CASE STUDY: ING Direct

ING Direct Australia is a regional office of the global group of companies: ING BV Group. The 7th largest group globally as of 2008. ING Direct made a profit of approx. $320 Mil in 2009 to provide some context.

In 2008 ING Direct engaged me to look at ways to optimise the business as we were headed into the Global Financial Crisis. The only mandate was to find ways to streamline the business operations and reduce costs without impacting customer value or simply reducing head count.

The Challenge
No Existing Optimisation Function

ING Direct at this point did not have an established procurement or business optimisation function. So it was a bit like the wild west in terms of vendor engagement.

Award Winning Culture

As a result of INGs award winning culture they also had the attitude of "if it isnt broken, don't change it" so innovation and change was not part of the culture.

No Visibility of Pending Invoices

No established procurement function meant thousands of vendors, and no central point to receive, code and allocate invoices for approval then payment, left them floating around the business for months.

The Solution
Map the existing business process from purchase order to invoice paid.
This involved interviewing stakeholders across all business units to clarify the existing process.
Reengineer the procure to pay business process to be optimal.
With over 147 steps in the original process it was no wonder invoices took 6 months on average to be paid. The new process brought this down to 17 steps and 3 weeks average to be paid.
Negotiate early payment concessions
Once a new average time-to-pay was established I could then negotiate early payment concessions of between 5 and 10% for early payment.
Implement a digital procure to pay system

This allowed all invoices to enter the bank via one email inbox or PO Box, then got scanned with OCR, General Ledger code applied, and routed to line managers for signoff. Then proceeded to accounts payable and added to batches for payment each day.

This system allowed total visibility of Purchase Order value issued compared to what was invoiced at any time of the month.

It also allowed full visibility from accounts payable to follow-up with invoices that were not yet approved after 3 days, and could be automatically escalated for approval.

The Results
Vendor Rationalisation

Reduced approved vendors from over 3,000 to less than 700

Consolidation Discounts

Consolidating vendors allowed savings of up to 20% with Service Level Agreements added.

Reduced Total Outgoings

An additional average of 6% early payment concession negotiated across the entire supply chain, saving approx. $20mil per annum.

Repurposing of Staff

Because the entire procure to pay system had been digitized, there was much greater visibility of the entire financial component to purchasing goods and services. At any time the bank could see what had been committed via Purchase Orders vs what had been Invoiced vs What had been paid.

This also prevented the manual entry by accounts payable as data was now captured on the front end via Optical Character Recognition (OCR) scanners and coded to the correct General Leger account as per the vendor agreement when vendor rationalisation took place.

So accounts payable could focus more time on forecasting, planning and audit instead of just manual data entry.

As you can see there were hard cost savings of approx. $20mil per annum, but also soft cost savings in terms of repurposing of staff and better oversight o the business, enabling better and more timely business decisions to be made to keep up with market changes.

ING Direct Reduces Accounts Payable Expenditure by Over $20 Million per Year Without Reducing Head Count or Value to its Customers.

Want similar results for your business?

This is a great example of change in a large corporate, so it wasn’t without its challenges. Some of which included resistance to change, the initial project rollout timeline vs maturity of the new function and system to achieve maximum benefits.

This project was one of a few that I worked on with ING Direct and most notably this tied into to the replacement of all their financial and banking systems. As of 2009 the general ledger was DOS based and a total of 14 different systems that did not talk to each other created a lot of manual data entry for the finance division along with many weeks to complete month and year end. This provided a massive disadvantage to understanding the business performance and being able to report back to head office in a timely manner.

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