the different steps required for sourcing to take place. And that is very strictly the direction we want to take our products and we’re going to be taking our products so that we can go ahead and offer these solutions for companies like Zuellig.

The example that Victoria gave is just so close to my heart because I believe that when I was talking about the productivity decrease and growth that the world has experienced over the past 10 years, if we can make procurement more productive as a function, then procurement organizations can make the entire organization more productive. They can actually focus on supplier relationships and the co-innovation partnerships with suppliers that are critical suppliers. That has an impact on the entire business.

And no one is better suited to do doing that than procurement. We just have to get them out of the day-to-day processes of running reports, figuring out what the data says, and focusing on the transactional events and purchase orders and payments that take place. We need to get them out of those processes so they can leverage their skills in terms of finding the right suppliers, developing the right relationships that make an innovation impactful, and have an impact to the top line of organizations -- along with the bottom one.

And it is very clearly the direction that we are trying to take as rapidly as possible because we know that the next 12 months are critical in this space.

Gardner: Victoria, what advice could you give to others who are trying to transform their procurement organizations to take advantage of the agility and resilience that are now required? What advice can you offer for folks who might be not quite as far as long as you are in your transformation journey?

Educate around procurement

Folbigg: It’s complex because it depends very much on the specific company and how anchored procurement is. But it’s about making sure you find sponsors of the function who really understand the benefits of procurement. Give your team and yourself a job to show the benefit that strategic procurement can bring.

In this part of the world, we are just now seeing procurement on the university curriculum. Where I worked before, in Europe and the US, it was an established kind of skillset that we would learn in university. And there were courses on that in MBAs and social work. It’s just starting to anchor in universities in Asia. Go to your leadership and put procurement on the table and give a very factual and viable rationale of why the systems investment is very, very important.

As you are able to anchor your procurement with the system, it will put a lot of pressure on you to deliver the benefits that the system’s business cases provide. It gives you an opportunity to reach for wider buy-in of the system with you and your purchasers. Your training of people on what procurement can provide then becomes part of their evaluation. So, I think certainly this goes in hand-in-hand.

Gardner: Baber, anything more to offer?

Farooq: Victoria said something just a few moments ago. She said, “I really don’t care about the feature functionality. I only care about the outcomes.” That should be your North Star. It’s natural when you get into the deployment that you care about all the different little things, but one of the things that organizations often struggle with once the deployment begins is they stay in those sub-processes and functional elements.

I only care about outcomes. That should be your North Star. It's natural when you get into the deployment that you can care about all the little things, but one of the things that organizations struggle with is that they stay stuck in those sub-processes.

And a lot of the things that were the guiding reasons behind their transformation to begin with, those got lost, right? I say keep that front and center. That is the basis by which not only you will get internal buy-in, CEO buy-in, and CFO buy-in -- but it’s also something that you should constantly be reminding people of as well.

Of course you have to deliver to those outcomes and that’s where companies like SAP need to be held accountable and be a partner to make sure that those outcomes are delivered. But those business outcomes from a technology perspective is everything that we want to be focusing on and from a business perspective, and everything that the procurement organization should focus on.

And COVID-19 will force a recalibration on what those business outcomes should be. The traditional measures of the efficacy of procurement will change -- and should change -- because procurement can make a bigger, deeper impact for organizations.

Supply chain resilience is going to become a much more important factor. Procurement should embrace what they want to impact. Co-innovative partnerships that you deliver for the business should become a much more important factor. Procurement should embrace and show the impact. These are not measurements that were traditionally monitored, but they’re going to be increasing in terms of importance as we encounter the challenges of the next couple of years. This is something procurement organizations should embrace because it will elevate their standing in organizations.

Gardner: I’m afraid we’ll have to leave it there. You’ve been listening to a sponsored BriefingsDirect discussion on the rationales and results when companies look to intelligent automation and standardization for how they acquire the goods and services.

And we’ve learned how organizations are finding -- even during the pandemic -- new lessons and efficiencies in how their source-to-pay processes and purchasing work best.

So please join me in thanking our guests, Victoria Folbigg, Vice President of Procurement at Zuellig Pharma Holdings. Thank you so much, Victoria.

Folbigg: Thank you for having me.

Gardner: And also a big thank you to Baber Farooq, Senior Vice President of Product Strategy for Procurement Solutions at SAP. Thank you, sir.

Farooq: Thank you, Dana, for having me.

And a big thank you as well to our audience for joining this BriefingsDirect modern digital business innovation discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP-sponsored BriefingsDirect discussions.

Thanks again for listening. Please do come back next time, and feel free to share this information across your IT and business communities.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how to bring agility, resilience, and managed risk to the end-to-end procurement process for significantly better overall business outcomes. Copyright Interarbor Solutions, LLC, 2005-2020. All rights reserved.

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Wednesday, July 29, 2020

How an SAP Ecosystem Partnership Reduces Risk and Increases Cost-Efficiency Around Tax Management

Transcript of a discussion on how end-to-end visibility of business tax, compliance, and audit functions allows for automated adherence to rapidly changing requirements.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Our next data-driven tax optimization discussion focuses on reducing risk and increasing cost efficiency as businesses grapple with complex and often global spend management challenges.

We’ll now explore how end-to-end visibility of almost any business tax, compliance, and audit functions allows for rapid adherence to changing requirements -- thanks to powerful new tools. And we’ll learn directly from businesses how they are pursuing and benefiting from advances in intelligent spend and procurement management.

To uncover how such solutions work, please join me now in welcoming our guests, Sean Thompson, Executive Vice-President of Network and Ecosystem at SAP Procurement Solutions. Welcome back, Sean.

Sean Thompson: Hi, Dana.

Gardner: We are also here with Chris Carlstead, Head of Strategic Accounts and Partnerships and Alliances at Thomson Reuters. Welcome, Chris.

Chris Carlstead: Thank you, Dana.

Gardner: We’re also here with Poornima Sadanandan, P2P IT Business Systems Lead at Stanley Black and Decker. Welcome, Poornima.

Poornima Sadanandan: Thank you.

Gardner: Sean, what’s driving the need for end-to-end visibility when it comes to the nitty-gritty details around managing taxes? How can businesses reduce risk and increase cost efficiency -- particularly in difficult, unprecedented times like these -- when it comes to taxation?

Taxes in the time of COVID-19

Thompson: It’s a near-and-dear topic for me because I started off my career in the early ‘90s as a tax auditor, so I was doing tax accounting before I went into installing SAP ERP systems. And now here I am at SAP at the confluence of accounting systems and tax.
We used to talk about managing risk as making sure you’re compliant with the various different regulatory agencies in terms of tax. But now in the age of COVID-19 compliance is also about helping governments. Governments more than ever need companies to be compliant. They need solutions that drive compliancy because taxes these days are not only needed to fund governments in the future, but also to support the dynamic changes now in reacting to COVID-19 and encouraging economic incentives.

There’s also a dynamic nature to changes in tax laws. The cost-efficiency now being driven by data-driven systems helps ensure compliancy across accounting systems to all of the tax authorities. It’s a fascinating time because digitization brings together business processes thanks to the systems and data that feeds the continuing efficiency.

It’s a great time to be talking about tax, not only from a compliance perspective but also from a cost perspective. Now that we are in the cloud era -- driving data and business process efficiency through software and cloud solutions -- we’re able to drive efficiencies unlike ever before because of artificial intelligence (AI) and the advancements we’ve made in open systems and the cloud.

Gardner: Chris, tax requirements have always been with us, but what’s added stress to the equation nowadays?

Carlstead: Sean hit on a really important note with respect to balance. Oftentimes people think of taxation as a burden. It’s often overlooked that the other side of that is governments use that money to fund programs, conduct social welfare, and help economies run. You need both sides to operate effectively. In moments like COVID-19 -- and Dana used the word “unprecedented,” I might say that’s an understatement.

I don’t know in the history of our time if we have ever had an event that affected the world so quickly, so instantly, and uniformly like we have had in the past few months. When you have impacts like that, they generally drive government reaction, whether it was 9/11, the dot-com bubble, or the 2008 financial crisis. And, of course, there are also other instances all over the globe when governments need to react.

But, again, this latest crisis is unprecedented because almost every government in the world is acting at the same time and has moved to change the way we interact in our economies to help support the economy itself. And so while pace of change has been increasing, we have never seen such a moment like we have in the last few months.

Think of all the folks working at home, and the empathy we have for them dealing with this crisis. And while the cause was uniform, the impact from country to country -- or region to region -- is not equal. To that end, anything we can do to help make things easier in the transition, we’re looking to do.

While taxes may not be the most important thing in people’s lives, it’s one last thing they have to worry about when they are able to take advantage of a system such as SAP Ariba and Thomson Reuters have to help them deal with that part of their businesses.

Gardner: Poornima, what was driving the need for Stanley Black and Decker to gain better visibility into their tax issues even before the pandemic?

Visibility improves taxation compliance

Sadanandan: At Stanley Black and Decker, SAP Ariba procurement applications are primarily used for all indirect purchases. The user base spans across buyers who do procurement activities based on organizational requirements and on up to the C-level executives who look into the applications to validate and approve transactions based on specific thresholds.

So providing them with accurate data is of utmost importance for us. We were already facing a lot of challenges concerning our legacy applications due to numerous challenges like purchasing categories, federated process-controlled versions of the application integrated with multiple SAP instances, and a combination of solutions including tax rate files, invoice parking, and manual processing of invoices.

There were a lot of points where manual touch was necessary before an invoice could even get posted to the backend ERP application due to these situations, including all the payback on return, tax penalties, and supplier frustrations, and so on.

So we needed to have end-to-end visibility with accuracy and precision to the granular accounting and tax details for these indirect procurement transactions without causing any delay due to the manual involvement in this whole procurement transaction process.

Gardner: Poornima, when you do this right, when you get that visibility and you can be detail-oriented, what does that get for you? How does that improve your situation?

Sadanandan: There are many benefits out of these automated transactions and due to the visibility of data, but I’d like to highlight a few.

Basically, it helps us ensure we can validate the suppliers’ charge tax, that suppliers are adhering to their local tax jurisdiction rules, and that any tax exemptions are, in fact, applicable for tax policies at Stanley Black and Decker.

Secondly, there comes a lot of reduction of manual processes. That happened because of automation, the web services, and as part of the integration framework we adopted. So tax calculation and determination became automated, and the backend ERP application, which is SAP at our company, receives accurate posting information. That then helps the accounting team to capture accounting details in real-time. They gain good visibility on financial reconciliations as well.
Tax calculations became automated, and the backend ERP, which is SAP, receives accurate posting information. That helps the accounting team capture details in real-time. They gain good visibility on financial reconciliations as well.

We also achieved better exception handling. Basically any exceptions that happen due to tax mismatches are now handled promptly based on thresholds set up in the system. Exception reports are also available to provide better visibility, not just to the end users but even to the technical team who are validating any issues that helps them in the whole analysis process.

Finally, the tax calls happen twice in the application, whereas earlier in our legacy application that only happened at the invoicing stage. Now this happens during the requisition phase in the whole procurement transaction process so it provides more visibility to the requisitioners. They don’t have to wait until the invoice phase to gain visibility on what’s being passed from the source system. Essentially, requesters as well as the accounts payable team are getting good visibility into the accuracy and precision of the data.

Gardner: Sean, as Poornima pointed out, there are many visibility benefits to using the latest tools. But around the world, are there other incentives or benefits?!overview

Thompson: One of the things the pandemic has shown is that whether you are a small, medium-size, or large company, your supply chains are global. That’s the way we went into the pandemic, with the complexity of having to manage all of that compliance and drive efficiency so you can make accounting easy and remain compliant.

The regional nature of it is both a cost statement and a statement regarding regional incentives.  Being able to manage that complexity is what software and data make possible.

Gardner: And does managing that complexity scale down as well up based on the size of the companies?

Thompson: Absolutely. Small- to medium-sized businesses (SMBs) need to save money. And oftentimes SMBs don’t have dedicated departments that can handle all the complexity.

And so from a people perspective, where there’s less people you have to think about the end-to-end nature of compliance, accounting, and efficiency. When you think about SMBs, if you make it easy there, you can make it easy all the way up to the largest enterprises. So the benefits are really size-agnostic, if you will.

Gardner: Chris, as we unpack the tax visibility solution, what are the global challenges for tax calculation and compliance? What biggest pain points are people grappling with?

Challenges span globe, businesses

Carlstead: If I may just take a second and compliment Poornima. I always love it when I hear customers speak about our applications better than we can speak about them ourselves; so, Poornima, thank you for that.

And to your question, because the impact is the same for SMBs and large companies, the pain centers around the volume of change and the pace of that change. This affects domestic companies, large and small, as well as multinationals. And so I thought I’d share a couple of data points we pulled together at Thomson Reuters.

There are more than 15,000 jurisdictions that impact just this area of tax alone. Within those 15,000 jurisdictions, in 2019 we had more than 50,000 changes to the tax rules needed to comply within those jurisdictions. Now extrapolate that internationally to about 190 countries. Within the 190 countries that we cover, we had more than two million changes to tax laws and regulations.

At that scale, it’s just impossible to maintain manual processes and many companies look to do that either decentralized or otherwise -- and it’s just impossible to keep pace with that.
With the COVID-19 pandemic impact, we expect that supply chains are going to be reevaluated. You're changing processes, moving to new jurisdictions, and into new supply routes. And that has huge tax implications.

And now you introduce the COVID-19 pandemic, for which we haven’t yet seen the full impact. But the impact, along the lines where Sean was heading, is that we also expect that supply chains are going to get reevaluated. And when you start to reevaluate your supply chains you don’t need government regulation to change, you are changing. You’re moving into new jurisdictions. You are moving into new supply routes. And that has huge tax implications.

And not just in the area of indirect tax, which is what we’re talking about here today on the purchase and sale of goods. But when you start moving those goods across borders in a different route than you have historically done, you bring in global trade, imports, duties, and tariffs. The problem just magnifies and extrapolates around the globe.

Gardner: How does the Thomson Reuters and SAP Ariba relationship come together to help people tackle this?

Thompson: Well, it’s been a team sport all along. One of the things we believe in is the power of the ecosystem and the power of partnerships. When it comes down to it, we at SAP are not tax data-centric in the way we operate. We need that data to power our software. We’re about procurement, and in those procurement, procure-to-pay, and sales processes we need tax data to help our customers manage the complexity. It’s like Chris said, an amazing 50,000 changes in that dynamic within just one country.
And so, at SAP Ariba, we have the largest business network of suppliers driving about $3 trillion of commerce on a global basis, and that is a statement regarding just the complexity that you can imagine in terms of a global company operating on a global basis in that trade footprint.

Now, when the power of the ecosystem and Thomson Reuters come together we can become the tax-centric authorities. We do tax solutions and help companies manage their tax data complexity. When you can combine that with our software, that’s a beautiful interaction because it’s the best of both worlds.

It’s a win, win, win. It’s not only a win for our two companies, Thomson Reuters and SAP, but also for the end customer because they get the power of the ecosystem. We like to think you choose SAP Ariba for its ecosystem, and Thomson Reuters is one of our -- if not the most -- successful extensions that we have.

Gardner: Chris, if we have two plus two equaling five, tell us about your two. What does Thomson Reuters bring in terms of open APIs, for example? Why is this tag team so powerful?

Partner to prioritize the customer

Carlstead: A partnership doesn’t always work. It requires two different parties that complement each other. It only works when they have similar goals, such as the way they look at the world, and the way they look at their customers. I can, without a doubt, say that when Thomson Reuters and SAP Ariba came together, the first and most important focus was the customer. That relentless focus on the customer really helped keep things focused and drive forward to where we are today.
When you bring two large organizations together to help solve a large problem it's a complex relationship and takes a lot of hard work. I'm really proud of the work we have done.

And that doesn’t mean that we are perfect by any means. I’m sure we have made mistakes along the way, but it’s that focus that allowed us to keep the patience and drive to ultimately bring forth a solution that helps solve a customer’s challenges. That seems simple in its concept, but when you bring two large organizations together to help try to solve a large organization’s problems, it’s a very complex relationship and takes a lot of hard work.

And I’m really proud of the work that the two organizations have done. SAP Ariba has been amazing along the way to help us solve problems for customers like Stanley Black and Decker.

Gardner: Poornima, you are the beneficiary here, the client. What’s been powerful and effective for you in this combination of elements that both SAP Ariba and Thomson Reuters bring to the table?

Sadanandan: With our history of around 175 years, Stanley Black and Decker has always been moving along with pioneering projects, with a strong vision of adopting the intelligent solutions for society. As part of this, adopting advanced technologies that help us fulfill all of the company’s objectives has always been in the forefront.
As part of that tradition, we have been leveraging the integration framework consisting of the SAP Ariba tax API communicating with the Thomson Reuters ONESOURCE tax solution in real-time using web services. The SAP Ariba tax API is designed to make a web service call to the external tax service provider for tax calculations, and in turn it receives a response to update the transactional documents.

During the procurement transactions, the API makes an external tax calculation. Once the tax gets determined, the response is converted back per the SAP Ariba message format and XML format and it gets passed on by the ONESOURCE integration and sends that over to the SAP application.

The SAP Ariba tax API receives the response and updates the transactional documents in real time and that provides a seamless integration between the SAP Ariba procurement solution and the global tax. That’s exactly what helps us in automating our procurement transactions.

Gardner: Sean, this is such a great use case of what you can do when you have cloud services and the right data available through open APIs to do real-time calculations. It takes such a burden off of the end user and the consumer. How is technology a fundamental underpinning of what ONESOURCE is capable of?

Cloud power boosts business outcomes

Thompson: It's wonderful to hear Poornima as a customer. It’s music to my ears to hear the real-life use case of what we have been able to do in the cloud. And when you look at the architecture and how we are able to drive, not only a software solution in the cloud, but power that with real-time data to drive efficiencies, it’s what we used to dream of back in the days of on-premises systems and even, God bless us, paper reconciliations and calculations.

It’s an amazing time to be alive because of where we are and the efficiencies that we can drive on a global basis, to handle the kind of complexity that a global company like Stanley Black and Decker has to deal with. It’s an amazing time.

And it’s still the early days of what we will doing in the future around predictive analytics, of helping companies understand where there is more risk or where there are compliance issues ahead.

That’s what’s really cool. We are going into an era now of data-driven intelligence, machine learning (ML), applying those to business processes that combine data and software in the cloud and automate the things that we used to have to do manually in the past.

And so it’s a really amazing time for us.

Gardner: Chris, anything more to offer on the making invisible the technology but giving advanced business outcomes a boost?

Carlstead: What’s amazing about where we are right now is a term I often use, I certainly don’t believe I coined it, but best-of-breed suite. In the past, you used to have to choose. You had to go best-of-breed or you could go with the suite, and there were pros and cons to both approaches.

Now, with the proliferation of APIs, cloud, and the adoption of API technology across software vendors, there’s more free flow of information between systems, applications, and platforms. You have the ability as a customer to be greedy -- and I think that’s a great thing.
Stanley Black and Decker can go with the number-one spend management system in the world and they can go with the number -one tax content player in the world. And they can expect these two applications to work seamlessly together.

As a consumer, you are used to downloading an app and it just works. And we are a little bit behind on the business side of the house, but we are moving there very quickly so that now customers like Stanley Black and Decker can go with the number-one spend management system in the world. And they can also go with the number-one tax content player in the world. And they can have the expectation that those two applications will work seamlessly together without spending a lot of time and effort on their end to force those companies together, which is what we would have done in an on-premise environment over the last several decades.

From an outcome standpoint, and as I think about customers like Stanley Black and Decker, getting tax right, in and of itself is not a value-add. But getting it wrong can be very material to the bottom line of your business. So for us and with the partnership with SAP Ariba, our goal is to make sure that customers like Stanley Black and Decker get it right the first time so that they can focus on what they do best.

Gardner: Poornima, back to you for the proof. Do you have any anecdotes, qualitative or quantitative measurements, of how you have achieved more of what you have wanted to do around tax processing, accounts payable, and procurement?

Accuracy spells no delayed payments

Sadanandan: Yes, all the challenges we had with our earlier processes with respect to our legacy applications got diminished with respect to incorrect VAT returns, wrong payments, and delayed payments. It also strengthened the relationship between our business and our suppliers. Above all, troubleshooting any issues became so much easier for us because of the profound transparency of what’s being passed from the source system.

And, as I mentioned, this improves the supplier relationship in that payments are not getting delayed and there is improvement in the tax calculation. If there are any mismatches, we are able to understand easily how that happened, as the integration layer provides us with the logs for accurate analysis. And the businesses themselves can answer supplier queries on a timely manner as they have profound visibility to the data as well.

From a project perspective, we believe that the objective is fulfilled. Since we started and completed the initial project in 2018, Stanley Black and Decker has been moving ahead with transforming the source-to-pay process by establishing a core model, leveraging the leading practices in the new SAP Ariba realm, and integrated to the central finance core model utilizing SAP S/4HANA.

So the source-to-pay core model includes leading practices of the tax solution by leveraging ONESOURCE Determination by integrating to the SAP Ariba source-to-pay cloud application. So with a completion of the project, we were able to achieve that core model and now the future roadmaps are also getting laid out to have this model adopted for the rest of our Stanley Black and Decker entities.

Gardner: Poornima, has the capability to do integrated tax functionality had a higher-level benefit? Have you been able to see automation in your business processes or more strategic flexibility and agility?

Sadanandan: It has particularly helped us in these uncertain times. Just having an automated tax solution was the primary objective with the project, but in these uncertain times this automated solution is also helping us ensure business continuity.
Having real-time calls that facilitate the tax calculation with accuracy and precision without manual intervention helped the year-end accounts payable transactions to occur without any interruptions.

Having real-time calls that facilitate the tax calculation with accuracy and precision without manual intervention helped the year-end accounts payable transactions to occur without any interruptions.

And above all, as I was mentioning, even in this pandemic time, we are able to go ahead with any future projects already in the roadmap because they are not on a standstill, we are able to leverage the standard functionalities provided by ONESOURCE and that’s easier to adopt in our environment.

Gardner: Chris, when you hear how Stanley Black and Decker has been able to get these higher-order risk-reduction benefits, do you see that more generally? What are some of the higher-order business benefits you see across your clientele?

Risk-reduction for both humans and IT

Carlstead: There are two broad categories. I will touch on the one that Poornima just referenced, which is more the human capital, and then also the IT side of the house.

The experience that Stanley Black and Decker is having is fairly uniform across our customer base. We are in a situation where in almost every single tax department, procurement department, and all the associated departments, nobody has extra capacity walking around. We are all constrained. So, when you can bring in applications that work together like SAP Ariba and Thomson Reuters, it helps to free up capacities. You can then shift those resources into higher-value-add activities such as the ones Poornima referenced. We see it across the board.

We also see that we are able to help consolidate resourcing from a hardware and a technology standpoint, so that’s a benefit.

And the third benefit on the resource side is that as you are better able to track your taxation, not only do you get it right the first time, when it comes to areas of taxation like VAT recovery, you have to show very stringent documentation in order to receive your money back from governments, so there is a cash benefit as well.

And then on the other side, more on the business side of the relationship, there is a benefit we have just started to better understand in the last couple of years. Historically folks either chose not to move forward with an application like because they felt they could handle it manually, or even worse, they would say, “We will just have it audited, and we will pay the fine because the cost to fix the problem is greater than the penalties or fines I might pay.”

But they didn’t take into consideration the impact on the business relationship that you have with your vendors and your suppliers. If you think about every time you have had a tax issue between them, and then in the case in many European countries and around the world, where VAT recovery would not allow that supplier to recover their taxation because of a challenge they might have had with their buyer, that hurts your relationship. That ultimately hurts your ability to do commerce with that partner and in general with any partner around the world.

So, the top-line impact is something we have really started to focus on as a value and it’s something that really drives business for companies.

Gardner: Poornima, what would you like to see next? Is there a level of more intelligence, more automation?

Post-pandemic possibilities and progress

Sadanandan: Stanley Black and Decker is a global company spanning across more than 60 countries. We have a wide range of products, including tools, hardware, security, and so on. Irrespective of these challenging times, all our priorities regard the safety of the employees and the families and keeping the momentum of business continuity responding to the needs of the community … these all remain as the top consideration.

We feel that we are already equipped technology-wise to keep the business up and running. What we are looking forward to is, as the world tries to come back to the earlier normal life, continuing to provide pioneering products with intelligent solutions.

Gardner: Chris, where do you see technology and the use of data going next in helping people reach a new normal or create entirely new markets?

Carlstead: From a Thomson Reuters standpoint, we largely focus on helping businesses work with governments at the intersection of regulation and commerce. As a result, we have, for decades, amassed an extensive amount of content in categories around risk, legal, tax, and several other functional areas as well. We are relentlessly focused on how to best open up that content and free it, if you will, from even our own applications.
When we can leverage ecosystems such as SAP Ariba, we can leverage APIs and provide a more free-flowing path for our content to reach our customers. The number of use cases and possibilities is infinite.

What we are finding is that when we can leverage ecosystems such as SAP Ariba, we can leverage APIs and provide a more free-flowing path for our content to reach our customers; and when they are able to use it in the way they would like, the number of use cases and possibilities is infinite.

We see now all the time our content being used in ways we would have never imagined. Our customers are benefiting from that, and that’s a direct result of the corporations coming together and suppliers and software companies freeing up their platforms and making things more open. The customer is benefiting, and I think it’s great.

Gardner: Sean, when you hear your partner and your customer describing what they want to come next, how can we project a new vision of differentiation when you combine network and ecosystem and data?

Thompson: Well, let me pick up where Chris said, “free and open.” Now that we are in the cloud and able to digitize on a global basis, the power for us is that we know that we can’t do it all ourselves.
We also know that we have an amazing opportunity because we have grown our network across the globe, to 192 countries and four million registered buyers or suppliers, all conducting a tremendous amount of commerce and data flow. Being able to open up and be an ecosystem, a platform way of thinking, that is the power.

Like Chris said, it’s amazing the number of things that you never realized were possible. But once you open up and once you unleash a great developer experience, to be able to extend our solutions, to provide more data -- the use cases are immense. It’s an incredible thing to see.

That’s what it’s really about -- unleashing the power of the ecosystem, not only to help drive innovation but ultimately to help drive growth, and for the end customer a better end-to-end process and end-to-end solution. So, it’s an amazing time.

Gardner: I’m afraid we will have to leave it there. You have been listening to a sponsored BriefingsDirect discussion on reducing risk and increasing cost efficiency as businesses grapple with complex and often global taxation management challenges. And we have learned how the payoff to gaining such a full and data-rich view of compliance spend patterns reduces errors, enables new business efficiencies, and leads to better strategic spend management.

So a big thank you to our guests, Sean Thompson, Executive Vice President of Network and Ecosystem, SAP Procurement Solutions. Thank you so much, Sean.

Thompson: Thank you, Dana.

Gardner: We have also been with Chris Carlstead, Head of Strategic Accounts and Partnerships and Alliances at Thomson Reuters. Thank you so much, Chris.

Carlstead: Dana, thank you. I have really enjoyed the time with you.

Gardner: And lastly we have been with Poornima Sadanandan, P2P IT Business Systems Lead at Stanley Black and Decker. Thank you so much, Poornima.

Sadanandan: Thank you, Dana. I enjoyed the conversation.

Gardner: And a big thank you to our audience as well for joining this BriefingsDirect modern digital business innovation discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP-sponsored BriefingsDirect discussions.

Thanks again for listening. Please do come back next time, and feel free to share this information across your IT and business communities.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how end-to-end visibility of business tax, compliance, and audit functions allows for automated adherence to rapidly changing requirements. Copyright Interarbor Solutions, LLC, 2005-2020. All rights reserved.

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