Global Invoice Implementation A migration project within Volvo

Electronic invoicing in a historical perspective Volvo started to implement EDI invoices around 15 years ago to a limited extent, but only regarding AP material In Sweden, ”Bokföringsnämnden” declared 1994 that EDI invoices were legally accepted (U 94:2) During the period 1995-2000 the share of EDI invoices for AP increased through pro-active supplier implementation using the Odette message standard and later Edifact In Europe the conditions for applying electronic invoices were a bit unclear and in certain countries not allowed The year 2001 Volvo initiated the MoveOn project aiming at implementing electronic invoices also for NAP and all units within Volvo were activated in receiving electronic invoices In the beginning of the 21st century WebEDI was introduced both regarding AP and NAP as a means for smaller suppliers to provide electronic invoices via a web browser on the Internet

Benefits from electronic invoicing An electronic invoice – independent of EDI or WebEDI – offers good potential benefits mainly on the receiving side There exists many efforts trying to estimate the benefits to introduce electronic invoices: Figures between SEK 30 and 500 per invoice have been mentioned Volvo (i.e. VBS) has a strong incentive to increase the share of electronic invoices since SEK 60 is saved per incoming invoice In total, VBS today has a 50% share of EDI invoices The VBS goal for 2005 was to increase the share with 10 %, but due to various reasons the progress has been limited

Global Invoice – a background A new harmonised legislation regarding invoices and VAT is valid within EU from 2004-01-01 No formal transition period allowed from authorities, but a ”soft” attitude towards business actors exists. But how long will this attitude last? There are indications that tax authorities will be more active 2006 The Global Automotive Industry has jointly produced a common specification for a Global Invoice covering all existing requirements regarding all types of invoices (a kind of framework) The Swedish Odette organisation has worked out a subset valid for use in the Nordic region. It is published on the Swedish Odette website The Volvo application of this global specification (AP) is now approved and published on the Volvo IT EDI web (www.volvo.com/edi)

Main characteristics of Global Invoice A common solution for the Automotive Industry globally A business transaction being a part of a complete business process covering: Global Delivery Schedule Global JIT (just-in-time delivery schedule) Global Despatch Advice Global Invoice All global messages are included in a common data model and the development has been supported by a modern tool guaranteeing quality and compliance Legal requirements originating from the EU directive are included All global messages can use any type of message format, e.g. : Edifact XML Proprietary In case Edifact is the preferred standard, a modern message catalogue (D.03A) is used

Why is Global Invoice important to Volvo? When applied - no risk that VAT deduction will be refused Can handle all known electronic invoicing requirements within Volvo and in relation with external business partners Global Invoice can support unusual invoicing patterns, e.g. VAT agent Covers both AP and NAP requirements Has the potential to replace existing mapping solutions Implementation among suppliers will increase information quality

The current situation at Volvo Volvo (excl. Renault) has a huge number of suppliers as ”Electronic invoice relations” in EDI- and Web-solutions 800 suppliers invoice Volvo via EDI-links (Odette or Edifact) 1200 suppliers register invoice information on web-based solutions provided by Volvo The average supplier invoice 8 Volvo units Renault has around 430 suppliers invoicing electronically Fully 300 Renault unique suppliers have invoicing via EDI 50 additional EDI suppliers are common with other Volvo units 50 suppliers invoice Renault via the local web solution Source: Internal Volvo figures from February 2005

The current situation at Volvo (2) Number of suppliers (Parma-id) invoicing Volvo (except Renault Trucks) units electronically for AP, NAP and Transport services Source: Internal Volvo figures from February 2005

The current situation at Renault Trucks Number of suppliers invoicing electronically 1) 1) Around 50 are common Volvo suppliers

Project scope The following types of electronic invoices will be migrated to Global Invoice (in order of priority): 1. All AP suppliers today issuing EDI invoices according to Odette v3 message (between 400 and 450 suppliers). 2. All suppliers today registering invoices via WebEDI (around 1200) 3. Volvo internal EDI invoice relations based on internal formats in line with EDIFACT and Odette 4. All AP and NAP suppliers invoicing according to EDIFACT v4 message (close to 200) 5. Suppliers uniquely invoicing Renault Trucks via EDI (estimated to around 300) 6. All transport companies invoicing mainly Volvo Logistics (VLC) according to EDIFACT D.93A message (less than 100)

Structure regarding the GI-project Basic scope -AP-invoices -NAP-invoices -Transport-invoices Project Management Volvo IT (e.g. EDI-group and R/3) Volvo internally (e.g. Purchasing, VBS) (Scania) Soft-ware suppliers Odette Co-ordination and information Technical Solutions Supplier Implementation Specifications and guidelines (Edifact and in-house) Information and working procedures AMTrix maps and modifications Supplier contacts; planning and follow up R/3 adaptations (FI + MMIV) Registration and initial tests Mapics modifications Testing and acceptance (VBS, VETNV, Logistics,…) Web-EDI modifications RVI unique suppliers Supplier Portal – if relevant US ? Misc.

Important implementation principles The approved Volvo specifications (AP, NAP and transport) will be the same for all units within Volvo Volvo will offer a contacted supplier to migrate existing Volvo customers (logical units receiving invoices) simultaneously All suppliers have to provide test files in parallel with on-going operations for existing receivers within Volvo Migration of WebEDI suppliers to Global Invoice can be controlled from Volvo, even though some suppliers can experience problems in catching the required data manually

Proposed supplier interaction Suppliers currently invoicing Volvo by EDI will be contacted individually: By a letter addressed to the supplier’s commercial contact and signed by a Senior Vice President Purchasing from Volvo The supplier is requested to return an email showing the contact person for invoicing matters and responsible for implementing Global Invoice An initial telephone call from the supplier implementation team Explaining the legal background, the Volvo requirements and demanding actions to take from the supplier Stating conditions to achieve before the next contact Follow up contacts To request a road map for the supplier’s implementation process To agree a date to receive the first test file

Proposed EDI-supplier interaction Volvo Amtrix Application Impl. planning and selection of suppliers Open for dialogue Planning and initial contacts Initial test Final test Open for dialogue Production Global Invoice contact person (email) Ready for test Supplier Letter Confirm accepted actions (email) Acceptance and go live Conditions for tests Respond Open for dialogue Local Implementation Test and start up Production Software provider Software Implementation Contacts and tests with Odette

Contacts with Global Invoice Implementation project Project leader Christer Edgren +46 31 345 31 25 christer.ce.edgren@consultant.volvo.com Head of the supplier implementation team Maria Pérez Pérez +46 31 66 69 62 maria.perez@consultant.volvo.com Global Invoice Implementation project mail box A means to support the implementation process May be used by suppliers, Volvo buyers and other stakeholders Accessed by all members of the supplier implementation team global.invoice@volvo.com Global Invoice Implementation project group telephone, i.e. EDI support +46 31 66 22 00 Global Invoice Implementation project web sites www.volvo.com/edi_europe (click projects) http://edi.volvo.net (for internal use in Volvo)

WebEDI WebEDI is an important tool for many suppliers invoicing NAP material and services Volvo controls the process to modify WebEDI to become compliant with Global Invoice All suppliers using WebEDI will be migrated at the same time Suppliers will be impacted to a limited extent The modified solution will be tested thoroughly before roll-out

Test requirements All suppliers invoicing via EDI, will be requested to test the local Global Invoice solution by means of the Odette test bench, available at www.odette.se All suppliers must provide test files in parallel to on-going operations according to the Volvo requirements Before production status is obtained, all test files will be subject to acceptance tests, i.e. received invoices will be processed against relevant information updated in the internal application systems of Volvo

Supplier actions and consequences Initiate an internal migration project Assign a contact person responsible towards Volvo regarding the project during the migration period Study the Volvo specifications and guidelines thoroughly If WebEDI-supplier: After notification be prepared to use a modified version of the web-service including both AP and NAP If EDI-supplier: Implement the specification and be prepared to send test files to Volvo at latest 3-6 months after initial contact

Project success factors Clear top management statement to migrate to Global Invoice All Volvo units in Europe involved (incl. Renault Trucks) Genuine support from purchasing top management Other automotive companies acting in the same direction, e.g. Scania Availability of compatible SW solutions and knowledge on the market Systematic working procedures regarding supplier implementation Good test procedures including the use of Odette test bench Perseverance

Volvo Global Invoice AP material (excl SBI) Invoice header Invoice number Invoice date Free text (max 3 occurences) Buyer information Ship-to party Seller information Seller as officially registered Payee information (incl account+bank) VAT agent information Currency information (invoice+home) R Invoice summary Total invoice amount in invoicing currency Total invoice amount in home currency Total taxable amount in invoicing currency Total taxable amount in home currency Total tax amount in invoicing currency Total tax amount in home currency Total line items amount (inv. curr.) Total invoice additional amount (inv. curr) Total invoice price adjustment amount (inv. curr) Total exemption amount (inv. curr) Total non-taxable amount (inv. curr) R Moved from line Invoice line Line item number Buyer´s article number Item description Invoiced quantity Invoiced quantity UoM Country of origin Invoice line item amount Unit gross price Unit price basis Unit price UoM Reference to order Reference to Despatch Advice (incl date) Line item tax type code Line item tax rate Line item tax category code Line item tax amount R Invoice summary per tax rate Summary tax type code Summary tax rate Summary tax category code Summary tax amount (inv. curr) Summary taxable amount R New code list Legend: Red – required (R) Blue – dependent (D) Green – optional (O) New code list Underline – new elements or new code list New code list Invoice line special charge Charge code Charge monetary amount Charge tax type code Charge tax rate Charge tax category code Charge tax amount O New code list 2005-10-31/CE