August 08, 2016

The View from the Top

by Procurement Trends, Source-to-Pay

Originally published in OpusCapita Journal.

To see the whole picture, you have to step out of the silo and find a better watchtower. Redefining purchase-to-pay into an integrated, automated and digital process, from sourcing to paying, expands horizons for corporate CFOs and CPOs, both of whom are reaching for overall control and compliance.

In the digitalized, networked economy, more and more industries and corporations find themselves in the middle of a changed competitive field. The game is no longer played and won between company A and company B, but rather the success of a company is based on the performance of its network of supply chains or its entire business ecosystem.

“The interconnections between the buyers and the vendors in the supply chain have become pivotal. Corporations are looking to strengthen the relationships and create new forms of cooperation and value. They are reaching for overall control and compliance. This is where the view provided by the traditional process from purchase to payment falls short,” says Stephan Albers, Head of Buyer-Supplier Ecosystem Products at OpusCapita.

“There is a great need to see the whole picture, and to cover the whole process chain from sourcing to paying: all the way from managing the first request for quotations (RFQ) to the point where the cash related to the trade has been managed and the working capital of both parties during the process has been optimized. This will allow the efficient collaboration and transparency that is now needed with all the trading partners.”

Albers joined OpusCapita from jCatalog, a German company specializing in procurement and product information management that he co-founded at the turn of the millennium. In 15 years jCatalog grew into a distinguished software solution provider and an expert in purchasing and sales in an international arena. The company became part of OpusCapita in 2016.

As Albers points out, every time someone buys something, someone else is selling something – the purchasing process is, in fact, also a sales process. The process from invoice to payment obviously deals with both the vendor’s O2C and buyer’s P2P processes. Seeing the whole picture requires an understanding of all sides of the corporate trade.

“The OpusCapita of today is in a unique position to cater to corporate selling, buying and paying. This closes the loop or completes the ecosystem. As products are sold more efficiently, with the help of high-quality and electronic product information management (PIM), for instance, the buying process is improved, and the digital experience for the buyer is ensured from the very first steps.”

Breaking down the silos of procurement and finance function is not a new goal for executives of either function. Still, according to Albers, it is easy to end up sub-optimizing either part of the process, even if the CFO and the CPO have sat down around the same table to develop the P2P chain.

“The mutual benefits are easier to spot in an integrated approach. With purchases made from catalogs, CFOs can achieve a high matching rate of purchase invoices and a high level of automation in accounts payable (AP). The joint platform for exchanging all the data and messages, whether it is purchase orders, goods received notes, reclamation confirmations, or invoices and reconciliation data on payments, gives both sides of the C-level a company-wide view and the needed control and compliance, in real-time.”

For instance, capitalizing dynamic discounting and other early payment discounts is tightly in the hands of the AP department and depends on efficient invoice handling processes, although optimizing the purchase costs and being able to collect the benefits negotiated by the procurement in the contracts are definite interests of the CPO.

Extending the P2P view to cover even the trade financing options and tying Supply Chain Financing to the chain increases both the buyers’ and the suppliers’ economic performance.

“More importantly, it gives the buyer more means to manage strategic supplier relationships. The benefits are measured both in the finance and the procurement functions,” Albers states.

A closer look at the e-procurement processes already implemented in the companies often reveals that only a small part of the companies’ purchases actually flow through that process. The desired error-free and efficient handling of purchase invoices through 3-way matching, for instance, may be a reality only in direct purchases.

“Even in large multinational companies, it is not uncommon that merely 10–15% of the spend is covered with electronic purchase orders, e-invoicing, and automated invoice workflow. Solid product information management can help to increase also the portion of indirect spend under management.”

The largest vendors of a business are usually quite well integrated, but there is a long tail: roughly put, 80% of suppliers responsible for 20% of your spend.

“The long tail includes not only the one-off suppliers but also a number of vendors who are of importance to you. Increasing supplier connectivity with easy-access portals will be the focus in the future years, to include an even larger group of suppliers and to allow the buyers to improve integration and consequently increase visibility to the whole supplier ecosystem,” Albers says.

In our personal lives, the technology and web services we use are mobile, convenient, flexible and intuitive.

“The corporate users get educated on Saturdays and Sundays, in their free time when they are using Amazon or eBay or a vast majority of other modern B2C services. You should not need expert skills or knowledge to be able to use the purchasing platform provided by your company to order the needed items at work, either,” Stephan Albers points out and says that the usability will, in most part, make or break your project.

“If you have to enforce the system on the users, you will have a hard time ensuring the compliance later on and increasing the system-based ordering. The same logic applies to the supplier onboarding – if it is cumbersome and a lot of hassle, it is hard to promote.”

If, on the other hand, the purchasing system features dynamic searching, filtering, and sorting options, and if it, for instance, can scan for differences to previous orders by the same users to help correct errors immediately, the system can get adopted quickly even by tens of thousands of users as it genuinely makes their lives easier.

And when the smooth, seamless and transparent process continues all the way to the invoices, payments and cash management, everybody wins.

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