The inaugural AP Honors Ceremony celebrated the accounts payable profession and recognized excellence in the field. During the ceremony, Ardent Partners presented awards for outstanding performance and execution in the last year — “The AP Honors” — to a variety of high achievers including Accounts Payable and P2P leaders and teams, as well as ePayables (AP Automation) solution providers and other experts.
Let’s look at the Procure-to-Pay (P2P) Collaboration Award winner.
The Procure-to-Pay (P2P) Collaboration Award: Presented to the organization that has best exemplified the improvements that can be achieved when AP and Procurement departments and personnel work closely with one another to benefit the greater enterprise.
Winner: Larsen & Toubro Limited [L&T Energy-Hydrocarbon]
Company: Headquartered in Mumbai, Larsen & Toubro is an Indian multinational engaged in EPC Projects, Hi-Tech Manufacturing, and Services. It operates in over 50 countries worldwide. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business for over eight decades.
The Company’s manufacturing footprint extends across eight countries in addition to India. L&T has several international offices and a supply chain that extends around the globe. The business is structured into the following verticals/business units:
- Onshore
- Offshore
- Construction Services
- Modular Fabrication
- AdVENT (Advanced Value Engineering & Technology)
- Asset Management.
Employees: Employees as stated in the 2022-23 annual report: 55,000+.
Global Operations: Global operations include multiple geographies such as India, the Middle East, Africa, Caspian Sea, Southeast Asia, Australia, and the North Sea. The company has delivered Offshore projects to reputed international companies like ONGC, Saudi Aramco, GSPC, British Gas, Songas, Qatar Petroleum, ADMA-OPCO, GASCO, PTTEP, Petronas Carigalli, Shell, MODEC, Technip, Maersk Oil and Bunduq.
Group Website: L&T India | Larsen & Toubro (larsentoubro.com)
*All data given above is based on publicly available information.
Opportunity for a Collaborative Revolution
In the intricate world of hydrocarbon energy, L&T Energy Hydrocarbon (a division of Larsen & Toubro Ltd.) was on the brink of transformation when the pandemic struck. The global event sowed the seeds of change, spurred by the imperative to consolidate operations amidst shifting productivity metrics. Initially perceived as an endeavor for continuous improvement, this phase set the stage for a deeper, collaborative revolution.
The glaring gaps between accounts payable (AP) and procurement/supply chain management (SCM), coupled with delays in supplier payments and cash flow maintenance emerged as critical pain points. These challenges were further exacerbated by dispersed work teams struggling with effective communication across geographies.
The crisis became the catalyst for an accelerated adoption of solution suites. The emphasis shifted from finding the perfect suite to finding a functional one, capable of addressing immediate needs, irrespective of catering to 100% of business scenarios.
A task force of functional leaders in AP and procurement was established but faced collaborative struggles due to the lack of a digital thread. Vineet Agarwal, Jt. GM – Offshore SCM for L&T Energy Hydrocarbon of Larsen & Toubro Ltd., says as design thinking moved towards enterprise governance, coalescing around a set of guiding principles became easier.
“As functional leads, we made a conscious effort not to have a top-down approach but rather a lateral assimilation of operational needs of the two functions,” says Agarwal. “Through a Strategic Environmental and Social Assessment (SESA) approach, among the top priorities that we addressed were the elimination of process redundancies and regulatory necessities across the various jurisdictions that we operated in.”
Critical Factors Fueling Success
The success of the collaborative initiative between AP and procurement transformation leads hinged upon pivotal discussions and strategies that aligned both functions. Agarwal explains that a shared meaning of enterprise governance was necessary to agree on good practices that could result in achievable productivity improvements.
“Governance around data management played a key role in formalizing how we asked users (internal as well as external) to enter data in the system, in a way that it serviced both operational needs as well as analytics,” he says.
Equally critical was balancing control with flexibility where utilization of standardized process flows with minimal customization. Agarwal notes that the Oil & Gas EPCIC industry is non-cyclic, with every project having unique design challenges, with limited scope for repeatability.
“Therefore, every supplier contract/purchase order had its peculiar challenges regarding payment terms, credit periods, bank guarantees, etc. Consequently, it was necessary to ensure that the design strategy catered to at least 80% of transaction scenarios across individual business groups within the Hydrocarbon IC of L&T,” says Agarwal.
“This necessitated conscious tailoring of control mechanisms in a way as not to disrupt ongoing transactions, while at the same time, keeping process exceptions to a minimum.”
Agarwal points out two other success factors instrumental in the transformation. He says respect for functional boundaries harmonized process and data interface protocols, fostering a positive environment amid the pandemic-induced tensions.
Similarly, implementing a user-centric approach in a decentralized environment was essential. “Decentralized teams across geographies demanded an approach that prioritized minimal user effort for significant gains in AP processes, aiding change management and securing user investment,” Agarwal says.
Multi-Focused Change Management Strategy
Launching and executing this initiative during a pandemic demanded meticulous change management. Agarwal says while thinking about transformation began in 2018-19, execution and adoption were accelerated during the pandemic, with four major areas of focus.
1) Clear cut-over strategy: Transparent communication and detailed analysis of affected contracts/purchase orders ensured smooth transitions for users and suppliers.
2) Dedicated task force for transition support: Providing guidance and support during the transformative phase was vital for seamless adoption.
3) On-the-job training: Training users across geographies ensured smooth operations in a decentralized setup.
4) Monitoring and managing exceptions: A proactive approach to handling process breakpoints ensured minimal disruptions to business operations.
Measurable Outcomes and a Path for the Future
The collaborative metamorphosis between AP and procurement at L&T Energy Hydrocarbon not only served as a guide through the pandemic but also set benchmarks for an adaptive, synergistic transformation in the industry, Agarwal says. The transformative P2P initiative yielded substantial, measurable outcomes.
Invoice value transacted through Ariba®: Nearly USD$1 billion in transactions, a testament to the initiative’s impact on procurement operations.
Exception rate across purchase orders: A remarkable 2% to 5% over three years, signifying a drastic reduction in transactional anomalies.
Error minimization in goods receipts: A staggering 70% reduction in goods receipt reversals due to inaccurate shipping documentation or delivery data opacity, ensuring smoother AP processes and timely payments — (around 315 reversals were documented in the preceding years).
Any transformation program begins with competing ideas, notes Agarwal. Building a collaborative atmosphere required alignment among task force members with overarching goals and a collective sense of responsibility.
“While the achievement of functional objectives and key results (OKRs) are important and must be addressed, some amount of flexibility shall be ensured at the interfaces so as not to have breakpoints. It is also suggested that manual overrides be incorporated to ensure minimum disruption to business activities.
“Finally, there must be a balance between a digital solution, the governance framework that the solution is required to achieve, and operational flexibility required to address uncertainties.”
