Streamlining and automating the procure-to-pay (P2P) process is something many companies are focused on, especially those dealing with hundreds, if not thousands, of suppliers and high volumes of purchase orders, shipments, and invoices. What are the current challenges companies are facing in their efforts to streamline and automate their P2P processes? How is technology helping companies achieve their objectives? What is the business case for this automation? Those are some of the key questions I discussed with Omar Nadi, Director of Supplier Product Management at Elemica, in a recent episode of Talking Logistics.
The order procurement black hole
I began my discussion with Omar by asking him to share some of the challenges procurement people are dealing with in the procurement process. Omar says, “In the worst-case scenario, companies are sort of firing their orders into a black hole. They’re not getting information back, they don’t know if the order is confirmed, they don’t know whether the order will be delivered on-time and in-full, and worst of all, they don’t know if there are any problems with the order until the day of delivery.
“A slightly better scenario emerged 10-15 years ago when companies started connecting to their top few suppliers using EDI with either in-house IT or a value-added network (VAN),” continues Omar. “Some then added a few more suppliers through an in-house portal or their ERP.
“The ones who have pushed the envelope and gained the most value are the ones who have used business networks to leverage one IT investment to have a much broader success rate connecting their partners. Those companies are connecting to upwards of 90 percent of their suppliers and are aware well in advance if there are going to be issues with their orders. They’re also connecting with their logistics service providers to ensure a timely flow of goods for operations and are collaborating with suppliers upstream on vendor managed inventory planning scenarios.”
Email: What’s old is new
Given the many limitations and often high cost of getting suppliers onto EDI networks or company portals in order to exchange order information, I asked Omar how using a business network is different.
Omar explains, “We use a technology that’s been around a long time and which virtually everyone has access to — email. When an order comes into our network, it is converted into a ‘quick-link’ email and sent to the supplier. The supplier enters how much they can deliver when, but rather than hit the reply button, they hit a ‘quick-link’ button that converts the response back to a digital format that can be sent through the network directly into the customer’s ERP system as an order confirmation. Thus, that supplier is now automatically on your network at no cost and you haven’t had to do anything. There are no IT hurdles to get over, no portals to sign into, no passwords to remember and no training costs. It’s a simple way to establish your business network very quickly. It levels the playing field for all buyers and suppliers regardless of size, eliminates the need for the 80/20 rule of automation and enables automation of the ‘long-tail’ suppliers who previously were not cost-effective to add.”
The business case
While the benefits of a quick, cost-effective way to digitize supply networks seems obvious, you still have to justify establishing the network to management. So, I asked Omar what companies should look at to help build their business case.
Omar comments that, “The business case usually starts with eliminating administrative overhead such as data entry. That can be significant when you consider hundreds of thousands of orders per year for a company.
“Latency is another issue. Most invoices still come in as paper copies through snail-mail. You can’t take advantage of things like early payment discounts while waiting for the mail to arrive, processing it through the mail room, and sending it to an individual to enter into your ERP system for payment. The window may be closed before all of that happens.
“Another big benefit is order visibility. Without this visibility to what’s happening with your order, you either throw a lot of bodies at tracking this information down, keep extra safety stock, or use air freight to make sure it arrives when you need it. These options all have significant costs that visibility can help to eliminate.”
I asked Omar to put some numbers around what these savings in labor, inventory and transportation have meant for their customers, as well as what the adoption of technologies such as IoT might add. I further asked him to provide some areas companies might examine to get started on the digitization of P2P. Watch the full video for his insights and advice on those topics and more, then post a comment and share your perspective!