Why You Need SIM-Powered Recovery

Two weeks ago, we explained how SIM Powered Recovery Will Take You to the Next Level by noting that it can improve your recovery results by a factor of 3, 5, or even 9 over time and asked you to download the latest Sourcing Innovation Illumination, sponsored by Lavante, on Taking Capital Recovery to the Next Level.

Today, we’re going to make it clear how that will happen. Traditionally, a recovery audit will be done by a recovery audit firm that will send in a team that will spend weeks manually reviewing invoices, payments, and transactions looking for discrepancies and revenue recovery opportunities. Depending on the deal you strike, this will cost you manpower plus a not-so-small percentage of the recovery above the manpower cost (that will be in the 10% to 20% range, we’ll assume 15%) in a time plus results deal, or a large percentage of the total recovery, typically 30% to 35% (and we’ll assume 30% after strong negotiations), in a results-only deal.

In addition, it will typically be three (3) to six (6) months before the recovery firm even attempts to recover the first dollar because it will take them that long to get through enough paperwork to find enough opportunities to make a recovery effort worthwhile. During this time, up to 20% of potential credits will disappear permanently as dispute timeframes and contracts will expire.

In comparison, it’s likely the case that you can acquire a perpetual license to a good SIM-based recovery platform for approximately 100K with 20% (or 20K) annual maintenance. And you won’t need to hire any extra manpower as all you’ll need to do is feed it your sourcing, procurement, and accounts payable data, set up some matching rules, and the platform will automatically identify duplicate, non-compliant, or suspicious payments. We’ll assume it costs 25K to integrate the data feeds and work with the provider to set up the initial rules set, and 5K to maintain the feeds on an annual basis. In addition, we’ll assume a firm that does a time plus recovery deal will bill you 150K in manpower. Given these costs, we can now compare manual-vs-SIM-based recovery efforts noting that an average company, due to cost, will only undertake a recovery effort every 2 years. (Mainly because a recovery audit firm will only want to do an audit every two years because it typically takes 18-24 months after a recovery effort before a company has the same recovery effort.)

After a recovery effort, a company will temporarily scrutinize invoices and payments more closely. During this time, the vendors will also be careful not to over-bill or duplicate bill until the buyers have stopped watching so closely and have gained confidence that the over-billings have stopped. As a result, available recovery will be less the following year. However, as the buyer gains confidence that overspending is under control, the buyer will stop watching as diligently and the vendor, if it has a history of over-billing or duplicate billing, will revert to its former ways and the overspending and recovery opportunity will creep back up to where it was.

Noting that you can expect to identify 90%+ of recovery opportunities with a SIM platform, that can process all of the data you throw at it, compared to the 60% of recovery opportunities that you can expect to find with a manual effort that stops when 80% of the spend has been identified and analyzed and when almost 20% of opportunities for recovery have been lost, we get the following.

 

Year 1 Year 2 Year 3 Year 4 Total
Overspend 1,000,000 500,000 1,000,000 500,000 3,000,000
Recovery
Year 1 Year 2 Year 3 Year 4 Total
SIM 900,000 450,000 900,000 450,000 2,700,000
Manual T&R 600,000 300,000 600,000 0 1,500,000
Manual R 600,000 300,000 600,000 0 1,500,000
Cost
Year 1 Year 2 Year 3 Year 4 Total
SIM 125,000 25,000 25,000 25,000 200,000
Manual T&R 240,000 0 240,000 0 480,000
Manual R 300,000 0 300,000 0 600,000
Recovery over Cost
Year 1 Year 2 Year 3 Year 4 Total
SIM 7.20 18.00 7.20 18.00 13.50
Manual T&R 2.50 N/A 3.75 N/A 3.13
Manual R 2.00 N/A 3.00 N/A 2.50

 

Which says that a SIM-effort is expected to return 4.3 times as many dollars into your organization as a manual time + results audit over four years and 5.4 times as many dollars into your organization as a manual results-only audit over four years!

You can argue the numbers a little bit each way, but it won’t affect the fact that a SIM Powered Recovery solution will deliver results that is orders of magnitude above what a manual audit will deliver. So download your copy of SIM Powered Recovery Will Take You to the Next Level today! (registration required)

Want to Ride the Rails? Go East, Young Man, Go East!

Recently we pointed out that despite the fact that the US has a 100 year lead on China on the rails, China is kicking the USA’s @ss when it comes to rail. It just launched the world’s longest high-speed rail route from Beijing to Guangzhou.

Now, not to be left out, India is getting in on the action. As per this recent article over on The Financial, “Tata Projects [has begun] work on [the] RS3300 crore Eastern Dedicated Freight Corridor project” (EDFC), which it recently won in partnership with Aldesa of Spain. This particular project will lay 337 lines of track between Bhaupur and Khurja in Uttar Pradesh.

Eventually, the eastern dedicated freight corridor (EDFC) project will connect Ludhiana to Dankuni (in the eastern corridor), and Dadri to Jawaharlal Nehru Port, Mumbai (in the western corridor). In addition, the EDFC has been designed for 32.5 tonne axle load, which is at par with America and China, and will increase the speed of freight by up to 100 km per hour.

It’s amazing. North America used to own the rails, but now we’re falling behind the emerging markets, who understand that while a truck is good, a locomotive that can pull ten cars is ten times better. If we were smart, we’d be investing in high-speed rail across the US, instead of bickering about cost distribution between states/provinces and the federal government. A century ago, rails was the future, and it looks like it will be again. Will we realize that before its too late?

If You Don’t Have Earthquake or Hurricane Insurance for Your Supply Chain

Get it now!

This recent graphic from Swiss Re that charts the amount of insured losses per year since 1970 clearly demonstrates that the bulk of losses were due to weather-related causes or earthquakes, with the biggest losses directly attributable to earthquakes and hurricanes. In the last forty-two years, only one year had significant losses not due to an earthquake or a weather related phenomenon, and that was the year of the September 11th attacks. Except for these attacks, losses from mad-mad disasters never exceeded 10 Billion, even in years where losses exceeded 120 Billion. So while it’s a good idea to have the standard insurance suite of fire, theft, and liability — where your supply chain is concerned, a natural (weather-related) disaster is going to be MUCH more costly.

The Cost of Catastrophes

Rawhide!

Happy 100th, Frankie Laine.
Even though you’re gone, we’ll keep those (beef) supply chains moving, whatever it takes.

Lyrics (Sing along!)

Rollin’ Rollin’ Rollin’
Rollin’ Rollin’ Rollin’
Rollin’ Rollin’ Rollin’
Rollin’ Rollin’ Rollin’
Rawhide!

Keep rollin’, rollin’, rollin’
Though the streams are swollen
Keep them dogies rollin’
Rawhide!
Rain and wind and weather
Hell-bent for leather
Wishin’ my gal was by my side.
All the things I’m missin’,
Good vittles, love, and kissin’,
Are waiting at the end of my ride

Move ’em on, head ’em up,
Head ’em up, move ’em on,
Move ’em on, head ’em up
Rawhide!
Head ’em out, ride ’em in
Ride ’em in, cut ’em out,
Cut ’em out, ride ’em in
Rawhide.

Keep movin’, movin’, movin’,
Though they’re disapprovin’,
Keep them doggies movin’
Rawhide!
Don’t try to understand ’em,
Just rope and throw and brand ’em,
Soon we’ll be living high and wide.
My heart’s calculatin’
My true love will be waitin’,
be waiting at the end of my ride.

Move ’em on, head ’em up,
Head ’em up, move ’em on,
Move ’em on, head ’em up
Rawhide!
Cut ’em out, ride ’em in
Ride ’em in, cut ’em out,
Cut ’em out, ride ’em in
Rawhide.

Rollin’, rollin’, rollin’
Rollin’, rollin’, rollin’
Rollin’, rollin’, rollin’
Rollin’, rollin’, rollin’
Rawhide!

Rawhide!

Lavante Connect – Streamlined Supplier Self Management

Lavante, a provider of Supplier Information Management (SIM) and SIM-based Recovery, has just released a new version of Lavante Connect, their supplier self-management solution.

Lavante Connect is one of the more powerful, and more streamlined, supplier information self-management solutions on the market. In the Lavante Connect solution, the supplier is walked-through the 3 to 5-step process of completing their profile and is updated with respect to their progress, and percentage of work remaining, after each step. In the Lavante system, the supplier goes through the following easy to follow process:

  1. Company Profile
  2. Legal Identification
  3. Certifications
  4. Payment Information (may be optional)
  5. Specific Information (may be optional)

Profile information walks the supplier through the definition of headquarters information, address information (notices, payment, warehouse, etc.), references, ownership, diversity, business structure, and contacts.

Legal ID walks the supplier through entry of business numbers, tax numbers, and other government identification in the countries that the supplier operates in. It also makes sure that the supplier uploads the appropriate documentation required by the customer, such as W9s in the US.

Certifications walks the supplier through the insurance and certification requirements of the customer and makes sure that the supplier specifies all of the relevant information and uploads the appropriate documents.

Payment walks the supplier through the specification of the payment types they accept (pCard, check, EFT, wire, etc.) and the specifications for each payment type.

Specific Information, of which there can be more than one tab, walks the supplier through the specific information requests unique to the client, such as required product and service information, sustainability information, etc. and the documentation that needs to be supplied.

The ease of use comes not only in the easy to follow registration, and profile completion process, but the fact that the system:

  • validates everything that can be validated,
  • eliminates duplication of data entry whenever possible, and
  • forces e-signatures and verification for all legal documents.

Not only does the system validate that all data entered is in a valid format, but it integrates with as many third party systems as possible to verify that the entered data is correct. Business numbers and tax numbers are automatically verified against government databases, address information is validated against address databases, bank and p-card information is verified through penny-transactions, etc. The system makes it hard for a supplier to make a mistake and harder for any errors to persist for more than a few days. It also alerts the supplier as soon as certifications or registrations are about to expire or information has to be re-verified (according to the customer’s schedule, where such customer may require re-verification of contact information every six months).

All address, contact, and similar data is automatically indexed and can be mapped to any other information requirement that makes sense. So, if headquarters also happens to be the payment and legal notice address, it only has to be entered once. Same for contact information.

For the most part, SIM isn’t complex, and neither are supplier portals, but few master the usability and simplicity required to onboard even the technology unsophisticated supplier quickly and easily with complete profiles, no errors in critical information, and fresh profile data. Lavante Connect is in this group.