Continuous Improvement Means

Continuous ROI in Procurement and Payables

Session #33460

Presenter: David Downey

Director Enterprise Services
CherryRoad Technologies Inc.
Today’s Agenda

1. Overview
2. Managements challenge
3. Technology is a tool
4. Breaking down silos
5. Continuous improvement
6. Goals of measurement
7. Designing meaningful measures
8. The value of measurement
9. ROI

2
Overview

‰ One of the largest transportation networks in the world.

– In 3 days, it moves more people than Amtrak does in one
full year.
– In 11 weeks, it moves more people than fly with our
nation’s airlines in one year.
‰ Subways, buses, and railroads provide more than two
billion trips each year.
‰ Bridges and tunnels carry more than 300 million vehicles
each year.
‰ Serves a population of more than 14 million people in a
5,000 square mile area.

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Public Perception

‰ "Out of Control" Cooked Books, Hid $500 Million

– Riders want "Heads on Sticks“. Comptrollers and Advocates call
for May 4th fare hike to be delayed

‰ “(Agency) hid half a billion dollars in 2002 budget, Fare

increase based on Misleading Information”
– Two Financial Plans: One Public, One Secret
• State Comptroller

‰ “Finances and operations are not available for public

inspection”

‰ “An accounting degree is required to analyze their annual

financial statement”

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Revenues vs. Ridership

5
Expenses vs. Ridership

6
Board Policy

‰ In July of 2003, the Board mandated the identification and

implementation of an integrated budget and financial system that
provides accurate, reliable and timely information for financial
decision-making and enhanced public understanding
of the Authorities’ finances.

7
Headquarters Overview

‰ Headquarters is chartered to provide consolidated financial

management and reporting for the operating agencies.
– $28 billion dollar in investment and debt obligations
management.

– $8 billion dollar operations expense budget.

8
Management Goals

‰ Improve the business processes and technical ability to

support consolidated financial reporting of all business
entities.

‰ Improve the business processes and technical ability to

support financial and human resource management functions.

‰ Standardize and integrate the information systems used to

support financial and human resource management business
processes.

‰ Create a standard information system platform and architecture

to support integrated financial management of all agencies.

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Oracle/PeopleSoft Enterprise Solution

‰ FMS ‰ HCM
– General Ledger – Administer Workforce
• Commitment Control • Position Management
• Combo Edits • Labor Relations
• Allocations – Recruit Workforce
– Project Costing • eRecruit
– Cash/Deal Management – Pension Administration
– eProcurement – Benefits
• Workflow • Benefit Accruals
– Accounts Payable – Payroll
– Time & Labor
• EPM • Police & Union
– Budgeting ‰ IT
– Global Consolidations – Enterprise Portal
• Financial Plan – Disaster Recovery Plan
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Project Overview
We are here
2004/2005 and 2006/2007 Deliverables

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08

Infrastructure & Enterprise Portal Initiatives

Infrastructure Configuration & EPM Upgrade
Go-Live 1/3/05
Support

Financial & EPM Initiatives

Global Financial Consolidations and Financial Plan Go-Live 1/3/06

General Ledger, Treasury,

Accounts Payable, Civil Rights& Compliance
Go-Live 1/3/05
Procurement Procurement Integration
& Project Costing

Budgeting Go-Live 10/1/05

HRMS Initiatives
HRMS, Recruiting, Position
Management, Benefits Training Administration
Go-Live 12/21/04
Payroll and Time & Labor

Pension Administration Go-Live 3/16/07

Continuous Improvement
Initial BPO Formation of MTA managed Procure to Pay Analytics Enterprise-wide Analytics
Recommendations Continuous Improvement Team and Process Improvements and Dashboard

Organizational Continuous Improvement Team Agency Shared Service Initiative

Assessment Wed @ 2pm - Board 40 identified

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Technology versus BPO

• Implementing technology alone results in an ROI of only 22%

of potential.
• This figure improves to 70% when people, processes, and
technology are addressed independent of each other.
• ROI can reach 100% when projects address people, process, and
technology at the same time.

Simultaneously addresses people,

process improvements and technology

People, process improvements and

100% technology addressed independently
Total ROI
70%

22%
Non-
Coordinated Technology
Coordinated
Strategy Only
Strategy
Source: The Hackett Group 2002

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Process Initiatives

‰ Initial Business Process Analysis Feb. – April 2004

‰ Formation of Cross Functional team April 2004
‰ Business Process Optimization April – Dec. 2004
‰ Organizational Assessment Oct. – Dec. 2004
‰ Formation of Continuous Improvement Team Jan. 2005 – Present
‰ SOP Initiatives begin Jan. 2005
‰ Board 40 Process improvements identified July 2006
‰ Shared Service Assessment Oct. 2006
‰ Procure to Pay Measurements and BPO Jan. – Dec. 2006
‰ Shared Services Phase 1 Oct. 06 - July 2007
‰ Enterprise Analytics & Dashboard TBD

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Continuous Improvement…

…is NOT fighting fires!

– When we take a problem solving approach, we often never

get to the root causes because our main goal is to put out
the fire.

– Its goal is NOT to blame people for problems or failures!

‰ When we engage in process improvement, we seek to learn

what causes things to happen and then use this knowledge
to remove activities that have no value to the organization.

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Continuous Process Improvement

‰ Quality is a never ending quest…

‰ Continuous Process Improvement (CPI) is a never ending

effort to discover and eliminate the root causes of problems.
– CPI accomplishes this by using small-step improvements,
as opposed to implementing one huge improvement

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 Continuous Improvement Team

Financial
Administration Management Budgets

Procurement Accounts Treasury General MTAHQ Gl obal Consol.

Payable Accounting Budgeting
CFT CFT CFT CFT CFT CFT

Legend
Continuous Improvement
EITG FIN CFT

New Role
CFT Direct Reporting
Relationship
HR CFT

New Tasks to MatrixReporting

Existing Role Relationship

CFT CFT CFT CFT

HR
Other Orgs
Organization
Police Time & Benefits
Labor HRIS Payroll Administration
Police
FIN & HR Functional
Areas In Scope for
Human PS Initiative
Resources

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Axioms of Performance Measurement

1. The goal of measurement is not to measure, but to improve

business performance.

2. You must know what you want to measure and why before
you worry about how.

3. Strategic clarity must precede measurement.

4. Processes are the key inflection point of an organization.

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A measurement has value only when it is…

1. Accurate
ƒ Reliably expresses phenomenon being measured
2. Objective
ƒ Not subject to interpretation and/or dispute
3. Easy
ƒ Inexpensive and convenient to compute
4. Timely
ƒ Readily available data source

5. Harmless
ƒ Does not induce inappropriate behavior

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Requisition Cycle Time: All Requisitions

• 39% of all requisitions in 2005 took more than 12 days to go through

approval workflow
• 46% of all requisitions in 2005 took more than 12 days to have the PO
dispatched
• Need to drill down on the requisition type in order to better understand the
data (seen on following pages)

Requisition Cycle Time Requisition Cycle Time

# Days from Req Date to Req Approval Date # Days from Req Approval Date to PO Dispatch Date
for ALL Requisitions for ALL Requisitions
45% 50% 46%
39% 45%
40%

35% 40%
35%
30%
30%
25%
20% 20% 25%
20%
20%
16%
15%
15%
8% 10%
10% 10% 8%
5% 5% 6% 5%
3% 5% 4%
5% 5%
1%
0% 0%
0 1 2 3 4-6 7-9 10-12 >12 0 1 2 3 4-6 7-9 10-12 >12
Days Days

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Axioms of Performance Measurement

‰ #1 - The goal of measurement is not to measure, but to improve

business performance.

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Requisition Submitted to Approval Cycle Time
(Operating ♦) & Number of Requisitions Approved

30.0
100
148
25.0 140 146
70
97
82
20.0 124 B
# of Days

88
50 118
15.0
98
10.0
19
5.0

0.0 E
J F M A M J J A S O N D J

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Axioms of Performance Measurement

‰ #2 - You must know what you want to measure and why before
you worry about how.

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Requisition Approval to PO Entry ▲ & PO Entry to
PO Dispatch ■ Cycle Times & Number of Purchase
Orders Dispatched

80.0
70.0
272
60.0
50.0
# of Days

40.0 84 B
30.0
20.0 103 62 101 79
39 55
52
10.0 63
176
70 122
0.0
J F M A M J J A S O N D J

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Axioms of Performance Measurement

‰ #3 - Strategic clarity must precede measurement.

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Invoice Receipt to Payment Date Cycle Time (Operating ♦)
& Number of Vouchers Paid

40.0
35.0
30.0 E
1,586 1,743
25.0
# of Days

2,385
1,351
2,053
20.0 2,535 2,265
B
1,584
15.0 2,489
2,378
2,340

10.0 2,126

5.0 1,366

0.0
J F M A M J J A S O N D J

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Invoice Receipt to Payment Date Cycle Time (Capital ■)
& Number of Vouchers Paid

40.0
1,825
35.0 1,960
1,915
1,605
2,039
30.0 E
1,653
25.0 B
# of Days

1,915
2,182
20.0
1,734 1,466
1,813 1,943
15.0 1,757

10.0
5.0
0.0
J F M A M J J A S O N D J

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Axioms of Performance Measurement

‰ #4 - Processes are the key inflection point of an organization.

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Requisition to Payment Cycle Time (Operating ♦)&
Number of PO Vouchers Paid

180.0
1,351
160.0
140.0
1,58 6
120.0 1,743
# of Days

2,489 2,265
100.0 2,535 2,053
B
2,340
80.0
2 ,378
60.0 2,126
1,584
40.0 1,9 84
1,3 66
20.0
0.0 E
J F M A M J J A S O N D J

9. Requisition to Payment Date Cycle Time (Roll-up CT for PO

Vouchers Chart 1 + 2 + 8 "Operating Only ♦" )
& Number of PO Vouchers Paid

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Return on Investment

‰ Significant drop in AP Interest liability and increased yield on

cash via “just in time” prompt payment.

‰ Consolidate $21 Billion Debt and Investment Portfolio

enhancing control and eliminated multiple manual activities,
improved efficiency and cash flow management.

‰ Pension calculation refinements resulting in less potential for

incorrect Plan Valuation feed to the Actuary.

‰ Significant intangible returns enabling more accurate, reliable

and timely information for financial decision-making and
enhanced public understanding of the Authorities’ finances.

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30
CIT Accomplishments

‰ Streamlined operations. Eliminated non-value activities.

Improved cycle time.

‰ Identified metrics to measure process improvements.

‰ Allowed for a process to base strategic decisions on real-time

information.

‰ Enhanced the bank account reconciliation process by

Automating Bank Reconciliation Reporting for a majority of
bank accounts.

‰ Reduced journal entry preparation on a monthly basis through

automated standard journal creation in the General Ledger for
every month/quarter in respect of recurring transactions.

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CIT Accomplishments (cont’d.)

‰ System and process design to enhance reporting ability across

all modules based on custom reporting ‘tree hierarchies’.

‰ Improved cash management process and control by

implementing the ability for dependant agencies to
request/initiate wires to headquarters directly from PeopleSoft
Cash Management system.

‰ Increased customer satisfaction regarding requisition process.

‰ Reduced Interest Liability by implementing metrics and

process controls regarding the payment of invoices to ensure
compliance with prompt payment laws.

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CIT Accomplishments (cont’d.)

‰ Improved the business processes and technical ability to

support consolidated financial reporting of all business
entities.

‰ Improved the business processes and technical ability to

support financial and human resource management functions.

‰ Standardized and integrated the information systems used to

support financial and human resource management business
processes.

‰ Create a standard information system platform and architecture

to support integrated financial management of all agencies.

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Questions?

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