new suppliers enrolled within six weeks
improvement in processing metrics
worth of invoices each year
In 2004, Mohawk’s CEO challenged the Accounts Payable (AP) team to evaluate methods to reduce costs by considering alternative and innovative solutions. At the time, paper dominated the processing environment at Mohawk, preventing the AP department from making the kind of breakthrough needed to significantly reduce operating costs. Combined with the need to address tough new compliance issues resulting from the Sarbanes-Oxley Act, and the need to continue Mohawk’s position as one of the best players in its industry, the endeavor represented a major challenge. The initial challenge to Mohawk — a need to reduce costs in AP—led to a focus on labor costs, by far the major cost component for AP.
Meet Mohawk Industries
Mohawk Industries (NYSE: MHK) is one of the world’s largest suppliers of flooring for both residential and commercial applications with $7.3 billion in annual revenue. Mohawk’s AP department is responsible for processing invoices for the U.S. operation — interacting with over 8,000 suppliers, ranging from small “mom and pop” businesses to large multinational organizations.
In 2004, Mohawk’s CEO challenged the Accounts Payable (AP) team to evaluate methods to reduce costs by considering alternative and innovative solutions. Mohawk needed a solution that would address the fundamental problems of increased labor costs – paper and exceptions. Since the majority of causes for exceptions can be traced back to paper, Mohawk focused on eliminating paper in the AP process.
E-invoicing has allowed Mohawk to pay its suppliers faster, generate revenue that was previously impossible, and realize significant cost reductions. Mohawk has seen the largest cost saving from the reduction of labor costs. Through natural attrition and re-assignment to more value-added positions, the company has been able to reduce the accounts payable full-time staff from 54 to 21 people. In all, Mohawk has realized about $3 million in annual savings since switching to Tungsten.