Dates have just been announced for the next CanMUG meeting in Toronto!
Mark your calendars, save the date. The Canadian Maximo User Group meeting in Toronto is always well-attended and well-organized, with useful and informative presentations from Toronto-area Maximo user organizations.
May 2nd and 3rd, 2017: with CanMUG meetings, the user group meeting generally takes place on the first day, and optional training sessions on the 2nd. But don't take it from me, check the CanMUG website for complete details.
If you find yourself in New York this week, head on over to the New York Maximo Users Group hosted by Consolidated Edison on February 16.
Details and registration link here: http://maximousers.org/nymug
P2Insight is a proud sponsor of this Maximo User Group, and Mike Popovic will be there to introduce us and The Order Hub, which connects Maximo buyers to their vendors online throughout the purchasing process.
If you follow P2Insight through any of our social media accounts, you may have seen me mention that P2Insight and Vroozi are working together to bring vendor punch out functionality to Maximo within the past couple of days.
What is punch out functionality?
In procurement, punch out functionality means that you can jump out to a vendor site from within your existing purchasing application, search for and select the part you need, and return with it to your purchasing application, where the part information from the vendor site will auto-populate your PO lines.
To better illustrate the concept of punch out functionality, check out the two process flows below that use Maximo as the starting point. One of them is short enough that I had room for a doodle...
Vendor sites vs. marketplaces
You can punch out to a single vendor site, or to a marketplace.
What do you think?
Do you see a place for punch out functionality in your existing purchasing process? Are you using punch out already?
This is a revised version of the 6th post in the series: How Much Does It Cost to Process an Order?
1st post: http://www.p2insight.com/blog/how-much-does-it-cost-to-process-an-order
2nd post: http://www.p2insight.com/blog/how-much-does-it-cost-to-process-a-purchase-order-internally
3rd post: http://www.p2insight.com/blog/calculating-the-cost-to-process-a-po-externally
4th post: http://www.p2insight.com/blog/calculating-the-cost-to-expedite-an-order
5th post: http://www.p2insight.com/blog/calculating-the-cost-to-receive-an-order
I was tasked with analyzing the average costs of processing an order through its various stages from Purchase Order (PO) creation through to invoice closure.
I decided that my starting point would be the concept: time is money. I had to figure out:
This post is a revised version of the post that discusses how I came to determine the average cost to process an invoice. You can read the original here, if you're interested.
Why the revision?
Long story short: I didn't like my own post.
When I was doing the research for the series originally, I was trying to find studies from different procurement organizations that addressed how long it takes to process an order at any of the different stages in the process. I found a few that discussed processing invoices, and while each study ultimately presented different data, all of them indicated that processing an invoice takes weeks.
I ran with it. But on reviewing the series after it had all been released, it was apparent that the logic behind the invoicing post was inconsistent with the logic applied to the rest of the series: the invoicing post took elapsed time into account, whereas the other posts in the series were based on active working time.
So I'm re-releasing this post, revised to use active working time instead of elapsed time as the basis for evaluation.
If you've been following this series, you know I like to find credible data from research studies conducted by other parties and then run with it.
Through the course of researching the costs of processing invoices, I found that - similarly to the cost of processing a PO - there are many different studies available that provide costs ranging from a few dollars to several hundred dollars per invoice.
What is interesting to note here is that I did see a few articles from different sources that reference a cost of $25 to process an invoice – but this seems to include the staffing cost of only a single A/P clerk, plus the costs of the office supplies associated with processing the order. To my mind this doesn’t accurately reflect the costs of the time and effort of everybody involved in reviewing and approving an invoice.
Number of hours to process an invoice
I found a study by Ardent Partners stating that a world class organization processes an invoice in 3.7 days, and a laggard organization takes 12.2 days.
But that works with elapsed time, and I need active working time. I couldn't find any studies that discussed the time it takes to process an invoice in terms of active working time. So here I'll attempt to figure it out myself.
Steps involved in processing an invoice
Presumably, by the time the invoice is sent for processing, the previous steps in the process have been followed and issues have been resolved. So most invoices should process relatively quickly. The steps themselves are straightforward:
So the perfect world invoice process takes maybe 20 minutes if all paperwork is in order, any issues with the order have already been completely resolved, and all items have been received as ordered.
I'm going to round that 20 minutes to 30. Partially for simplicity's sake, but also because some orders may be larger and it'll take longer to review the paperwork, and some orders may have had problems along the way that have since been resolved and the associated paperwork has to be reviewed in detail for the payment can be approved.
Cost to process an invoice
I'm going to apply the hourly rate established earlier in this series to determine the cost of processing an invoice:
1/2 hour * $27.78 = $13.89
A lot of things can make invoice processing take longer.
Incomplete or incorrect paperwork, incorrectly routed invoice documents, partial receipts, returns, order changes, delays, additional feedback required from interested parties, duplicate payments, etc.
I have to take my calculations further with processing invoices, because invoice exceptions can add a significant amount of time and complexity to the task, and exceptions are commonplace; a 2016 study by Ardent Partners indicates that the average invoice exception rate is 17.6%.
How much time is spent on invoice exceptions?
Similarly to how I determined the amount of time spent negotiating an order with a vendor, I split invoice exceptions into categories based on the complexity of the problem.
Starting with the exception rate of 17.6%, I converted that to 18 invoices with exception per 100 invoices processed. The following table illustrates how much time is spent processing those 18 invoices with exception:
From the table:
Total extra minutes spent on invoice exceptions per 100 orders: 2,430
This works out to 135 extra minutes, or 2.25 extra hours, per order with invoice exception (on average).
Cost to process an invoice with exception
Time to process an invoice (without exception): 1/2 hour
Additional time to process an invoice with exception: 2.25 hours
Total time to process an invoice with exception: 2.75 hours
Staffing cost per hour: $27.78
2.75 * $27.78 = $76.39
Following my (revised) logic and calculations, it costs:
$13.89 to process an invoice, and
$76.39 to process an invoice with exception.
What do you think about the revised numbers? I think this makes a lot more sense than what I had written previously; the elapsed duration involved in processing an invoice would understandably be fairly long, but the active working time... not so much.
Now that the numbers make more sense and the same logic has been applied consistently to all posts, I'll be able to compile my findings into one document and spreadsheet. Stay tuned, I'll publish that soon.
I've said it before and I'll say it again - it's so exciting that there's going to be a dedicated large-scale Maximo conference again! Welcome back Maximo World!
There are a lot of great opportunities throughout the year to network with other Maximo user organizations and learn from each other, but this will be the biggest, with the most Maximo-specific content of any event.
There are many Maximo User Groups
If you're familiar with the different Maximo User Groups, you know that most of them meet online or in person once or twice annually. Most are region- or industry-specific, and they aim to bring like-minded users together to learn Maximo strategies and approaches from each other.
There's IBM InterConnect
Perhaps you've been to InterConnect in recent years. InterConnect is a staggeringly huge conference put on by IBM in Las Vegas that, while providing a vast wealth of opportunities for user organizations to learn more about IBM's different offerings, is... staggeringly... huge. Maximo content plays a role, but not necessarily a starring one, and it can feel sometimes like it gets a little lost in the shuffle.
But there's only one Maximo World
P2Insight is a proud founding member of this reboot of a large-scale Maximo-specific conference for Maximo user organizations from all industries and locales.
There has been a great deal of interest in Maximo World from the entire community so far: the call for papers closes this week, and already the conference committee has received more than 50 presentation abstracts!
If early buzz is any indication, this event is not to be missed. If there is one Maximo conference you attend this year, Maximo World should be it! Check out the website, subscribe to our newsletter, or follow #maximoworld on twitter for updates.
We'll see you in August in Orlando!
What would you like to see at Maximo World?
As I said, P2Insight is a proud founding member of this conference. If you tell us what you'd like to see there, I will be sure to relay it to the conference committee. Leave a comment or contact us at email@example.com and let us know!
The Facilities Management Maximo User Group (FMMUG) gets under way today in New Orleans! P2Insight is a proud platinum sponsor of the event, and you can see President and founder Mike Popovic introduce the company and our flagship product, The Order Hub, on Thursday during the conference.
Stop by our booth to learn about how we're modernizing Maximo purchasing and making it easier to connect you with your vendors. And leave us a business card for your chance at some modern technology too!