P Card programme gets the Kaizen treatment in this big leap forward by Ingersoll Rand
When Ingersoll Rand deployed a new ERP (Oracle R12) it decided to also revitalise its procure-to-pay (P2P) process. One of the identified focus areas were low-value purchases as there was room for efficiency improvement.
Its objectives included trimming the supplier base before the introduction of the new ERP, creating a robust process to avoid introduction of one-time suppliers in ERP. Ingersoll Rand was also flooded with low value invoices and wanted to eliminate as many of these as possible. Further, it wanted to improve relationships with suppliers, who occasionally withheld services, and to provide the business with responsive and flexible procurement support for urgent business needs.
A Purchasing Card (P Card) could address all the above challenges so a programme was rolled out to a select group of businesses to begin with. However, the roll out did not yield the results Ingersoll Rand was anticipating. Not many employees opted to receive a card and employees who did weren’t really using them. Low-value invoices continued to flood into Accounts Payable and the business continued to feel shackled by procurement practices holding them back.
As the standard approaches were not working, it was decided to leverage the Japanese principles of Kaizen and organise a ‘Rapid Improvement Event’ (RIE).
The RIE was held in the Netherlands over a five-day period, bringing together all stakeholders including Citi representatives. The objectives were: gap analysis, finding solutions, building new processes, trial and debug, and standardisation.
In the run up to the RIE, Ingersoll Rand also conducted a survey amongst the P Card target population group to understand their views of what was and was not working.
The main RIE themes included poor employee awareness, supplier awareness, and lack of acceptance. As the gaps touched almost all aspects of the P Card programme, it was realised it wouldn’t be possible for any one stakeholder to solve them. A unique ecosystem-based approach that brought in specific value-adds from a host of different partners was adopted to revitalise the programme.
P Card policy was refreshed and recirculated amongst internal stakeholders, with a quick start guide made available on the intranet. A video was created, dispelling myths and explaining how P Cards make working lives simpler.
Best practice and innovation
Citi ran analytics to help Ingersoll Rand have a clear understanding of suppliers that had card accepting capability. Calls were made to reconfirm they could accept a card payment and inform them of P Cards being Ingersoll Rand’s preferred payment method.
Where suppliers had never accepted a card payment before, Citi introduced a fintech, Billhop, allowing card payments even to suppliers that do not accept a card, giving payment process consistency.
Ingersoll Rand also adopted the artificial intelligence-based VATBox system, ensuring VAT paid on purchases via P Cards was being reclaimed. Data feeds were set up between Citi and VATBox, consolidating all card transaction data.
Citi proposed the option of Amazon Business purchase with integrated and pre-defined approval processes, commodity restrictions, multiple seller quotes and preferred business features.
- Removal of 30,000+ invoices from the accounts payable process expected.
- Able to pay c.2,000 suppliers in 2018 who did not need to be maintained in the supplier database.
- Internal processes established to avoid new supplier set-up/maintenance for low value purchases: estimated savings of US$25,000 annually.
- Full visibility of vendors paid due to reporting available in Citi systems.
- Suppliers benefit from upfront payments for goods/services provided.
- Programme contributed to 10% growth in Ingersoll Rand’s rebate earned across all programmes in 2018.