Basware on procurement networks, collaboration and visibility

There are so many reports and surveys published these days, frankly we can’t feature them all and I struggle at times to see what some of them add. But Basware, the leading P2P and e-Invoicing firm, tend to publish material that’s worth a look, often because they focus on the Chief Finance Officer (CFO) rather than Procurement leadership as their survey subjects.

And that makes them interesting for the many procurement people and functions who either report into Finance or have Finance as key stakeholders. Certainly when I was a CPO, reporting to the CFO, getting an understanding of the key issues and priorities for finance people was important.

So  the second chapter of The Cost of Control – Disrupted Networks report, the third annual study commissioned by Basware, provides insight into the opinions and priorities of over 550 finance executives around the world. This chapter looks at the impact that the increasing complexity within any web of commercial interactions is having on buyers and suppliers and the implications of late or erroneous payments.

I’m not quite sure I get their title – “Disrupted Networks” -  but the report itself is well worth a look.

There is a strong focus on the increasing use of supplier networks, which throws up some perhaps counter-intuitive findings.  For instance, 59% of the finance people surveyed think the visibility of supply chain activity and supplier payment is becoming more difficult due to the increasing complexity of the networks.

While 64% believe that transparency of the network can overcome this, the fact that most see the situation  as getting less clear is interesting.

There’s also a paradox in the area of payments. Most of the respondents understand that late payments can cause real problems for their supply base (which I guess we might have expected). Yet a surprising amount acknowledge that they are guilty of paying late themselves!

I suppose that could be “I know it’s not right, but we’re in cash flow difficulties so I have to pass on my problems”. Or it might be “I know it’s wrong but my systems and processes  are so rubbish I can’t do anything about it!”.

Personal experience of ten years on the supply side suggests that late payment is  - 9 times out of 10 -  the result of incompetence rather than strategy, so perhaps the second theory is more accurate.

The conclusion Basware draw from all of this is that use of networks and  technology needs to be combined with strong buyer / seller relationships. Esa Tihilä, their CEO, says:

 “Supply chains have become a complex web of commercial interactions and each organization that is part of the network has a role to play in minimizing commercial risk. Finance executives are aware that late or erroneous payments will create problems for their suppliers, yet late payments still exist. Businesses are recognizing buyers as ‘equals’ but the quality of this relationship is held back by a concern for the commercial risk on their own organization. To navigate the complexity of these supply chain networks successfully, buyers and suppliers need to focus on building collaborative relationships and sharing information.”

It’s hard to disagree with that, but as always, the devil is in the detail and in the implementation. “Building collaborative relationships” (with strategic suppliers at least) has been a  goal of procurement for many, many years – yet how many have actually achieved that with any degree of real success?

That’s for another day perhaps, but do take a look at the report here.

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