Cash & Liquidity ManagementCash ManagementAccounts PayableCase study: BC Hydro powers improving supplier relationships

Case study: BC Hydro powers improving supplier relationships

The western Canada utility has partnered with SAP Ariba in eliminating inefficiencies from its supply chain.

There are over 4.6m people across the province of British Columbia, which includes Canada’s third-largest city of Vancouver with a population approaching 2.5m. Ninety-five per cent of the province’s population relies on British Columbia (BC) Hydro and Power Authority to power their homes and businesses, across the vast expanses of some of the world’s most unforgiving terrain.

To pull off this challenge, BC Hydro’s electric transmission system is connected to the transmission systems of neighbouring province Alberta to the east – and Washington state to the south. In terms of resources – powering the homes and enterprises of almost all of British Columbia requires 56,000 gigawatt hours of electricity being produced per year, close to 300 substations, 18,500 kilometres of transmission lines, 60,000 kilometres of overhead and underground distribution lines and 300 kilometres of underground and submarine transmission cables.

In addition to equipment resources, BC Hydro has a workforce of approximately 6,000 individuals – spread across offices in more than 100 communities throughout the province – who are all dedicated to keeping customers supplied with electricity around the clock.

The challenge

Managing an operation across such a wide span of territory comes with the corresponding challenge of managing a sprawling and complex supply chain. The organisation spends more than US$2bn per year to ensure its operations are functioning properly and efficiently.

Who BC Hydro buys resources from, how the company buys it, and even when it buys it all has a direct impact on costs and, ultimately, the prices it can offer customers. The sheer scope of the utility’s supply chain has always presented a challenge to manage supplier relationships – from making sure they’re paid on time to having solid policies and controls that cover the entire supply chain.

A few years ago, BC Hydro noticed an increasing number of non-compliant invoices, which revealed that many suppliers were not being paid on time. These inaccuracies and inefficiencies put a severe strain on customer relationships, leading to corresponding loyalty and revenue repercussions.

Hanif Dhrolia, supplier e-commerce manager at BC Hydro, was well aware of this glaring problem and set out to find a way to solve it.

The solution

Dhrolia recognized the need to streamline invoice workflows in order to achieve two mission-critical goals that would ultimately make it easier for suppliers to do business with the utility:
• Ensure compliance and on-time payments.
• Provide a supplier portal for self-service invoice and payment status.

To deliver on these objectives, BC Hydro kicked off a pilot programme on the Ariba network, the largest cloud-based business-to-business (B2B) marketplace where buyers and suppliers can transact business within a single, networked platform. Initially a small selection of key suppliers were brought on board to test the waters; gradually more were added as the approach proved successful. Today, 80% of BC Hydro’s invoices are managed through the Ariba network.

The results

Through the Ariba network and SAP Ariba’s solutions focused on finance, HR and master data governance (fully-integrated within the network) – BC Hydro was able to:

• Better manage orders, acknowledgments and invoices with suppliers.
• Automate invoice and purchase order (PO) processing; eliminating errors and exceptions from manual processing.
• Implement the discount management capability SAP Ariba Payables, to introduce early-payment offers – giving suppliers greater control over their cash flow

Through these capabilities, BC Hydro was able to ensure compliance with internal and external business rules, increase the number of on-time payments and drastically reduce invoice errors and accounts payable costs.

When Dhrolia decided to partner with SAP Ariba, his target was to pay 93% of invoices on time. He exceeded this goal, ultimately reaching 95%. Additionally, BC Hydro is saving US$1m a year in accounts payable (AP) costs while simultaneously finding opportunities to cut spending through dynamic discounting over the network.

The takeaway

It’s not just about the numbers. Providing suppliers with end-to-end visibility of invoice and payment status drastically improved BC Hydro’s supplier relationships. The utility’s suppliers and internal stakeholders have seen – and appreciate – how the invoice compliance required in the Ariba Network saves effort, time, money and headaches in the end. “It’s not only about saving money but is also about improving supplier relationships,” says Dhrolia.

“The benefits to our suppliers of an e-commerce platform are the increased speed and frequency of on-time payments, the ability to track invoices and orders online in one place, fewer invoice exceptions, and paperless, environmentally-friendly trade.”

This all equates to a happier and healthier supply chain for BC Hydro – and a better-powered British Columbia.

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