Supplier Enablement - B2B eCommerce and CSR
Does Corporate Social Responsibility (CSR) extend to cover the relationship between buyers and suppliers involved in B2B eCommerce?
CSR tends to be an agenda for larger companies and governments.
Is size important or should all businesses have a CSR stake in the ground?
Generally speaking CSR statements include references to the environment and what efforts will be made to optimise use of energy and reduce harmful CO2 emissions. So B2B eCommerce and CSR: best mates?
One of the outcomes of B2B eCommerce is a REDUCTION in the consumption of paper. How is that? For each transaction between a buyer and a supplier typically 6 pages of printed documents will be produced. You have 100 transactions and you have 600 pages of paper, 1000 and you have 6000. Ok.
So what if the consumption of paper was REDUCED to NO PAPER consumed? You have just saved a bunch paper, the cost to you etc and made a contribution to the environment.
How much of a contribution?
Ask yourself, when you recycle your bottles and newspapers you don't ask yourself how much of a contribution you are making. If you stacked all your recycling for a year I bet you would be both amazed and proud of yourself that does not occupy a landfill.
So, let's say you process 6000 pages of printed documents a year that is a pile of paper that stacks to 66cm (25.98 inches). It weighs about 27.3 kgs (60lbs).
Imagine the impact when 100,000 of you convert to eCommerce and eliminate the consumption of paper and the numbers are:
600,000,000 pages of paper stacks to 66 kilometers (41 miles) high
If laid end to end that stack of paper is 4 times the circumference of earth
Its quite heavy! Weighing 2,730,000 kgs (3008 short (US) tons).
Not hard to see what difference you can make.
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Supplier Enablement - inch by inch
I think it was Bill Clinton that remarked that when it seems you are making no real progress that it helps to think of progress happening inch by inch.
OK let's apply this thinking to how suppliers can make progress with eCommerce.
I know that many fight shy of making the decision to get involved even when under pressure to do so by a customer.
Inch by Inch way to eCommerce happiness:
1st inch: receive your customer electronic (XML) orders and print them out - absolutely NO CHANGE to how you do things today other than you give the good impression to your customer that your eCommerce savvy!
2nd inch: you reply with e-Invoices to your customer. Now your customer is sending you electronic orders and you are replying with electronic invoices. Now you really are wired for eCommerce - there is some change now as you will need to create electronic invoices and that is really easy. Follow the link below.
3rd inch: consider autohandling of received electronic orders so eliminating manual re-keying of orders - change as systems now need the capability to automatically process electronic orders and that may present a number of technical challenges. It does mean that your business is open 24x7 for handling received orders.
4th inch: consider offering ALL customers the choice of paper or electronic invoices - now that is different.
Need a quick and easy way to generate e-Invoices?
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Supplier Enablement - pressure point
You are thinking about participating in an expedition to the North Pole. You have some questions like; how cold will it be? Would you prefer to believe someone who has completed an expedition to the North Pole or someone who is planning an expedition to the North Pole?
Well as you know I write about supplier enablement and eProcurement. I assert that supplier enablement is a challenge for those implementing eProcurement and often overlooked in the planning stages.
Well, what we can learn from those that have implemented eProcurement. They would likely put on their T-shirt: don't be dumb - suppliers matter
In the world of information research leaders like Aberdeen Group provide real world experience and analysis based on interviews. In a recent report: The EProcurement Benchmark Report of August 2006, they report the top two pressures faced by Procurement organisations are:
supplier enablement - the external interface of the business with suppliers
user adoption - the internal interface of the business with its users
So, those that have done it are telling us that you need a plan for supplier enablement.
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Supplier Enablement - how do you measure up?
Are you a best in class, average or a laggard? Do you measure your performance in these terms?
New research once again confirms that for those implementing eProcurement the top two pressures are:
1. Enabling Suppliers - external to the business
2. Driving User Adoption - internal to the business
The good news is that
eProcurement is now delivering real business benefits.What should you measure and how do you classify your performance?
The bottom line is that you are looking to reduce costs in two ways:
1. Reducing the invoice cost of purchased goods and services
2. Reducing the process costs - the cost to raise an order, to process an invoice etc.
What do you measure?
Clearly savings; a £1 saved whether on the invoice cost or through productivity is a direct contribution to profits.
The other measure is what you control. This is a measure of how much of your spend is under control, that is, spending that you have visibility to before it is committed? Those best in class work at getting more spend under control.
If you are buying essential essential goods and services and these costs represent 20% of your turnover (invoice cost + admin costs) and your competitor is achieving 17% then they have a competitive advantage.
If you do not know what your admin costs are, take the people and facility costs of your procurement and accounts payable departments as a baseline.
The amount of information and experience available now confirms that the function of procurement is now a big contributor to business performance. eProcurement has well and truly landed.
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B2B eCommerce is in error; sonny got that wrong!
The B2B eCommerce agenda: work smarter not harder, reduce costs, increase productivity and reduce errors.
Eroors? Whet errorrs?
What is the cost of an error? If your suppliers’ invoices has errors on it then that causes work for you and your supplier to resolve. These errors demand a disproportionate allocation of resources to resolve. This is counterproductive to the Number 1 aims of B2B eCommerce: to reduce costs.
So, perhaps our implementation of eProcurement/eInvoicing should consider how we aim for
the error free processing of invoices.
What is the origin of these errors?
They could be originated by your supplier in information passed to a buyer that is then used to to create a purchase order. These errors work there way out of the system over time as they are corrected. Even so, errors in purchase orders prevent suppliers from processing those orders resulting in delays to customer and lengthening the order to invoice cycle for the supplier. That is a cost to both buyer and supplier.
They could be made by the supplier during the handling of the purchase order and input into their system for processing. Errors are common during
manual entry of data and they perpetuate in all related documents that rely upon that entry of data. For example, if the customer PO number was EYO990 and that was entered as EU0990 by the supplier then that error will perpetuate through to the creation of the associated invoice if it remains undetected.
The buyer receives the supplier invoice complete with incorrect PO number and then is unable to post this.
One error has created a problem that now needs to be resolved by both buyer and supplier. Actually, the supplier is more inconvenienced as their invoice could reasonably be disputed and payment withheld.
The error-free way.
Buyer creates requisition/purchase order based on supplier information either from an electronic catalogue or from punch out web site.
Buyer sends electronic purchase order to supplier
Supplier receives electronic purchase order and imports this into their system for processing. The system performs validation checks against customer and products ordered before allowing the order to be accepted for processing.
No manual data entry has occurred and
no errors are introduced. We now have a clean sales order for processing.
Supplier now processes the order and creates electronic documents for internal use and for despatch to customer. Internal documents would include a Pick Note. Documents for the customer would include a GRN and invoice. The supplier now creates an electronic invoice and sends this to the customer.
Customer receives electronic invoice, reception is automatic and it is automatically processed based on a two or three way match. As the customer has not intercepted the invoice nor performed any manual data entry there is no scope for the introduction of errors.
Error free processing is achievable but it does depend on
eliminating manual data entry and having supplier content that can be relied upon to create requisitions/purchase orders.
It also requires the end-to-end integration of buyer and suppliers systems to eliminate the need for manual data entry.
The reality is that few have achieved this and the cost and technical complexity are two good reasons.WHAT IF: you could have end-to end integration with suppliers without making any new investment in hardware or software or changes to your or your suppliers IT systems. Would that change things for you and your suppliers?
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Supplier Enablement - DIY not always best
What can we learn from the mistakes of others?
Here is a story about B2B Consolidation published in Line56.com today. It tells the story of a major manufacturer deciding to DIY an online trading hub and fail. They then went down the route of outsourcing with a provider and succeed.
Given thousands of global suppliers, unique business systems, and more than 12 million procurement and financial transactions a year, a major commercial and military aerospace manufacturer decided that standardizing business integration would save millions of dollars annually. The company deployed an online trading hub designed to automate a wide range of financial and supply chain business procedures while reducing IT infrastructure costs.
The manufacturer decided to build support for e-business integration in-house. However, despite a massive investment in hardware, software, and dedicated IT teams, it was able to integrate only a handful of trading partners after 18 months of effort. Realizing the enormous complexity and cost of external integration, the company re-evaluated its approach and decided to outsource a solution. IaaS (Integration as a Service) delivered the secure, seamless information exchange the manufacturer sought. A single connection links all the company's trading partners, whatever their technological sophistication, IT systems, or data models. Real-time transmission delivers the fast transaction turns the company requires. The company deployed its trading hub in less than four months, connected with 100% of its business partners, and saved millions of dollars annually through dramatically reduced hardware and software costs as well as more efficient financial and supply chain processes. The manufacturer is not identified but the story highlights some things that can be more difficult that you might imagine when implementing B2B eCommerce:
support for e-business integration in-housethe enormous complexity and cost of external integrationoh, and the cost in hardware and software and dedicated teamsfor this manufacturer at least the wasted time and effort of a failed projectNot a pleasant lesson but perhaps a call to compare the options before setting off on your own DIY path.
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Supplier Enablement - criteria
More lessons from EXPP 2006. btw this conference will be in London in 2007.
I'm busy reviewing all the presentations and in particular those of organisations that have put their money where their mouth is and got ahead by implementing B2B eCommerce.
I liked this quote from a company that had implemented e-orders and e-invoice with 6000+ suppliers. Their criteria for selecting a solution:
no capital expenditure
no specialist software
no lengthy training
no consultancy
This is a completly different place to start your project to let's say defining a published specification for electronic document exchange. You still need those documents but as list of criteria I think the above list is very supportive of how you would describe your project internally and to counterparties (suppliers, partners etc.).
I like it, it says; we need these things to be achieveable and if they are then we have a solid foundation to proceed. Now let's evaluate solutions against this criteria.
How many B2BeCommerce projects get bogged down in detail because there is no clarity for the project in terms of; we need to achieve xxx and criteria for that is yyy.
Good lesson.
