The Top 4 Ways Procurement Can Leverage Business Networks
In my frequent conversations with procurement professionals, its quite clear that the importance of increasing collaboration with suppliers is well recognized. After all, in today’s Networked Economy, we are more connected and dependent on our trading partners than ever before.
Yet, when we start to discuss what that means in practice, there is far less clarity. For example, few seem to understand just how to leverage business networks, a key enabler of such collaboration, to drive greater value. Seems we all need to spend less time discussing theory and more discussing real world application. A new infographic produced by SAP takes a crack at doing that, showing how Patrick, a fictitious purchasing manager leverages a business network to do his job better and drive a range of company benefits.
I’d like to get even more specific. From my experience, here are the top ways that procurement professionals should leverage business networks.
1. Automate P2P. I’ll start with the obvious one. Business networks let companies easily connect to their trading partners. You should ensure your purchasing systems (and your einvoicing for that matter – P2P is all one process ultimately) are connected to a business network so that as many of your suppliers and catalogues as possible are available in those systems and your orders and invoices are processed electronically, with automated 3 or 4 way matching, in a “touchless” manner. This:
- Improves compliance
- Reduces errors/exceptions
- Increases transparency & control
- Ultimately saves you a ton of time to focus on higher value add activities
But the best business networks can do much more than digitize purchase orders and invoices.
2. Improve Sourcing. 40% of sourcing time is typically consumed by discovering and qualifying suppliers. You can shave the bulk of that time by using a sourcing solution with integrated business network discovery. Not only can you reduce cycle times by cutting down supplier discovery, you can also:
- Decrease costs through more competitive auctions
- Reduce risk via network insights such as 3rd party financial/risk data and peer reviews
- Meet non cost objectives such as CSR, Green & local supplier requirements without sacrificing cost
3. Increase Spend Under Management / Control. Its amazing how much time is spent trying to optimize auctions to squeeze an extra percent in price reductions. This no doubt saves money, but there is a limit to how much you can squeeze out of your suppliers, and squeezing too much increases supply risk. The much bigger opportunity in most companies is in all those unmanaged categories and purchases. By connecting your purchasing systems to the right business network, you can bring a new level of control and visibility over that spend.
- Spot buy capabilities let users buy specific categories from online catalogues from qualified suppliers. So if your contracted supplier is out of an item or a category is uncontracted, you can still drive purchases through your purchasing system.
- For more complex purchases, spot quote capabilities let users quickly obtain several quotes, select one and place the order. You want employees to adopt your systems? Take away their excuses to go around them.
4. Innovate. Supplier-driven innovation need not be limited to a handful of strategic suppliers for a handful of categories. Crowdsource requirements (rather than bidding exact specifications) over a business network and let potential suppliers offer creative ways to meet your requirements, potentially offering a much better solution AND reducing costs more than an auction for a pre-defined specification could. A business network extends the universe of suppliers that can offer their innovative approaches.
This is hardly an exhaustive list, but I believe a good start. Ultimately, today’s Networked Economy, is creating entirely new ways of doing business smarter. Business networks are a key enabler for procurement. Let’s all stop talking and start doing. Just like Patrick.