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E-Procurement Simplifies the P2P Process, but What About the Vendors?

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Companies around the world are implementing e-procurement software to simplify the procure-to-pay (P2P) process, ultimately changing the way companies purchase, sell and transact with one another. A critical component in the successful implementation and adoption of e-procurement technology for a buying organization falls to the role of their suppliers. According to the Supplier Network 2012 study by Aberdeen group, the top pressure for buying organizations is to enable more B2B e-commerce with their suppliers and this still holds true.

However, engaging suppliers to participate has proven to be challenging for many reasons. In the same study by the Aberdeen Group, 32% of buyers surveyed didn’t know what barriers their suppliers face when it comes to adopting supplier networks.

PunchOut2Go surveyed 800 buying organizations in July 2017 to gather information and uncover any new trends around supplier adoption. The results of the survey yielded that supplier adoption continues to be an obstacle for the majority of buying organizations even several years later. The results of the Supplier Adoption Survey 2017 by PunchOut2Go found that:

  • 62% of buying organizations encounter suppliers reluctant to adopt and sell through their marketplace.
  • 70% of buying organizations encounter suppliers that have issues supporting electronic purchase order and invoicing.
  • 52% of buying organizations encounter suppliers that have issues integrating catalogs to their marketplace.
  • The average percentage of suppliers integrated within a buying organization’s marketplace is only 15%.

So, why are suppliers reluctant to engage? Here are some of the barriers that your suppliers are facing.

  1. Lack of knowledge and skill. There is a wealth of information on the e-procurement market from a buy-side perspective but for the supplier-side, there is very little information available. Except for the large enterprise suppliers that have been selling through eProcurement for years, most suppliers are at the elementary stage of understanding this channel and typically take a reactive approach to e-procurement rather than viewing it as a strategic business initiative. There is no e-procurement 101 crash course for suppliers and typically the first time they hear about e-procurement is when responding to an RFP or contract bid. Internal IT departments are typically not skilled in B2B e-procurement integrations nor understand how to develop punchout catalogs and B2B order automation capabilities from within their existing e-commerce infrastructure — that is, if they are a large enough supplier to have an e-commerce application already in place. Suppliers are left to educate themselves and others within their business on the customer need, market, procurement process, benefits and potential risks.
  2. Technology Requirements. What is cXML or OCI? Is that the same as EDI? What is a punchout catalog? What are UNSPSC codes? Can our order management system accept electronic purchase orders and send out advanced ship notices and invoices? These are just a few questions that suppliers are trying to figure out along with how the technology works, how to provide technology to display the correct product offering and pricing to each buyer and IF their current infrastructure can support what is needed. In addition, suppliers must determine the best path forward in supporting the technology. Do they manage the technology in-house or partner with a third-party e-procurement integrations provider such as PunchOut2Go? In each case, a thorough assessment needs to be completed to determine the proper technology needed and the best ongoing support structure.
  3. Building the business case for ROI. Suppliers are pressured by their buyers to make an investment and business decision to offer the technology needed to do business through the e-procurement channel or risk losing the current business or miss the opportunity to win additional sales opportunities. From a supplier’s perspective, it is challenging to develop a business case and return on investment justification for integrating with their buyers’ procurement systems. There are no benchmarks studies today that provide information to suppliers such as an average increase in sales from other suppliers that have been successful within this channel. Suppliers are trying to determine if their sales will increase as a result of time and resources spent integrating an electronic catalog and if operating costs will decrease by automating purchase orders and invoices. In addition, it is also difficult for suppliers to determine if other customers are using e-procurement systems and if there is potential to integrate those customers. It is helpful if the supplier has multiple requests from multiple customers to integrate to justify the level of investment and identify the upside potential.
  4. Multiple e-procurement networks with unstandardized usages of standard protocols. Large enterprise suppliers have hundreds of customers utilizing an array of different procurement spend management systems such as SAP Ariba, Coupa, Oracle, Jaggaer (formerly SciQuest), Workplace Paramount, PeopleSoft, Zycus and Vroozi. Each e-procurement system has its own protocols for data interchange and specifications for e-catalog formats. Even buyers utilizing the same e-procurement provider, there are variations in the requirements and data interchange on each platform. Due to the lack of standards for electronic catalogs, suppliers will always be challenged with learning the various e-procurement systems, new protocols and finding the right e-business solution that is scalable.
  5. Implementation Costs and Supplier Fees. With the various e-procurement providers in the market today comes various business models that suppliers need to understand. For example, some providers charge the supplier a transaction fee based on the amount of business conducted over their network, which is a built-in barrier for supplier adoption. There are other e-procurement models that charge the buyer a licensing fee for each supplier integrated with their network. While these providers claim they have no supplier fees, the buying organization might pass along the licensing fees to their suppliers as an “enablement” fee of becoming a “preferred” supplier, adding incremental costs of doing business for the supplier. Many new e-procurement providers have come to market over the last several years that do not have supplier fees (because they know it inhibits adoption) causing others within the market to rethink and adjust their business model.

Suppliers must determine if the cost of the implementation and associated “supplier fees” are worth the cost of doing business on a per customer basis.

In an effort to alleviate supplier adoption barriers, many buying organizations, suppliers and eProcurement providers are teaming up with third-party managed service providers focused on B2B eProcurement integrations to help reduce the complexity of system integrations, provide solutions to fill the technology gap requirements and accelerate onboarding time.

Recently, a healthcare company instituted a new e-procurement platform and teamed up with third-party managed service provider PunchOut2Go, whose focus is bridging the vendor gaps to help onboard and transition initially high volume suppliers for everything from punchout to orders, ship notices, invoicing and beyond. The e-procurement system natively supported a standard of cXML. The vendors supported different standards of cXML, EDI predominantly and other means. PunchOut2Go, as an integration layer, was able to help the health care company’s vendors leverage the vendors existing individual capabilities, harmonizing data end points as a service and thus turned vendor integrations into more of business conversations rather than technical.

In order for buying organizations to successfully leverage their e-procurement software to simplify the P2P process and receive a return on investment, it is critical to understand barriers that suppliers are facing, help suppliers see the value in this new sales channel and when challenges arise, provide education on third-party managed services providers available within the space that will accelerate onboarding time, allowing buying organizations to drive more spend through their procurement system and suppliers opening up new opportunities, adding to their capabilities arsenal of doing business efficiently.

Kari Cress is vice president, marketing, at PunchOut2Go.

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Voices (5)

  1. Gary Hare:

    Regardless of their limitations, cXML and OCI have become the standard, at least for Indirect e-procurement, so that’s what we have to work with. As far as taking adoption to the next level, I’ll refer back to my original comment – the cloud-based platforms of leading B2B connectivity providers (aka punchout providers) have made cXML and OCI easier to implement, extend and customize, allowing users to overcome many of the limitations of both, including the marketplace example provided by Robert. Again, its not buy-side eprocurement providers (Coupa, SAP Ariba, etc.) who have these capabilities (they focus on providing connectivity to their network); nor the consultants who resell their solutions, where is many seem to look for a solution, but the punchout providers (Vurbis, Punchout2Go and EqualevelGo in the public sector) to name three. As soon as this sector gets more recognition (and the market leaders get funded), things will improve quickly for suppliers looking for cost – effective punchout and e-invoicing solutions.

  2. Gary Hare:

    Recent advances in cloud technologies (micro-services, containers, REST, etc.) have made past B2B connectivity challenges like implementing punchout and invoice automation straight forward, secure and most importantly, affordable, to any supplier. Couple this with the many, many B2B eCommerce platform options available today (Magento, Shopify, etc.), there is no reason suppliers shouldn’t be able to meet their customer’s B2B requirements (and improve their own profitability.) Its a matter of educating the market.

  3. Derek Lancaster:

    In my view, a common standard is vital and perhaps only governments can implement it – – currently, it’s like offering drivers a choice of driving on the left or the right within the same country, and some manufacturers putting the accelerator on the left and the brake on the right.
    When MIDI came to electronic audio, it helped feed massive growth and innovation for suppliers of kit. We need the same in P2P.
    Mad!

    1. Robert Calert:

      CXML

      1. Robert Weitmann:

        Unfortunately also cXML has its limitations. Especially when connecting to an e-Marketplace or Catalogue-hoster with multiple vendors.
        I would say an OCI but it will probably move to API in the near future, enabling the customer to verify prices and availability right before creating the PR/PO.

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