Inala International

Procure to Pay- Analysis and

Recommendations
Team E

Agenda

Identify and
report
significant data
findings
Current state
organizational
processes and
systems
documents

2013 EYGM Limited

Slide 2

Recommend
and prioritize
improvement
opportunities
and initiatives

Assess
current state
organization
al processes
and
technology

Future state roadmap

Supplement
efforts to
enable a high
level business
case model
stating costs
and benefits

Background and Approach

INALA

Inala International Limited. is a global company that designs and markets sports and
fitness products, including footwear, apparel and accessories.
Procure to pay (P2P) is the process of obtaining and managing the raw materials
needed for manufacturing a product or providing a service. It involves the
transactional flow of data that is sent to a supplier as well as the data that surrounds
the fulfilment of the actual order and payment for the product or service.

Approach
1. Analyze the data provided to us by Inala
2. Report on key findings from the analysis.
3. Compare Inalas processes to best industry
practices
4. Recommend
changes
and
strengthen
existing systems in place
5. Provide a crystal clear approach to an
improvement in the market.
6. Put forward a potential course of action to
regain the lost advantage

Page 3

Why EY?
1. We have the largest repositories of
best industry practices
2. Provide exceptional client service,
meaning we are the most connected,
responsive and insightful to our
clients needs
3. Operate as a truly borderless
organization allows us to serve our
clients through cross-border, crossservice line teams who bring diverse
perspectives and experiences

EY

Executive Summary
OBSERVATIONS

IMPLICATIONS

Frequent Order Changes

Material
demand

inventory

isnt

Discontent of suppliers
meeting

customers Inala resorts to spot market with a higher cost and

also further results to dissatisfied customers

ERP system is too complex

Segregation of duties are
unorganized logical access

Parts of Procure to Pay Processes excluded from

ERP System
not

clear

and Process flow delay and quality checking hindered

Duplicate invoices are generated and invoice Cash disbursement recorded does not match the
system is obsolete
invoice amount resulting in losses for the
company

Page 4

Current State findings

Risks

Rating

Frequent order changes with risk of not

procuring enough material for producing
output

High

Inala changes the orders so often that the

vendors are having a difficult time invoicing
and shipping the products ordered
Inala does not receive electronic invoices
leading to duplicate invoices

Page 5

Medium

High

Frequent emergency changes makes the

suppliers unhappy with the risk of losing them

Moderate

IT department enters new suppliers and

vendors even though they arent authorized

Moderate

The purchasing department isnt in control of

the purchase orders

High

Current State Summary:

Focus Dimensions

Our review of the Procure to Pay Process reveals our observations against the below given
dimensions:

Vendor
Concerns

Purchase Order

System
Deficiency

Purchase Cycle

Page 6

85% of the suppliers are uncertified because of which we have to do processing of invoice manually. This
is leading to employees dissatisfaction and waste of valuable resource time.
Spot market purchase

The purchase department is forced to make changes in the PO due to change in customer order and thus
not meeting materials demand.
Rise in FTE.
3 way match

Duplicate invoice and fictitious vendors are generated.

Complicated ERP

Long cycle times due to change in POs which is forcing Inala to do spot market purchases
3 way match
Current process takes time

RACM- Risk and Control Matrix

Process

Page 7

Control
Numbe Sub Process
r

What Could Go Wrong

1.1

Accounts
Payable

Cash disbursements
recorded differ from
amounts paid.

Purchase to
Pay

1.3

Accounts
Payable

Fictitious/duplicate
invoices are recorded.

Purchase to
Pay

3.1

Purchasing

Purchase Information
Records are incomplete
or inaccurate.

Purchase to
Pay

5.2

Supplier
Invoicing

Duplicate invoices are

processed for payment.

Purchase to
Pay

1 January 2014

Presentation title

Control Objective

Control

Each transaction pertainng to disbursement

of cash must be mapped to the respective
invoice by the authorised personnel of AP
department.
There should be two tables- one for
approved vendors and the pother for
System does not allow
unaaproved vendors. The vendor's name
vouchers to be created for
against each voucher raised must be
invalid and/or unapproved
checked for in the approved table. If the
vendors
validation, the voucher should be rejected
and the AP supervisor should be alerted.
Purchase information must be entered by
the person placing the PO (maker) on the
All key information is
same day. It must be verified by the
captured in the Purchasing
purchase manager/supervisor as and when
Information Record
a PO is raised through the unique PO
number.
There should be a master invoice table
wherein the unique invoice number is
recorded. Once an invoice is raised, the
The system warns in the
invoice number must be checked for
event of a potential
existence in the master invoice table. If the
duplicate invoice.
validation is true, the invoice should be
rejected and the AP supervisor should be
alerted.
Ensure that the check
amount is the same as the
invoice amount.

RACI- Responsibilities, Accountabilities, Consulted,

Informed

Page 8

1 January 2014

Presentation title

Future state finding- Transformation in the ERP system

Prioritize improvement ideas

2. Structured and Managed System

3. High Cost
4. Risk- Functionality

Low

High

1. Suggestion for a new ERP

system ore changes In the existing

Ease of implementation

Recommendations

5. Dependencies - On information
from all 3 departments
6. Timing- long term
7. Training is required to implement
the new system

Page 9

Short term

Long term

Benefits realization

Change in Responsibility and Accountability

Recommendations

Prioritize improvement ideas

3. No Cost
4. Risk- Low Risk
5. Dependencies- Responsible
execution of roles
6. Timing- Less time
7. People need to be apprised of
their new roles and responsibilities

Low

High

2. Benefits- Coherent logical access

Ease of implementation

1. Organized Delegation of roles in

an improved way

Short term

Long term

Benefits realization

Page 10

Duplicate Invoices:
Recommendations

3.Low Cost
4. Risk- Could lead to discrepancies
depending on master table.
5. Timing- Less time
6. Train people in the organisation
to use the Application.

Low

High

2. Benefits- Control on payments.

Ease of implementation

1. Unique invoice no. will be

recorded in the master invoice
table. If the Extended Invoice no.
already existing in master invoice
table.

Prioritize improvement ideas

Short term

Long term

Benefits realization

Page 11

Costs and benefits, cumulative net benefits and payback

16
14.36

14
12

13.05
11.8
10.7
9.9

10

Benefits
Costs
Moving average (Costs)

8
6
4
2
0

Page 12

0.33

0.36

0.4

0.44

0.49

2012

2013

2014

2015

2016

Costs and benefits, cumulative net benefits and payback

10% Discount rate (WACC)
## years Payback
($4,38,68,297) NPV
#NUM!
IRR

Date: 03/03/2016
Benefits
Labor arbitrage
Headcount reduction
Increased process efficiency
Process standardization
Working capital reduction
Occupancy savings
Software license savings
Economies of scale
Total Benefits
Costs
Transition/work shadowing
Relocation
Training
Capital expenditure
Software licenses
Recruiting expense
IT infrastructure
Severance
Retention
Project team
Other
Total Costs
Net impact

2012

2013

Page 13

2015

2016

Total

$
$
$
$
$
$
$
$

3,36,000
3,36,000

$
$
$
$
$

3,69,600

$
$
$
$

4,06,560

$
$
$
$

4,47,216

$
$
$
$
$

4,91,938

$
$

3,69,600

$
$

4,06,560

$
$

4,47,216

$
$

4,91,938

$
1,07,91,277
-

$
$
$
$
$
$
$
$
$

1,18,70,405
-

1,30,57,445.17
-

$
$
$
$
$
$
$
$
$

1,43,63,189.69
-

$
$
$
$
$
$
$
$
$
$

99,00,985
11,000
-

1,07,91,277 $

1,18,70,405 $

1,30,57,445 $

1,43,63,190 $

99,11,985

(1,04,55,277) $

(1,15,00,805) $

(1,26,50,885) $

(1,39,15,974) $

(94,20,047) $

America-51982
23 USD
Europe- 63,593
30 US
Asia-38120
PT-18

2014

47840

$
$
$
$
$
$
$
$

$
$
$
$
$
$
$
$

$
$
$
$
$
$
$
$

20,51,314
20,51,314

$
$
$
$
$
$
$
$
$
$
$
$

5,99,83,302
11,000
5,99,94,302
(5,79,42,988)

Way ahead - Inalas E-Commerce Store

Recommendations:
1. Open up a new e-commerce store for customers
2. Centralised order taking platform for global customers

Benefits

1. 24X7 Accessibility to customers Avoid

overhead costs of physical stores with global
reach
2. Integration with ERP system - real time
inventory status of products
3. Easier delivery of Information of products
4. New promotions can be introduced through
website
5. Increased product and brand awareness

Page 14

Risks/Cost

1. Medium investment required initially

for development of website.
2. Low cost of integration of Website
with ERP System.
3. Low cost of maintenance of website.

ERP Invoice Conversion Tool

Recommendations:
1. Introduce an automated tool for converting hard copy invoices to electronic form.
2. The tool can be integrated with ERP for fetching electronic invoices.

Benefits
1. Standardized invoices for purchases made
through both approved suppliers and spot
purchases.
2. The AP process will have improved visibility
over invoices.
3. E-invoices will result in improved companyvendor relationship.
4. Improved compliance.

Page 15

Risks/Cost

1. Low development cost

2. Low integration cost with ERP System
3. Tool must be checked for possible
vulnerabilities before implementing
with ERP system.

Thank You!

Page 16

1 January 2014

Presentation title