Supplier Enablement – $200Bn at stake
The idea of creative destruction was introduced by the economist Joseph Schumpeter describing the process of industrial transformation that accompanies innovation. That innovation looks to destroy that which is outdated and inefficent and renew with that which is updated (often enabled by technology) and efficient by comparison. I like this as a statement of what supplier enablement is all about.
Yesterday in this blog I referred to a report by a top academic on the impact of electronic business initiatives in the supply chain. The full 9 yards is available in a report for the Society for Information Management (SIM) and published on their web site.
In the SIM report it puts a value on the inadequacies of current supply chain methods of the automotive and electronics industries. Now, these are two industries that are acknowledged as being very progressive in terms of supply chain automation so they represent the best examples.
It is claimed that these
inadequacies represent about 1.2% of the value of shipments in each industry. These are mega industries and that is a lot of money, the estimate is $5Bn for automotive and $3.9Bn for electronics.
In some industries the inadequacies will represent much more than 1.2%, perhaps 5% or even more.
Someone is paying for that – the consumer.
When I write about supplier enablement I note that the business driver (profit driver) is the reduction of costs incurred by buyers and suppliers in the course of their trading.
The two industries above have an estimated $8.9Bn in added and unnecessary costs as a result of supply chain inadequacies. Let’s speculate what that value might be for the global economy. $100Bn? Perhaps $200Bn? It is a really big number anyway.
You want to pay a smaller price for your electronics and automobiles? Don’t we all.
It certainly appears there is scope for that and for these companies to achieve a handsome profit from improving the supply chain so let creative destruction do its work on that supply chain.
Now global business has already spotted the opportunity and is doing its job so this is work in progress and is starting to permeate the whole supply chain from top to bottom.
Make sure you don’t get left behind!
Need some help?
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Supplier Enablement – Top Academic gives verdict
I’ve mentioned in other blogs that getting suppliers involved in your electronic business initiatives is not always as straightforward as you might hope.
Well, now a top academic has piled in with some help.
They report:
“Despite the amazing technical advances of recent years, and all the talk about agility and real-time information, the information systems that link customer to supplier remain woefully limited.”
Ouch! - I hear you say, I didn’t want to hear that cos’ that spells trouble.
Is there any good news from this academic?
Well, they go on to say:
“Successful partner integration largely depends on understanding both industry trends and your company's business relationships.”
That’s a comfort?
And does this academic have the answer?
They sure do.
Here it is:
“How can I help you to help me?'"Did I hear you shout eureka?
Click here for the full article
Click here if YOU NEED HELP with: “How can I help you to help me?'"
Big company want e-Invoicing - little company say ooh!
I have written in the past about the dilemma for the SME who is challenged by big companies (their customers) to respond to initiatives like e-Invoicing.
There is an interesting article published by Channel Insider that talks about this, here is an excerpt:
"The problem is that none of this works very well in the SMB (American speak for SME) space. IT investment activity among smaller companies is almost completely driven by the "need/solution" mindset - i.e. the customer is generally looking for safe, hassle-free and cost-effective offerings that address immediate problems and opportunities. There are exceptions, but typically smaller businesses don't have the time, resources, breadth of skills or inclination to get involved in the same speculative or exploratory activities as their larger cousins". Click here for the full article.
As I have commented before in a recent blog, SMEs are not all the same, they have differing attitudes and appetites for innovation, progress and risk.
The article I have referred to contrasts the reality of big versus small business attitudes to exploring the use of new technologies. Big "can and do", small "might like to but don't".
The UK public sector has taken a different approach and for example the Zanzibar marketplace that serves the UK public sector provides for suppliers' participation in their purchase to pay initiative at NO COST TO THE SUPPLIER and meets the requirements of "safe and hassle free and totally cost-effective". That is progressive thinking on the part of the public sector!
Click here for more about Zanzibar.
Click here if you are a SME
Click here if you are a buyer looking to implement e-Invoicing
XML 101 - Help for Business Managers
Interestingly searching XML on google turned up a number of results that talked about SOA and Web Services 2.
Me thinks – that’s not very interesting to the majority of business managers?
This blog originated from a conversation with a supplier that rejected EDI yet knew something about XML. The trouble was, something, as in not very much.
XML 101 – something worth knowing if you are not a computer whizz but need to stay on top of your game.
XML is for all sizes of business.XML allows you to exchange documents with others; your customers, your suppliers. These are electronic documents.
What is an electronic document? It is not paper although electronic documents can always be printed in a human readable form. Electronic means that it has been constructed in such a way that it can be sent from one computer to another and the receiving computer can interpret the information in the received document and process that. The construction of the document uses XML.
How does that help? It saves having to intercept the inbound document, route it to a department or person so the information in the received document can be translated into instructions that people can act upon or input to a computer.
Many question why the received document that is nearly always computer generated has to be received as a paper document and the information re-entered into a computer? It doesn’t and that is the whole point of using electronic documents that can be used to pass information from one computer to another even if those computer systems are different.
That is the power of XML to resolve the differences between IT systems that are used around the world yet still allow them to pass information for processing.
What are these documents? Mostly Purchase Orders and Invoices although other documents types such as Advanced Shipping Notices, Credit Notes, and Debit Notes are supported. This is a fast developing area and the UK Government has specified 14 different document types that will be supported as XML documents.
Why all the interest in XML? There are costs associated with purchasing goods and services as you request quotations from suppliers, process orders and invoices for payment.
Since the activity of buying the things you need for your business is indispensable, many organizations are now looking at their costs to raise a purchase order, to process an invoice, and, alarmed at the scale of these costs are determined to find a better and lower cost alternative. Solutions include increased use of automation and the use of the Internet to send and receive documents in preference to postal mail.
So XML is mainly to do with buying and selling? No, type XML in your Microsoft WORD help bar. There are many potential uses for XML but I am writing about how it used business to business between buyers and suppliers.
Do I need to do anything about XML? No, it is a technology and this blog is about debunking the techno speak for business managers.
Think about the transactions that you have with customers and suppliers and the business process and documents that support those transactions. Do you know the cost to process an order, process an invoice, to develop, publish and distribute a printed catalogue?
This is where others start out when looking at the business case “to change how things get done around here for the better”. That can be sparked by an increase in business, competitive pressures, a squeeze on margins, a new CFO, there all sorts of reasons.
I'm a business manager, what are the benefits? Let’s suppose you save £1.00 on the processing of an order and invoice and that you processed 10,000 orders/invoices per annum. That is a saving of £10,000. How much do you have to sell to achieve £10,000 in gross profit? If you have a gross margin of 10% you have to sell £100,000. So, if you were looking at the profitability of your business would £10,000 incremental profit be attractive?
Basic stuff but in a low inflation economy with little scope to increase prices (unless you sell energy!) then you have to look at how you can take cost out of the business without doing harm to customer service or supplier relations. Just some thoughts so you can develop this further for yourself.
When I searched in google.com for XML the 1st result shown linked me to this web site
http://www.w3.org/XML/Have a look and send me a comment if my blog has helped you.
Click here if you are a buyer
Click here if you are a supplier
Suppliers do say NO!
I am always looking for anecdotal proof to support things that I write about in this BLOG.
Recently I wrote about EDI and mentioned that few suppliers commit to use EDI even when the option is put to them by a supply chain partner.
Today I was at our web design agency and I engaged in a discussion about EDI and the person that I was talking to who was asked by their distributor to use EDI said; "it was just too expensive". That was reason number 1,2,3,4,5 etc.
It is not that suppliers aren't interested to improve supply chain logistics and actively participate in how that it is achieved BUT it has to be at an affordable price to include cost of acquistion and usage. For this supplier EDI failed that test.
This same supplier knew about XML but did not know how this is being used in the supply chain. Pause for thought. So here we have a supplier that has eliminated EDI, recognises the 3 letter acronym that is XML, but is not infomed as to how this could benefit the business.
So, a decision has been made to write a blog that is the 101 beginners guide to XML - business points of view only.
Can't wait for that ?
click hereNeed a refresh on the EDI - XML debate?
click here
BLOG AD - IMPAQ
Apologies for a bit of blatant commercial activity to test the utility of the search engines that trawl BLOGS.
I have noticed how old (by date) some of the postings are that show up in results lists from BLOG searches.
Why is that?
BLOG wisdom is that you must make regular positings otherwise you drift off the results pages of the major search engines.
Testing, testing, testing. IMPAQ, IMPAQ, IMPAQ.
Testing over.
Don't do as I do, do as I say! STOP IT!
There is on old saying that is drilled into presenters; say it, say it again, and then say it one more time in case they didn't hear you.
So, here goes:
If you don't want paper documents from your suppliers STOP sending paper documents to them, I repeatIf you don't want paper documents from your suppliers STOP sending paper documents to them, I repeat once moreIf you don't want paper documents from your suppliers STOP sending paper documents to themSending paper documents as an attachment to e-mail is PAPER SENT BY E-MAIL.
Sending paper documents as a fax is PAPER.
Sending paper by post is PAPER in an envelope.
Let your supplier have the choice to print your electronic documents if they need to but don't burden them with paper when you are trying to eliminate paper yourself.
Click here for more information on getting those electronic documents on the move.
What a Carry On
It is getting bigger and bigger and I’m not kidding. This could be a line be out of a Carry On film but I’m referring to the growing number of suppliers that are being lured into electronic trading with their customers. It is as if 2006 is the year of supplier enablement.
If you are a supplier does this make you laugh like a Carry On film might or cry in your beer as you do when your horse falls at the first fence?
Is this a right ol’ caper or something that you simply must pay attention to?
My blog has been running for 3 months and I’ve looked for interesting news to comment on and highlighted research that helps to inform you about what others are thinking and doing.
You will find news about China, comments about EDI, real stories (OK I’ve had to protect the names) about buyers and suppliers that have implemented electronic trading and lots of research and surveys so that you can form your own opinion about ‘what’s going on’ out there in the market.
I also work in a business that is at the coal face working with suppliers to equip and support them to participate in electronic trading.
It is happening; last year’s trickle is during into a deluge.
In business, and this is particularly true of business leaders, it is their job to anticipate the future. Get it right and you are a hero with a fat bonus. Get it wrong and you are looking for a job.
I hope this blog is useful to you and please comment if I’m right or wrong to say that electronic trading is hot – my job might depend on it!
Click on Comments below now and let me know your thoughts.
Feel better - benchmark your performance
Are you under the cosh to find a way to improve the visibility into your costs and supplier performance?
Don't worry. You are not alone according to a recent survey by Aberdeen Group. Feel better?
To read the abridged edition of Aberdeen Group's report; The Invoice Reconciliation and Payment Benchmark Report
click hereNeed some practical assistance with delivering cost savings?
Click here for help.
China get on board
China is in the news as a booming economy that is supporting growth in other economies due its demand for raw materials and need for logistics and for infrastructure to support its growth.
There is an interesting news item just published by Line 56.com about what China is doing to develop and improve it B2B capabilities.
For example, the news item quotes that the electronic exchange of business information is not as popular as using manual methods. In fact that is no different to western economies that continue to rely upon manual processes and enhance those by using tools such as fax and e-mail to speed up delivery.
It also quotes a very interesting statistic that supply chain and logistic costs represent 18.9% of China's GDP whereas in western countries that is 8 - 10%. Good to know the West in beating China in one area.
I see many reports in the business pages of newspapers about how we remain competitive against the low cost country producers like China.
Perhaps our investment to drive down costs in our supply chain and logisitics is one are where we are ahead and can keep ahead.
A good read,
click here for the full report.
Are you looking to drive down costs in your supply chain and logisitics?
Click here for more information on how to.
Supplier Enablement - get ahead of the game
Are you a buying organization moving in the direction of eProcurement and in discussion with vendor(s) for your eProcurement solution?
Is supplier enablement on your agenda or that of your
vendor(s)?
It should be on yours as your suppliers are going to be impacted by your introduction of eProcurement.
Perhaps you will require your suppliers to publish electronic catalogues and for them to classify their products using UNSPSC,
click here for help with UNSPSC.
You may want your suppliers to submit electronic invoices to reduce your invoice processing costs.
None of this is going to be possible unless you are thinking about the implications for your suppliers and how they will meet your particular requirements.
For this reason you should consider what your supplier enablement strategy is as a core component of your eProcurement planning.
For more information
click here
EDI or XML? Take the test
If you have experience with supplier enablement then you will know it is a bumpy road.
Why is that? Money, People, Technology, Relationships are all in the mix and there is 'change' and it is not that we don't accept change it is just that change forces decisions.
One of those decisions would be about technology.
Consider that your customer wants to commence electronic trading with you and all paper documents that are currently sent to and fro are to replaced by electronic documents. That spells change and has big implications on how you support this change and in particular impacts technology (IT systems) that you use.
One of the things that we know about supplier enablement is that you should consider every way to minimise change for your suppliers at the outset and provide options to grow as they absorb the change and become confident and proficient with electronic trading. The reason is the more change and disruption that is imposed on your suppliers at the outset will result in delays and a lack of progress that is highly frustrating.
Minimise changeIf your objective is to minimise change would you look to XML or EDI?
I say XML as this can be implemented without the neccesity for end to end testing of IT systems.
Click here to read an article published in Line 56 about EDI Transaction Testing and ask yourself -
am I ready for this?If the answer is NO then consider the alternative - XML.
Your customer wants to send you an electronic (XML) order and request you return an electronic (XML) invoice. You have no experience of XML. Your IT systems work just fine and you have no desire to make any changes at this time.
If you could meet this request without making any new investment in hardware or software or any changes whatsoever to your IT systems would you consider that?
If the answer is YES
click here
XML and EDI; or is that XML bye bye EDI?
EDI came first of that there is no dispute.
With the availability and increasing use of XML, is EDI threatened with obsolescence? NO.
Are businesses that use EDI also using XML. YES.
Are there businesses using EDI that plan to extend the use of EDI to all suppliers? Maybe (because we don't know), but doubtful. Let's assume NO.
So, we can be pretty certain the EDI and XML will co-exist.
YES.Also that XML will become dominant, as while EDI is well established it is not widespread in its use? This will provoke debate but XML is going to win out as the preferred way for most business (large and small) to exchange messages and documents electronically.
Consider that 99.3% of UK businesses employ less than 50 persons; how many do you suppose use EDI? We don't actually know the answer to that question because there is no data but it is fair to assume that it is a tiny tiny percentage and they will be mainly suppliers to major companies that have mandated the use of EDI such as major retailers and automotive industry.
The real growth will be XML as these businesses are introduced to electronic trading and the need to exchange electronic documents with their customers and suppliers.
Why XML not EDI?
The cost to implement XML is much smaller than the cost to implement EDI and this matters, particularly to the SME.
There are more businesses that can or will support XML than there are those that will support EDI and that we know from current projects that promote only the use of XML.
There is a telephone argument; if I buy this telephone how many people can I talk to? Only those people that have the same telephone as you - EDI. Everyone who has a telephone - XML. The choice is yours. This is a simplistic argument but also true.
In summary:
EDI is here to stay where it is already established.
Use of XML is growing rapidly.
The post, fax and use of e-mail to communicate messages and documents goes on but in many businesses is coming under review for eProcurement, eInvoicing and for the automation of Purchase to Pay.
The business issues that drive the debate:
COST, as businesses look for ways to reduce both the invoice price for bought goods and services and the cost to the business for 'procurement'.
COMPLIANCE, the new word casting a shadow over business and in our context it means tighter controls over what we spend and whom we spend it with.
CONTROLS, as a quick look at the non-pay expenditure of an organisation or the cost of goods in a P&L will reveal the extent of money spent with suppliers. All that has to be accounted for and in pursuit of saving money (reducing costs) so more controls are being implemented.
For more information on these issues
click here
SaaS - Microsoft announcement
There is a flush of news about Software as a Service (SaaS) with Microsoft most recently announcing the availability of hosted CRM,
click here for that story.
What characteristics does a hosted service need to have to be SaaS?
It is hosted. There is no specific hardware and software that need to be installed 'on premises'. The service is accessed from a PC with browser and connection to the Internet - that's all!
It is multi-tenanted. If it weren't then each customer would require their own system, that does not scale well and negatively impacts the economics of the service.
It has low start up costs. If you don't have to acquire hardware and software and you can use PCs that are already connected to the Internet then you can get going fast and at a low cost. This is particularly interesting to SMEs who do not have the capital budgets to invest in IT or the resources to build and support numerous applications 'on premises'.
While Microsoft will deliver CRM as SaaS during 2007, IMPAQ have a working SaaS built with Microsoft.NET and SQL Server 2005.
The IMPAQ Supplier Portal serves organisations of all sizes both in the public and private sector that need to exchange electronic business documents, such as Supplier Catalogs, Purchase Orders, Invoices and others.
The Supplier Portal makes collaboration easy between buyers and suppliers irrespective of whether they are high or low tech IT users as all they require is a PC connected to the Internet.
Like the idea?
Click here for more information.
Paper Invoices returned unpaid
According to an article in eGov Monitor 10th July 2006, in Denmark the public sector no longer accept paper invoices from suppliers - there are returned unpaid to the supplier.
Why is that?
The savings available to the Danish public sector are €120 - 150m per year - an impressive sum.
To read the article
click hereNeed a solution to your own eInvoicing needs?
Click here
Electronic Invoicing made easy
Help your suppliers to deliver electronic invoices to you.
If your supplier could create an electronic invoice in 5 seconds with NO new investment in technology and minimal training would that be an assistance to you and them?If the answer is NO, sorry to have wasted your time.
If the answer is YES, here are the steps to follow:
1. Send and electronic order to your supplier. This order will be an XML document and it does not matter what XML standard you use.
2. Your supplier receives your electronic order as a document they can action just as if it had been received by e-mail, fax or post. So, no change for your suppliers.
3. The electronic order is stored in a secure area only accessible by your supplier so they can refer to it when they need to create an electronic invoice.
4. Supplier fulfills the order and now needs to create an invoice. They refer back to the stored electronic order and with "one click" create an electronic invoice and press SEND.
Job done!
This routine task is made easy where the buyer provides their suppliers and electronic order and this document is used to create the electronic invoice.
You get what you give!
Click here to learn more about how easy it is to start electronic invoicing.
Electronic Invoices - suppliers' point of view
We have lots of conversations with businesses that want their suppliers to send electronic invoices to them and we understand why this is a valid request. But what is their suppliers’ point of view?
Let’s examine the issues that arise for suppliers:
1. They are set up to process paper documents inbound to and outbound from their business using post, fax and e-mail. The associated costs have no particular visibility because of the reliance on these methods to serve all customers.
2. Less than 5% are equipped to process electronic documents, specifically XML.
3. SMEs in particular find it a challenge to know how to respond to a customer’s request for eInvoicing particularly so as each customer has their own unique requirements. These costs have high visibility in the business as they are attributed to serving individual customers.
How do you eliminate paper invoices and replace with electronic invoices?
First, consider that if you want electronic documents (invoices) FROM your suppliers shouldn’t you provide electronic documents (orders) TO your suppliers? This can help your suppliers prepare the electronic invoices that you require - click here to find out why that is.
Second, consider what capability your suppliers need to receive and send your electronic documents? Do they have the capability, if not, who can provide it?
Click here for more information on "make it easy" for buyers and suppliers to move to electronic invoices.
