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Automating the Purchase-to-pay Process at BAE Systems
Aerospace leader streamlines and standardizes a complex, resource-intensive process
A Tornado GR4 from RAF Marham's 13 Squadron (Copyright© 2005 BAE Systems. All rights reserved.)
By Editorial Staff
BAE Systems has crafted a multi-tier, worldwide network with thousands of suppliers and other partners to support the rapid, cost-effective delivery of its market-leading solutions to the global aerospace and defense (A&D) industry. Collaboration and interactions with these third parties directly affect how well BAE Systems ultimately serves its customers.
The legacy purchase-to-pay process — initiated with the creation of a purchase order (PO) and completed when a supplier is paid for goods or services — typified the multi-enterprise communications hurdles BAE Systems faced. In the company's Military Air Solutions organization, for example, the average time between PO generation and ultimate acceptance by all parties was 50 days, with only 13 percent of supplier PO responses getting registered in the business unit's enterprise resource planning (ERP) system. The invoicing phase of the purchase-to-pay process was similarly challenged. Too many steps required manual intervention, including the validation of incoming invoices and the execution of three-way matching between these invoices and the corresponding POs and receipt of goods (RoG) notices. The result? An inefficient process that took longer than necessary to complete and consumed too many valuable resources.
This situation was unacceptable to BAE Systems because it not only threatened production schedules but also affected valuable partner relationships. A number of very common circumstances found across many companies contributed to the situation. First, basic processes differed from business unit to business unit, limiting consistency and any opportunity for economies of efficiency. Second, the process required access to, and interaction with, a variety of information systems, all with different user interfaces and disparate data, raising process complexity and the likelihood of information mismatches.
As is often the case in the A&D industry, interactions with most suppliers were too reliant on the human factor, which opened the door to the unintentional introduction of errors and delays, deviation from the agreed process, or both. For example, buyers and suppliers entered PO, PO response, and PO change data into their respective back-office systems by hand, printed and faxed/mailed forms to one another, and checked on status via phone or e-mail. Invoice processing also required manually intensive interaction, as did the three-way matching and progression through the remainder of the invoice reconciliation and approval chain.
For BAE Systems, maintaining the status quo for the purchase-to-pay process was a non-starter. In the Military Air Solutions unit alone, upwards of 11,000 POs and PO changes, as well as over 25,000 invoices, from nearly 1,000 suppliers were processed in a one-year period. Across the company, these numbers were on the rise, promising to exacerbate problems for these manual, legacy activities. At the same time, BAE Systems' customers were strong proponents of automation and efficiency, to the point of pushing toward their incorporation as evaluation factors for contract award. In other words, establishing a streamlined, consistent purchase-to-pay process would not only benefit the company's suppliers, but also BAE Systems itself.
BAE Systems has crafted a multi-tier, worldwide network with thousands of suppliers and other partners to support the rapid, cost-effective delivery of its market-leading solutions to the global aerospace and defense (A&D) industry. Collaboration and interactions with these third parties directly affect how well BAE Systems ultimately serves its customers.
The legacy purchase-to-pay process — initiated with the creation of a purchase order (PO) and completed when a supplier is paid for goods or services — typified the multi-enterprise communications hurdles BAE Systems faced. In the company's Military Air Solutions organization, for example, the average time between PO generation and ultimate acceptance by all parties was 50 days, with only 13 percent of supplier PO responses getting registered in the business unit's enterprise resource planning (ERP) system. The invoicing phase of the purchase-to-pay process was similarly challenged. Too many steps required manual intervention, including the validation of incoming invoices and the execution of three-way matching between these invoices and the corresponding POs and receipt of goods (RoG) notices. The result? An inefficient process that took longer than necessary to complete and consumed too many valuable resources.
This situation was unacceptable to BAE Systems because it not only threatened production schedules but also affected valuable partner relationships. A number of very common circumstances found across many companies contributed to the situation. First, basic processes differed from business unit to business unit, limiting consistency and any opportunity for economies of efficiency. Second, the process required access to, and interaction with, a variety of information systems, all with different user interfaces and disparate data, raising process complexity and the likelihood of information mismatches.
As is often the case in the A&D industry, interactions with most suppliers were too reliant on the human factor, which opened the door to the unintentional introduction of errors and delays, deviation from the agreed process, or both. For example, buyers and suppliers entered PO, PO response, and PO change data into their respective back-office systems by hand, printed and faxed/mailed forms to one another, and checked on status via phone or e-mail. Invoice processing also required manually intensive interaction, as did the three-way matching and progression through the remainder of the invoice reconciliation and approval chain.
For BAE Systems, maintaining the status quo for the purchase-to-pay process was a non-starter. In the Military Air Solutions unit alone, upwards of 11,000 POs and PO changes, as well as over 25,000 invoices, from nearly 1,000 suppliers were processed in a one-year period. Across the company, these numbers were on the rise, promising to exacerbate problems for these manual, legacy activities. At the same time, BAE Systems' customers were strong proponents of automation and efficiency, to the point of pushing toward their incorporation as evaluation factors for contract award. In other words, establishing a streamlined, consistent purchase-to-pay process would not only benefit the company's suppliers, but also BAE Systems itself.
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