Supplier eCommerce story – by the eCommerce fairy
If I were a supplier and the eCommerce fairy visited me what would I tell?
Surprise and delight. We tell all our customers that we promote eCommerce as our preferred way to conduct our business. Please don't fax your orders send them as electronic XML documents that helps us to be efficient. Documents that we need to send to you, such as invoices, will be sent as XML documents so you can automate processing and payment. Some are surprised others are delighted.
Inspire others. Our customers ask us about our experience with eCommerce as they are eager to learn and as a result our customers admire us and see us as more than just a supplier, we are visionary.
Be shrewd. We promote eCommerce as our way to drive costs out of our business so that we remain highly competitive. Where we save money we share the benefit with our customers through lower prices. This is really novel for our customers and changes how they perceive us.
Be different. We know we have great products while we also understand that every trading relationship has a cost to buyer and supplier. When we tell customers how we use eCommerce to drive cost out of our transactions they see us as more just a supplier, we are a supplier that values their business.
Distance the competition. We use our eCommerce expertise to showcase our company, we are different, we are better and we know how to sell the difference. As product differentiation becomes increasingly hard particularly with the ease that you can search for products using Google then you have to deliver on “customer experience”. We want our customers to tell others that we are easy to do business with; fast, convenient, if only all our suppliers were as good.
Bank it don’t spend it. Our commitment to eCommerce means that as our business has grown we have not had to increase our back office costs and this grows our bottom line – the reason I keep reminding myself why we are in business.
eCommerce fairy needs to go to sleep now.
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Labels: buyers, customer experience, eCommerce, newspaper, suppliers, The Times
It's all gone electronic guv'nor
It is full steam ahead for the roll-out of eProcurement but is it all plain sailing?
On the good ship Jolly Buyer it is: goodbye to paper, hello XML, let’s do it on the Internet and productivity and profits will soar.
As I work with buyers and suppliers a couple of issues surface:
Inconsistencies among buyers. Some buyers sponsor their suppliers into their eProcurement programme while others make their suppliers pay.
Suppliers face cash and IT constraints. Suppliers are being swamped with requests to engage in their customers’ eProcurement programmes and wrestle with the business case and IT implications.
I discuss below how this is impacting buyers and suppliers.
Inconsistencies among buyers.
You are a supplier and you have 5 requests from customers to engage in their eProcurement programme. 2 of your customers are sponsoring you so there is no cost to you while the other 3 direct you to a service provider who you will pay so your can conduct your business with your customers.
Which of the 5 requests do you prioritise?
Sounds like a question for a Business Studies exam paper but this is exactly the question that suppliers face. It is confusing suppliers why eProcurement comes at a cost to them for some customers and at no cost for others?
Of course if 1 of the requests is from your top customer then you probably don’t have a choice and with the growing practice to mandate eCommerce as a condition of business then suppliers just make the commitment even if they are not sure how they will deliver on it.
I know suppliers that have stock answers that they use to confirm they will engage in eCommerce. All of the answers say enough but not so much that precludes interpretation of their answers. So, buyer happy, supplier happy; until the day cometh.
Test of the reasonable man
When you can’t make up your mind apply the test of the reasonable man.
You are a buyer and you need your suppliers to participate in your eProcurement programme; do you believe they are more likely to say YES if you meet the cost?
Is this inconsistency going to be resolved soon? Er, no, sorry and that is due to the maturity of the market.
The more interesting question is: among buyers who is having more success in engaging their suppliers those that pay or those that insist their suppliers pay?Answers please on a £20 note. Ta.
Suppliers face cash and IT constraints
A supplier confronted with a buyer expecting them to engage in eProcurement and pay will reach for the calculator and analyse the impact on its margins.
Those suppliers that have been down this road before will look to see if they have re-use of what they have implemented before with other customers for eProcurement.
Suppliers baulk at the idea that they have to implement unique solutions for individual customers as these add cost and complexity to their business –
not very appealing.
Referring to I. above, those buyers that meet the cost include a solution so that suppliers can engage with eProcurement so solving both cash and IT issues for suppliers -
much more appealing.
Suppliers benefit from automationIn reality, the win from eProcurement for suppliers is being able to automate the processing of received purchase orders and that is only possible where the buyer sends an XML document to the supplier. Suppliers don’t see eInvoicing as a benefit to them unless they get paid more quickly – and buyers unsurprisingly don’t give such commitments.
All suppliers are not equal in the land of eProcurementThere are differences between suppliers and their approach to eProcurement that broadly define 3 categories:
Highly organised: usually large companies with big IT/eCommerce investments that have formulated policy on how they conduct their online customer business. Can sometimes result in a bit of a stand-off between supplier and buyer over; “our way not your way”.
Capable but limited resources: will have e- experience and try to accommodate buyers but often limited by IT infrastructure, IT skills, people availability and usually there is no policy in place.
Newbies: first timers who need a lot of help. Many SMEs find themselves in this situation and they need an ‘out of the box’ solution that requires no IT skills and no disruption to the business and their IT. With the proper advice they will understand that eProcurement can benefit their business and cement their position as a supplier.
Attention buyers - take your own medicineMany buyers overlook the advantage to a supplier of having an XML purchase order sent to them while at the same time compelling the supplier to send them XML invoices so they can automate the processing of invoices.
I don’t get it and neither do suppliers that I talk to.
Back to the test of the reasonable man (apologies this intended as a gender neutral reference).
You are a supplier and are uncertain about what your customers’ eProcurement programmes mean for your business which buyer motivates you more; the buyer that makes you meet the cost or the buyer that says there is no cost to you?
Is anything ever free?
Does at no cost really mean free? No. Oh dear never mind eh. Suppliers are quite realistic and accept that change comes at some price but the price has to be offset against a saving or benefit to the business. When a supplier engages in a buyer’s eProcurement programme some change occurs in their business and they accept some investment in the name of progress.
Read about
co-prosperity to learn more.
Finally, the big question
The market is still in an early adopter phase but it is growing very quickly and what we are all trying to figure out is what the business model needs to be for a mass market? That is another blog for another day.
Click here if you are a buyer
Click here if you are a supplier
Labels: einvoicing, eprocurement, sales order processing, suppliers, XML
Bad invoices are bad for business
The debate over what the potential savings are with the introduction of electronic invoicing continue.
As we come to terms with electronic invoicing and I know that is a big assumption on my part we are starting to ask different questions.
For example:
How many invoices processed annually are in error and need special attention?Bad invoices are bad for businessIt is the invoices in error that create most work and drive up the cost.
I think everyone accepts that a computer can process invoices faster than any person but that assumes that the invoice is correct and the automated processing of an invoice by computer occurs without error. How much is saved per invoice? This is a measure of productivity and the savings only arise when for example 2 people can do what formerly 4 people were needed to do.
Interestingly, computers can't resolve issues arising from an invoice in error, let's call them exceptions.
Only people can do that so the full benefit and savings from electronic invoicing increase as you work towards zero exceptions. Is that practical and what is the implication?
If you ask any AP manager the bid deal for them is the workload associated with exceptions. Interesting many will reveal that it is often a core number of suppliers that they have quality problems with.
Three point checkSo, savings depend on three things:
1. automating the processing of invoices -
drive down routine processing costs2. reducing the number of exceptions -
delivers big savings as explained later3. resolving quality issues with suppliers -
change process and apply technology to automate
Putting some parameters around this:
Few exceptions
If you have few invoices in exception then implementing electronic invoicing offers you productivity and a moderate win in terms of savings since your costs associated with exceptions are low. Bigger AP departments have much more scope to deliver savings and they have been in the early wave of adoptors of electronic invoicing.
Many exceptions
If you have many invoices in exception then implementing electronic invoicing is harder as you have quality issues with suppliers to resolve yet also offers you a big win with a reduction in the number of exceptions.
Bad is expensiveI am not going to write the "how much does it cost to process an invoice" sums as these are misleading. What we do know is that exceptions cost considerably more to process than clean invoices. Research suggests exceptions can cost up to 10x more to process.
How many invoices do you have in exception as reducing these in number deliver the big savings?
Let's say you process 50,000 invoices p.a and 3% are in exception, that is 1500 invoices
If we estimate it takes 20 minutes on average to resolve the exception then that is 62.5 frustrating and non-productive days of work.
Now if we can reduce that to 1% then the impact is that you spend 20.8 days in this non-essential (as far as your business is concerned) activity.
That is a real saving of 42 days.
The point of this blog was to highlight an area that will assist your business case and justification for electronic invoicing based on looking at the problem area in AP - exceptions.
It is not the whole story just shining the torch on a problem area.
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Labels: accounts payable, electronic invoicing, savings
