Enabling vendors to send electronic invoices helped flooring company to significantly reduce workload and leverage discounts.

by Mark Dailey

When Mohawk Industries’ accounts payable (AP) department set out to reduce costs and streamline our processes, we didn’t know where the search for an effective solution would take us. We ended up with an innovative electronic invoicing strategy that has more than achieved our goals.

The AP department for Mohawk—one of the world’s largest suppliers of residential and commercial flooring—is located in Dalton, GA. The company is historically highly innovative, and our eventual AP solution turned out to be no exception.

The change began five years ago, when operations were largely manual. With 20,000 invoices arriving by postal service weekly (a million per year), each AP clerk spent two hours daily opening the mail and keying data from each invoice into our JD Edwards Financials system. The invoices were imaged on the back end of the process.

Workflow software was our first improvement. Our applications—a blend of Lotus Notes, JD Edwards Financials, and the Screen Surfer screen scraping tool—allowed us to send invoices directly to our imaging services department. By scanning and indexing invoices on the front end, we increased productivity by reducing the time involved in the mail handling process for our clerical employees. The AP clerks entered data from the invoice images into the JD Edwards system, using Screen Surfer to populate Lotus Notes. We handled exceptions via e-mail.

Building on that improved approach, which doubled the number of invoices each AP clerk could handle daily from 75 to 150, we continued to look for additional opportunities, especially paperless solutions, to streamline the process.

Investigating alternatives over the course of two years, we looked closely at electronic data interchange (EDI) and outsourcing. The problem with EDI was the effort required by the IT staff. Because each supplier has its own requirements and invoice formats, our IT people would have had to manually map the data types of thousands of suppliers to our own JD Edwards system. Even if we focused only on high-volume suppliers, this still would have been a tremendously time-consuming and expensive initiative for Mohawk and our suppliers.

We were also concerned about significant supplier resistance if we moved to an EDI solution. The technological migration is simply too costly for smaller suppliers, and most lack the IT resources needed to manage transactions of this type.

As we investigated outsourcing, we focused on solutions to reduce the number of people involved in the process, so we could move them into revenue-generating positions throughout the company. It was at this point that we saw the potential for electronic invoicing. We examined that option closely and decided an e-invoicing strategy was right for Mohawk. We launched the OB10 solution, becoming part of the company’s global e-invoicing network in November 2005.

Several factors were critical to any long-term solution. We wanted a process that would strengthen our relationships with suppliers and eliminate the paper from the invoice-to-pay process as well as the errors from paper handling. The process also had to be efficient and cost-effective, assure regulatory compliance, keep all data transmissions secure and confidential, and involve leading-edge technology.

It was important for Mohawk that the e-invoicing solution facilitate supplier enrollment and participation, making sure smaller suppliers could participate as easily as larger ones. The OB10 network solution met those requirements. Because the network is format agnostic, any supplier can submit invoices easily in its own preferred format, and the invoice is automatically mapped to the Mohawk format and delivered to us, ready for handling in our JD Edwards system. None of our suppliers were inconvenienced by requirements for special mapping software or system hardware.

E-invoices are transferred directly from the OB10 network to our JD Edwards system. With Mohawk’s rules in place to determine invoice validation, the number of exceptions is minimal, and few invoices require human intervention. Matched invoices are transferred to the Mohawk vouchering system and queued for timely payment.

As Mohawk rolled out the e-invoicing solution, we focused initially on high-volume suppliers. Within the first six months of the launch, we had nearly 800 suppliers signed up, representing more than three-fourths of our high-volume suppliers. This accomplishment alone translated to a reduction of some 400,000 invoices annually, and OB10 has continued to add more suppliers each week.

An enthusiastic reception jump-started our implementation, resulting in huge productivity increases. We have been able to reduce our department headcount by one-third, and we are benefiting from prompt payment discounts that escaped us previously. We achieved a return on our investment in the OB10 network within three months.

Although many suppliers were initially reluctant, they are seeing the benefits as well. With their invoices being paid more quickly and accurately, they now agree with us that e-invoicing is an innovation from which everyone can benefit.