Agenda Judith Stafford Vice President 18005718611

1
Agenda Judith
Stafford

Vice President
1-800-571-8611

American
Express
B-to-B E-Commerce Growth
E-Payment Overview
Process Optimization
2
E-Commerce Benefits
E-Commerce Opportunity
Buyer
Supplier

• Reach new customers
• Increase loyalty with existing customers
• Reduce selling cost
• Manage excess and obsolete products

• Reduce maverick spending
• Achieve product cost savings
• Improve internal purchasing processes
• Access new dynamic sourcing tools

3
E-Commerce Growth Impact on Payments
Projected U.S. B-to-B e-commerce Billions,
percent
Projected U.S. B-to-B payments 2003 Billions,
percent
1,331
100 13,670
On-line
10
CAGR 99
843
499
251
109
43
90
Off-line
1998
1999
2000
2001
2002
2003
Source Forrester Research McKinsey Payments
Practice McKinsey analysis
4
Projected E-Payment Growth
PROJECTED GROWTH IN B-TO-B PAYMENT FLOWS BY
INSTRUMENT
Billions, percent
Payment flows by instrument
Projected flows by electronic instrument
CAGR
100
10,347
13,670
100
1,171
3,543
25
4
On-line
11
Electronic
10
26
Credit card

Credit card
38
99

EFT/ACH
(off-line)

Debit card

Electronic payments

Electronic payments
will account for over 70
will account for over 70

EBP
ACH
percent of the total
percent of the total
(off-line)
5
9
projected growth in B-
projected growth in B-
to-B payments through
to-B payments through
2003
2003
Paper
89
86

On-line payments will

On-line payments will

Cash
74
account for over 50
account for over 50

Check
percent of the total
percent of the total
57

Other
projected growth in
15
projected growth in
electronic payments
electronic payments
1998
2003
1998
2003

Electronic payments includes paper instruments
(e.g., check, cash) used to settle on-line
transactions

All on-line flows, regardless of instrument, are
captured in the on-line category
Source
McKinsey Payments Practice Forrester Research
McKinsey analysis
5
E-Payment Process Flow
Authenticate
Authorize
Value Exchange
Financing
Accounts Receivable Mgmt.
Information Reconciliation
Reporting
Dispute Resolution/ Servicing

• Verify identity
• of Business
• Verify Identity
• of End-User

• Allow
• Businesses to
• complete a
• transaction
• Allow user to
• complete a
• transaction

• Transfer
• funds from
• buyer to
• seller
• Electronic
• bill
• presentment

• Instant
• finance
• authorization
• and funding
• Various
• funding
• Instruments

• Factoring
• Full credit
• recourse
• Billing and
• collections

• Reconcilliation
• (3 way match)
• General ledger
• integration
• Reports
• Statements

• World class
• customer
• service

Definitions
6
E-Payment Services
Supplier
Buyer

• E-Payment Services
• Electronic Bill Presentment
• International Payments
• Trade Receivable Account
• Installment Loans (specific to transaction)
• Line of Credit (for use across multiple sites)
• Lease (specific to transaction)
• Charge Card Products

7
E-Payment Benefits
Supplier
Buyer

• E-Payment Benefits
• Consolidate bills and reduce accounting costs
• Eliminate checks and paper processing
• Speed reconciliation steps
• Ensure proper authentication of buyers and
  suppliers on-line
• Access real-time credit lines and authorization
• Leverage a true global payment tool
• Capture enhanced data

8
Process Optimization

• Strategic Management
• Buying
• Paying
• Reconciliation
• Data Integration

9
Evolution of Expense Management
Managing The Operating Expense Base
Cost of Goods Sold
Salaries Benefits
Indirect Operating Expenses
Process Re-engineering, Total Quality
Management Local, paper intensive
Process Re-engineering, Total Quality
Management Local, paper intensive
Cards introduced to manage TE Category
1980s
1980s - 1990s
Card extension to cover TE petty cash Enhanced
data introduced for commodity management
MRP /ERP(Manufacturing Resource Planning )
Systems Introduced Regional, automation
HRP/ERP (Human Resource Planning) Systems
Introduced Regional, automation
1990s - 2000
E-Commerce/ Purchasing Card Integration Global,
fully automated solutions
Integrated ERP/E-Commerce Global, Automated and
Integrated Solutions
Integrated ERP/E-Commerce Global, Automated and
Integrated Solutions
Source Killen Associates, American Express
Consulting
10
Purchasing Automation Tools
Functional Benefits
Limitations
Level of Data Detail
EDI ERP Systems E-Purchasing
CommodityPurchasing Cards Petty
Cash Purchasing Cards

• High cost
• Complex supplier enablement (non-scalable)
• Lack of consolidated billing

• Client /Supplier Data Interchange
• Transaction tracking

Direct Costs (COGS)
High
Client/Supplier Electronic Data Interchange

• High end-user implementation cost
• Complex enterprise implementation
• Usability barriers
• Inflexible - strict rules , cumbersome
• Lack o f robust reporting tools

• Automated requisition process
• Transaction tracking
• Central data

Enterprise Resource Planning - Automating the P.O

• Client/Supplier Data Interchange
• Automated work-flow/ approval routing
• Transaction tracking

• High Cost
• Complex supplier enablement
• Lack of reconciliiation tools
• Lack of robust reporting tools

Indirect OPEX Commodities
Internet Buying

• Lack of approval routing for large expense
  dollar items
• Lack o f sourcing tools for end-users

• Consolidated invoicing
• Low implementation costs
• Robust payment, reporting and reconciliation
  tools

• Limited Data
• Non strategic
• Lack of preferred supplier utilization

• End user convenience tool
• Alternative to petty cash

Indirect OPEX Petty Cash
Low
11
Purchasing Automation Tools

• Capital
• Energy
• Transportation

• Cost of Goods Sold

• ERP Systems
• EDI

HIGH
STRATEGIC IV
SPECIALTY III

• ERP Systems
• EDI

Dollar Size of Purchase

• Business Retail

• MRO (Industrial Supplies)
• Low Dollar Capital
• Services
• TE

SUNDRY I
STAPLES II
LOW

• Petty Cash Cards
• TE Cards

HIGH
LOW
Frequency of Purchase
12
Study Results - The Findings
Reconciliation Data Integration
Buying
Paying
Reconciliation Data Integration 21
Buying 65
Potential Savings Opportunities
Paying 14
Best-In-Class Costs
Note Numbers are directional and will vary based
on processes in place and level of automation
adopted.
Source American Express and Ernst Young
Purchasing Process and Automation Study 1999