Why Buyers and Suppliers Choose to Integrate Their Supplier Network with ERP
Until supplier networks like SAP Ariba Networks came along, trading among buyers and suppliers was either tedious and manual or complex and automated. If volumes were small, phone, email or web portals were used to exchange order information by hand. As trading volumes grew, electronic data interchange (EDI) would be adopted to automate some of the process. Setting up this document exchange was a complicated process that required considerable time, effort, and money.
Supplier networks make it much easier for buyers and suppliers to collaborate resulting in significant time savings and much clearer communication. Even with all the added efficiency, data that needs to be entered into or retrieved from the network still requires manual intervention. Order, shipment, invoice, and payment information usually originate from an ERP such as SAP S/4HANA, NetSuite, Microsoft Dynamics 365, Workday or Acumatica. Depending on volumes, bottlenecks and delays can occur that negatively impact experiences. That’s where integration comes in.
Challenges Buyers and Suppliers Face without Integration
Without integration between supplier networks and ERP, buyers and suppliers must continue to rely on manual processes.
Suppliers find themselves entering sales orders and invoices manually which is not only time-consuming, but also prone to errors. Suppliers may spend over 30 hours a week entering sales orders manually into their ERP, which can also make it difficult handle large volumes of transactions without inevitable errors that cause frustration. Data entry delays and errors preclude real-time visibility into cash flows and can cause backlogs in processing invoices, which can delay payments.
For buyers, lack of integration with their ERP means that they have to use manual processes to enter order confirmations, ship notices, and invoices into ERP. Again, manual processes are often error prone and labor intensive, which can be costly. Without integration, buyers can lack real-time visibility into invoicing and risk making incorrect payments, such as overpaying or making duplicate payments to suppliers. Even worse, inefficient processes can result in delays that lead to product backlogs and the dreaded stock outs that drive customers to competitors.
Benefits of Integration
Integration is not a band-aid fix for the above problems. It eliminates symptoms and gets to the root of the problem, providing a relief that can’t be explained if you haven’t experienced it. A fully integrated solution between your supplier network and ERP can completely automate the end-to-end business processes for procure-to-pay or order-to-cash.
An integration can sync the two systems and automatically:
- Receive buyer purchase orders as sales orders and return order confirmations
- Send ship notices to buyers as soon as they are entered
- Receive notification directly in ERP when goods have been partially or fully received
- Send invoices as soon as they are submitted
- Receive notice in ERP that the buyer has paid the invoice
With this the order-to-cash process automated, suppliers experience improved operational efficiency, better customer relationships and greater visibility into payment status.
Orders flow automatically from buyers on the network into the supplier’s ERP, improving the efficiency of the order entry processes and thereby reducing costs from errors and manual processes. Suppliers can gain a competitive advantage by leveraging savings to supply their product at the low price demanded by large retail buyers without sacrificing the quality of product materials.
Suppliers also see improved cash visibility because invoices are entered correctly, on time and none are missed. They can even have real-time visibility from their ERP as to when payments are coming in.
In addition, suppliers improve their relationships with their customers because of the improved experience they provide with quick and accurate order processing. Buyers are provided with real time order status and updates throughout the process. This, in turn, makes the supplier more desirable to buy from.
Integration enables buyers to automate their procure-to-pay processes and can automatically:
- Send purchase orders from ERP and receive order confirmations in ERP
- Receive ship notices from suppliers in ERP as soon as they are received in the supplier network
- Send notification to suppliers that items have been partially or fully received
- Receive invoices in ERP as soon as they are created in the supplier network
- Send payment notifications from ERP so the supplier knows payment was issued
With automated procure-to-pay processes, buyers reduce manual data entry for purchase orders, order receipts and vendor bills. This saves time and money, and lowers the risk of incorrect payments and costly mistakes. Everything can be monitored from ERP – from shipment statuses to invoices, and automatic updates improve material planning so buyers can deliver products and services to their own customers in a timely manner, bypassing the dreaded stock outs.
The Nuts & Bolts: How iPaaS Automates Key Business Processes
While there are many integration options out there, an integration platform as a service (iPaaS) can give you the most flexibility in aligning with your business requirements and processes. An iPaaS can transform data it gets from the source application – let’s say SAP Ariba Network’s EDI or cXML file, into whatever data format the receiving application or ERP requires.
An iPaaS may also have prebuilt connectors for many applications, so you spend less time developing and maintaining integration connections and APIs. Once integrations are established, data can be passed from one application to the other in regularly scheduled intervals or via a Webhook that “listens” for triggers such as submits or status changes which then fires off data from the source app to the destination app.
In the case of most iPaaS, once integrations are built, they are “set-it-and-forget-it.” Auto notifications send issue alerts which can typically be monitored from a dashboard – if a system goes down or errors occur, it’s easy to identify the source of the issue. Some iPaaS even have prebuilt integration templates between particular supplier networks and ERPs, greatly reducing implementation time and costs.
Buyers and suppliers who wish to streamline their end-to-end procurement or order-to-cash processes, reduce costs from errors and manual processes, and improve overall employee/customer satisfaction will want to consider integrating their supplier network with their ERP system.