Supplier Networks and P2P: The Benefits of Direct Connectivity for Suppliers

In the second installment of this series covering supplier networks and P2P processes, I noted that one of the most important challenges that buying organizations and suppliers face when interacting with each other is the lack of effective technology solutions that can connect each other’s activities and processes in order to ensure efficiency and productivity while eliminating errors and process delays, either caused by miscommunications or insufficient collaboration capabilities. However, supplier networks and P2P solutions can help overcome these hurdles and enable buying organizations and suppliers to connect and interact in a more efficient (and often more effective) manner.

In this last installment, I will focus on the risks of insufficient connectivity, the benefits of doing it properly and why it is worthwhile for suppliers to invest time and resources to stay connected in the most automated means possible.

Risks and Complications from Poor Connectivity

For organizations that still use their ERP as their only (or primary) system to process all procurement, invoicing and payments activities, typical document exchange and communication methods are done either by paper, fax or email (some firms may also have EDI technologies or web services in place to interact with select suppliers). Although these forms of communication have been used for years, they are insufficient today, as they introduce significant risks to the buyer/supplier connectivity process.

Here are some of the potential risks:

  • Loss of documents (POs/invoices), causing productivity problems and wasting time and/or resources
  • Mismanaged documents, slowing process steps and overall cycle times
  • Insufficient workflow (e.g., matching) and process steps, causing friction in business relationship and unproductive collaborations
  • Communication misunderstandings, causing business relationship problems, process delays, customer dissatisfaction (internal and external), inappropriate outcomes, etc.
  • Inability to handle issues such as document matching between POs, goods receipts and invoices, causing inaccurate payments and unsatisfied users (internal clients and suppliers!)
  • Inability to ensure compliance with contracts, pricing agreements or budgets, creating business liabilities for buyers and suppliers (or credits that become lost or are only later identified)
  • Complications in handling changes in documents or disputes management, leading to dissatisfied suppliers and incomplete processes
  • Inability to track document status during its process (lack of visibility), leading to customer dissatisfaction and unproductive uses of time
  • Lack of document digitization, thus requiring manual or semi-automated processes, which can introduce their own set of risks
  • Unproductive collaboration between stakeholders (buyers/suppliers/AP), causing process delays, unproductive use of time and resources, unsatisfied outcomes, etc.

Being well connected is not something that buying organizations and suppliers should consider lightly. Connectivity can become a significant competitive advantage (or disadvantage), especially given the increasing digital world that procurement and accounts payable must operate in.  

Benefits to Being Well-Connected

There are many ways to connect suppliers with buying organizations. However, not all of these ways are necessarily optimal!

Today’s organizations require business interactions (among internal clients and third parties) to be efficient, effective, and increasingly, in real time. Typically, the most important goal of connectivity is to enable process automation with real-time collaborations and information visibility. And this is where technology solutions such as supplier / business networks and P2P solutions have changed the concept of connectivity, bringing together buyers and suppliers and all interested parties (inside an organization).

In this new environment, the communication capabilities of an email or EDI technology by themselves are not enough. Networks and P2P portals have enhanced business communications by creating a centralized place to connect buyers and suppliers directly and in real time (one to one, one to many or many to many). They incorporate features and functionalities that improve communication, collaboration and business decision-making between them and eliminate the pain points mentioned above.

The following are some benefits that suppliers can easily take advantage of:

  • The ability to upload into a centralized repository all the information required to do business and interact in real time with one or more buying organizations in addition to making to driving the self-management of supplier activity
  • Access to technology or services to capture, digitize, match and incorporate any type of source document (e.g., paper, email PDF, XML, EDI) to an automated process (as e-invoicing, e-payment, document management, etc.). Moreover, these processes can be enabled by configurable workflows and business rules (alerts, escalations, conditional decisions, etc.), enhancing efficiency.
  • End-to-end P2P process integration (purchasing, invoicing and payments) enabling real time visibility (document status, analytics, etc.) and process efficiencies (e.g., programmed payments and repetitive invoices, disputes management, etc.)
  • A proper document exchange with receipt acknowledgements, approval processes, audit trails, related communications links and real-time status reports
  • Access to real-time collaboration mechanisms (e.g., chat, messaging) supported with workflows capabilities to increase communication productivity (document changes, disputes, exceptions, etc.)
  • Access to value-added services such as support to get onboarded and enabled; an e-invoicing compliance service (country-specific); e-payments options; and financing opportunities funded by the buying organization or a third-party company (banks, lenders)
  • Full integration between the supplier’s systems and the buyer’s systems through the network. The supplier’s systems include account receivables, accounting and even account payables for those scenarios where suppliers can become a buyer within the same network capabilities

Direct connectivity through a network or a P2P platform is full of benefits for buyers and suppliers. IT solutions vendors (networks and P2P suites) have been investing its capital in best-of-breed capabilities to improve the business connection among buyers and suppliers. Through technology and services, these vendors seek to benefit millions of suppliers by simplifying the way they do business with the buying organizations, in addition to improving their business results. The open network concept is in its infancy. Once it gets to maturity, however, the business scenario will be beneficial to all supplier business incorporated into a business network.

ROI for Suppliers

For suppliers, direct connectivity through a network or a P2P platform is more than just about enabling document exchange, collaboration mechanisms, status visibility or even process automation. The suppliers also benefit economically, which can make direct connectivity investments worthwhile. Below are some examples:

  • Improved cash flow, caused by faster payment cycles or financing options
  • Resource savings (headcount) by working with a fully automated P2P process (supported by workflows and business rules)
  • Increased revenue through more productive processes and cost avoidance
  • Increased sales by having access to more business opportunities through the network connections

And more subtly, suppliers that are properly connected to their customers (and their own suppliers) through best-of-breed technology such as networks and P2P solutions will be where IT investments for research and development are happening. The result is that they can enjoy the benefits that the future in information technology has for us.

Supplier networks are evolving quickly. Being fully connected is akin to being able to use all the “apps” available via the Apple or Droid store versus just the native functionality contained on a smartphone when you buy it. Regardless of supplier size, it is nearly always worth the time and investment up front.

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