A Technology Foundation to Reduce Supply Risk With Higher Interest Rates and Restricted Bank Lending Jason Busch - August 26, 2015 7:40 AM | Categories: Technology & Platforms | Tags: rising interest rates The combined specter of rising interest rates, reduced bank lending to small and medium-sized businesses, demand/supply variability and economic growth prospects in a number of European and Asian countries – most notably China – suggest a rather dangerous supply risk cocktail is brewing for procurement organizations. In the first installment of this series, I provided an overview of why these challenges matter and can contribute to supply risk. Today, I’ll share how specific solutions can help address these challenges – and build into applying trade financing techniques in the most targeted and strategic manner. But first, let’s talk about a sub-set of foundational technology and capability and how we’re counseling clients right now on the topic, starting with transactional systems and visibility: Forget ERP alone. ERP systems, without the right transactional visibility, accurate vendor file data and analytics front-end, do not begin to provide enough foundational data and insight to let organizations tackle supply risk management and trade financing holistically, for the most part. (There are some exceptions, such as layering on loosely coupled tools like C2FO on top of them.) Supplier onboarding and enablement tools that capture and maintain current vendor file details, implemented correctly and broadly, are in a sense a type of “know your supplier” – analogous to know your customer (KYC) – to stay on top of supplier information, which can enable organizations to take action. Some providers do this as a service with software, including Ariba, Taulia, Tradeshift, Tungsten and Transcepta, as part of transactional enablement. P2P and transactional procurement systems, often including e-invoicing, are great foundational tools not only for capturing vendor details but also for creating information exhaust from transactional data, such as whether or not suppliers are opting to take static or dynamic discount offers. There are literally dozens of providers in this space, including those listed above. Additional vendors include Coupa, SciQuest, Verian, GEP, Proactis, Wax Digital, Hubwoo, IBX/Capgemini, Vortal, WALLMEDIAN, Simeno and jCatalog. Payment Analytics – different from spend analysis – is a rather new space that can help organizations understand historical and current supplier behaviors in terms of PO and invoice accuracy – approaches factors have had to do manually in the past – and even predict whether a PO or invoice that is submitted is accurate. Applying additional statistical analysis on top of this and related datasets can provide some fascinating leading indicators of supply risk. Some organizations are “rolling their own” solutions here with BI front-ends. Others are just starting to use specialized solutions like Remitia or adopting specialized tools (e.g., Opera/BIQ) and others to explore different datasets on their own or with the help of their solution partners. Consultancies can also perform payment analytics as a service. Supplier management/risk management solutions not only can help with on-boarding and enablement (see above) but highly specific supply risk, supplier performance management, master data management, vendor file management/maintenance and related capabilities. Aravo, Hiperos, HICX, Lavante and Zycus, which is also strong in analytics, sourcing and related areas and is getting into P2P more aggressively, are just a few of a range of providers to consider in this area. Note: reduced supplier performance levels including quality, on-time performance, responsiveness to corrective action requests and related metrics are some of the best leading indicators of supply risk and financial challenges at a given vendor. As a final consideration, please note it is our opinion that data-centric providers (e.g., D&B, BvD) have fallen behind the times here with their own tech solutions, and while their data can serve as a valuable component to address supply risk – typically more accurate with large suppliers, at least in North America – should not be considered frontline tools to reduce supply risk alone. With its Open Ratings acquisition nearly a decade ago, D&B was previously at the vanguard here. Perhaps they’ll get their risk management mojo back at some point. These types of foundational systems can serve as a magnifier for implementing different trade financing approaches to reduce supply risk – and as this series continues we’ll explore a few approaches procurement should become most familiar with. Related Articles Planning for Higher Interest Rates and Restricted Bank Lending: The… Economies of Scale (part 2) – Bigger Procurement is Not… When will this huge Corporate Cash Hoard be Unleashed? Banks need to make Supply Chain Finance more User Friendly Trade Financing and P2P Technology: How Can Banks Get Smart… Ingredients for Accounts Payable-Procurement Alignment Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.