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.
Click here to continue reading
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
Electronic Invoicing - spend or invest?
I was reflecting on the use of language and how government no longer spends our money raised as tax revenue they invest it.
Electronic Invoicing; do you spend or invest?
There is a cost to implementing eInvoicing and someone has to meet that cost. Will it be the buyer or the supplier? This debate about who pays is unresolved with no consensus on who pays and why. I suspect it will remain so for the foreseeable future.
What is the outcome of implementing eInvoicing?
AP costs are reduced - easy win and the financial justification provide you can cash the savings
Discounted goods and services - if you have capital available to take early payment discounts
Warm and fuzzy compliance improvement - but some pay attention others don't
Lower prices - how is that?
I was thinking the other day about how to, once again, help a customer justify their investment in electronic invoicing. They need their suppliers to participate and I used the words "you need to sponsor your suppliers.".
Now I want to use the words
'invest' and 'sponsor' when discussing eInvoicing.
Previously I would have talked about
"who will pay" and
"getting suppliers to commit".Is this just a massage of words or more?
Justification for invest and sponsor approachLet's say you spent £15M on purchased goods and services per annum with 425 suppliers. Your investment in electronic invoicing to include the sponsorship of your suppliers' participation amounts to £15,000 per annum (0.1% of your spend).
You now are looking at what ROI you can achieve on £15,000 per annum.
Let's go for the simple case:
If you accept that eInvoicing is not a fad and is on course to be the way that buyers and suppliers will facilitate AP and AR functions then we need a solution that is equitable for all. Supply chains have many tiers and the cost in the supply chain is ultimately reflected in the price that the end customer pays. eInvoicing is a method to reduce the cost of processing a supplier invoice that saves the payer and payee time and money and when you put that saving into each tier of the supply chain there is a benefit to all supply chain participants. Perhaps the milkman is not a big player in this scheme but you probably pay them out of petty cash.
This is why supply chains prosper as they seek to drive cost out of the supply chain as lower overheads result in lower prices.
For
eInvoicing to deliver the best ROI you need all suppliers to participate as then you can have one AP process (all electronic rather than electronic for some and paper for others). Therefore all suppliers should be sponsored.
How do your recover your investment?
You spend £15M per annum
You have 425 suppliers
You invest £15,000 per annum
You save £30,000 with no risk
You sponsor your suppliers and recover your investment by taking a discount of 0.2% (1/5%) on all invoices (£15M x 0.2% = £30,000) Will your suppliers quibble at a 1/5% discount?
Your ROI is only based on savings against money that you were going to spend anyway and does not include other cash savings that you might achieve. It a no risk return.
Even if you reduce the number of suppliers, as many are doing, then you spend the same but with fewer suppliers but this does not affect your ROI. Actually, with the trend to have a smaller number of suppliers who in turn sub-contract with suppliers who used used to be direct suppliers to you, then the argument to drive cost out of the supply chain is even more valid.
Let suppliers know the dealYour suppliers benefit as they should no longer need to service requests for copy invoices and your capability to process supplier payments on time is greatly improved. Of course if you never intend to pay your suppliers on time then that is another matter. You may also send a message to your suppliers that you only deal with suppliers that agree to submit electronic invoices so they know they are on a level playing field with other suppliers.
Your supplier has invoices totalling £200,000 per annum under the formula above their invoices would be discounted by £400 (£200,000 x 0.2%) that is £8 per week to have the capability to receive and process electronic orders and send electronic invoices - the price of twenty five first class stamps.
Your supplier has invoices totalling £10,000 per annum under the formula above their invoices would be discounted by £20 (£10,000 x 0.2%) that is 40 pence per week to have the capability to receive and process electronic orders and send electronic invoices - little more than the price of one first class stamp.
A better way I suggest this approach is much more favourable way to approach the introduction of eInvoicing than to confront suppliers with an
upfront cost and is perhaps showing them the way to go downstream in their supply chain to introduce eInvoicing so there are savings in n tiers of the supply chain.
Food for thought?
Labels: einvoicing, lower costs, roi, suppliers
