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Case Studies
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SPI Increases Internal Recoveries by $8 Million & Reduces Cost of Identifying Recoveries by 50% Business Problem
As a part of its 2010 strategy, a large retailer sought to improve its operational efficiency in order to reduce the organization's overall costs. After an examination by company stakeholders of its departments, it determined that a key area needing attention was procurement. Traditionally, the client had experienced an extraordinarily high rate of lost cash flow on account of overpayments made to vendors and wanted to address the issues creating the conditions for this problem.
Solution
In late 2009, the retailer called SPI to engage in a consulting assignment of its procure to pay process and – as quickly as possible - follow up its examination with an approach that would minimize vendor overpayments.
Based on the approach, SPI did three things that would immediately impact its client's bottom line.
- SPI implemented real time audits, including statement, off invoice allowances, scan allowances, duplicate, pricing and promotional pricing.
- On the statement audit, SPI identified credits on vendor statements and immediately took deductions on subsequent invoices
- SPI targeted to increase the recoveries of the client's internal audit team by $6 million dollars by providing them with the right tools and processes.
Lastly, SPI implemented custom tools and routines to drive payment errors out of complex claim categories. With its IT capability, SPI effectively addressed errors' root causes. To achieve that, SPI delivered:
- An industry-recognized recovery team to partner with, consult and train the client's internal team
- Support and leadership for the execution of the statement audit
- An enhanced auditing tool set for the internal team
- Custom designed tools to pursue more complex claim categories
- Management reports that outlined specific steps to close future recoveries
- An offshore model that mitigated costs associated with incremental audit resources
Through their partnership, SPI made recommendations to the client's internal audit team, which resulted in:
- The retailer saw $8 million increase in recoveries, surpassing the original goal of recovering $6 million.
- The retailer experienced a 50% reduction in the cost of identifying recoveries.
- An expected $3 - $4 million additional reduction in recoveries going forward.
- A detailed report outlining root cause analysis of payment errors.
- Due to its high success, SPI expanded into an additional client division, as well as initiating two types of new audits for the client: Direct Store Delivery and Pharmacy.
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