5 Replies Latest reply on Aug 13, 2010 6:54 AM by Gavin Pratt

    Tier 2, Pass Through or 'On Behalf Of' Spend

    Keith York Apprentice

      Hi - I have a long history of building spend management applications at HP - first for Direct Procurement and most recently for our Indirect and Services procurement orgs.  There's a problem that we've not been able to solve easily, or in an acceptable manner, yet and I'm wondering A) if anyone else has this problem or if it's unique to HP, B) if Ariba is planning a solution and/or C) if anyone else has solved it successfully.


      There are multiple scenarios in which spend that we're interested in leveraging isn't on our systems.  Any purchases that are made 'On Behalf Of' HP, by an outsourced manufacturer or services provider, or spend we've passed through credit card companies for t&e transactions, as examples, should be leverageable by us but are very difficult to get to.  Principally those in which we've in some way influenced the supplier decision.  We leveraged a  proprietary framework and data standards for Direct Procurement, but we were trading PO data and not payment data, so the spend wasn't trusted.  Add to that the challenge that vendors don't always want to share prices and it gets even more difficult. 


      It would be preferable to have a single framework through which all such transactions could flow, so we don't have to define different architectures and data trading standards for the multiple scenarios.


      I"m hard pressed to believe that we're the only ones with this problem.  Is there a solution already out there somewhere?

        • Re: Tier 2, Pass Through or 'On Behalf Of' Spend
          Ryan Sammel Apprentice

          In my past experience as an Ariba Spend Visibility Project Manager, I can state you are not alone.  Most companies have a Pcard system, and it is common that the data is not integrated to the corporate ERP.  Due to this, your visibility is limited to the overall invoice from the 3rd party, but no transaction details.


          These vendors should be able to provide transaction detail reports that can be referenced per your request.  I have worked with customers to load this extract into Ariba's Spend Visibility system for reporting along with their ERP data.  The level of detail can vary per customer, due to the agreements they have with the provider (providers may charge a fee for exports).


          The minimum detail I have seen was spend by supplier per month.  While not ideal, the data can be classified to a commodity for reporting through supplier enrichment.  This allows compliance reporting if end users are purchasing items outside of contracts.  If they provde the card numbers, many times other details can often be derived to allow for more detailed reporting.  I did work with one customer that used the Pcard provider had an interface that allowed the AP group to provide some of the corporate details.


          I hope this helps.



          Ryan Sammel

          Product Manager - Ariba Data Enrichment

            • Re: Tier 2, Pass Through or 'On Behalf Of' Spend
              Keith York Apprentice

              Ryan - thanks for your response, and the validation.  After over 600 views and no responses I was getting that "Oh no - there really IS such a thing as a stupid question" feeling again.


              I am so infrequently willing to believe that HP is the only company experiencing many of the challenges we do, which also leads me to believe that someone has solved them.


              We'll keep the thread open in case someone else out there is brave enough to tell me how they've addressed this issue.



              • Re: Tier 2, Pass Through or 'On Behalf Of' Spend
                Gavin Pratt Journeyman

                Keith - you are not alone.


                Ryan - We are in the middle of implementing Spend Visibility currently.  Can you explain at a conceptual level different methodologies for replacing your own hidden data (e.g. a few large payments to Vendor ABC) with the suppliers detailed data (Venor ABC 100,000 transactional data)?


                I am concerned/stumped on how I can identify and remove internal source data with more detailed supplier data on an apples to apples approach (timing and dollar amount) so I don't double count or remove real spend. I am also concerned as to what happens to the internal data elements (GL account codes, cost centrs, etc) when you take a few transactions and replace with many supplier provided.

                  • Re: Tier 2, Pass Through or 'On Behalf Of' Spend
                    Ryan Sammel Apprentice

                    Hi Gavin,


                    I have seen several approaches, and can say I haven't seen a concrete right/wrong answer.  Mostly it depends on how the data is maintained in the AP  system, size of the user base, etc.  Naturally there are pros and cons of each.  Here are a few options:


                    • Exclude pcard vedor invoices from the ERP export- I consider this the cleanest option, but this really is driven by how the data is captured in the AP system.  In situations where this has worked well, the customer has a specific supplier ID that is only invoiced for payment of the 3rd party spend so it ultimately ties out.  If we take a bank as a Pcard provider and other business is done and all invoiced to the same specific supplier ID in the system, this is not a good option because you would be excluding these other payments. 
                    • Create an offset entry in the AP system data- In this example, lets say the company was invoiced for $1m from the vendor, but only $900k was included in the transactional data that they are providing (remaining $100k were fees or other items not in the transactional data).  In the AP data set loaded into Spend Visibility, you would have one $1m invoice transaction, and then a credit transaction for $900k, and you would then load the 3rd party transactional data in as a new source system so the total roll-up of spend equals $1m.  The drawback here is that the credit transaction would likely need to be created manually, which is not ideal. 
                    • Load both AP data and 3rd party transactional data- I have seen this work well for customers that have a very small user base, as they would have to report based on source system in all cases to avoid duplication, so they really had to be careful.  It really depended on what type of analysis they were doing to know what sources to view.  This option helps avoid the GL account concern you brought up as again, the AP data is unchanged and ties back exactly.  It is difficult to do this in a very large user base though as education is difficult to make sure they are not viewing duplicated data.


                    One other option I have thought about but I have not seen it used by anyone (its just something I have thought about) is to actually merge the the AP data with the 3rd party detail.  Again, it would depend on how things were tracked in the AP system to do this, but it would eliminate the risk of losing GL account data, etc.  The real drawback here is that it would likely be fairly manual to do, but depending on how many 3rd party vendors you are looking to integrate it is a possible solution.


                    I hope this helps a little.  As I mentioned, I have seen all of these work well depending on the customers I worked with in the past, you just have to know the risks for each.  I would be glad to talk with you more if you want to brainstorm on this.



                • Re: Tier 2, Pass Through or 'On Behalf Of' Spend
                  Sean O'Quin Journeyman

                  I've worked with spend & contract analysis in complex sourcing scenarios with visibility to Tier 3 transactions. Here are my thoughts on how I would address the scenarios raised by Keith

                  *For P-Cards/T&E the only way to accurately capture  spend data is to require suppliers  to provide level 3 transaction data or a line item level detailed supplemental invoice.

                  *For spend/contract analysis within HP’s extended supply chain I have had clients that interfaced with their suppliers systems to capture the transactional data required for performing the spend/contract/demand analysis. It is quite possible to make the sharing of pricing data mandatory. When it makes sense, HP should also be leveraging their contract pricing throughout their extended supply chain.