Utility reports returns of 5 to 1 on e-procurement and other technology investments
Cinergy Corp. is a strong believer in the value of e-procurement, and a look at the company’s achievements tells you why—lower transaction costs, shorter procurement cycles and better order accuracy. Purchase order costs, for example, have been reduced from $100 to less than $20 per P.O.
How did Cinergy achieve these impressive results? The company concentrated on technology and business process improvements necessary to attain a high level of supply chain performance. A particular focus was eliminating costly, inefficient manual transactions throughout the procure-to-pay (P2P) cycle. The Pantellos Marketplace offered Cinergy the foundation for automating its P2P process by providing a single integration point to connect with suppliers and conduct transactions faster, more accurately and at a lower cost.
Once Cinergy’s senior leaders saw the business case for implementing e-procurement and other business process innovations, they gave the supply chain organization full support for rolling out the programs companywide. The internal rollout program included communication to engage the staff and prepare them for change. Some 300 users, including supply chain professionals, plant personnel and administrative staff, received training on how to conduct transactions through the Pantellos Marketplace.
To enable the technology for e-procurement, Cinergy established a direct physical connection between its Indus PassPort system and the Pantellos Marketplace, setting a goal to move 80 percent of the company’s procurement transactions to the Marketplace.
Supplier adoption has been a key success factor in implementation. Cinergy focused on key suppliers, setting a goal to connect directly with its top 200 suppliers via the Marketplace. The utility dedicated people and resources to involve suppliers in the process and support them in making the transition to integrated e-commerce. Pantellos provided tactical assistance and testing services to help bring suppliers on board. To date, Cinergy has integrated 64 key material suppliers.
Furthermore, Cinergy has moved 50 percent of all procurement transactions to the Pantellos Marketplace. The utility conducts an average of 4,300 transactions monthly for both direct and indirect commodities, including poles, wire and cable, distribution transformers, electric and gas meters, office supplies, safety equipment, general MRO supplies and IT software.
Cinergy’s total Marketplace spend now exceeds $190 million, with more than 110,000 transactions to date. By leveraging the use of the Pantellos Marketplace, Cinergy has lowered transaction costs and reduced procurement cycle times—with fewer full-time resources. Order accuracy has improved from an error rate of more than 15 percent on EDI transactions to just 0.2 percent for XML transactions through the Marketplace.
Cinergy reports a return on investment of approximately 5 to 1 on its technology and business process innovations, including e-procurement through the Pantellos Marketplace.
“Our investment in doing business with Pantellos has more than paid for itself,” said Craig Weida, Cinergy Vice President for Supply Chain and Administrative Services. “Supply chain savings have a huge impact on a utility’s financial health because they go straight to the bottom line.”
With this successful track record, Cinergy continues to move more transactions through Pantellos. The number of transactions has increased by 21 percent over the last 12 months, and work is now underway to begin buying several additional categories of MRO materials. Cinergy is currently rolling out the Pantellos e-Settlement Network, which will fully automate the P2P process by enabling electronic submittal and payment of supplier invoices. Cinergy expects this solution to cut its invoice processing costs in half and help improve supplier relationships through shorter payment cycles.
If your organization is looking for ways to lower costs and streamline procurement operations, talk with your Pantellos Development Manager about Marketplace Services that can help you reach your goals, or contact Randall Dobbins at Pantellos.
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