Supplier Onboarding – It’s all about the Front, Middle and Back office Part II

In this short series, TFM continues to look at the onboarding process with a look at the Front Office.

Selling money can be hard work. Early pay techniques selling money attached to some eProcurement or eInvoicing or Network platform have proliferated but cannot operate a build it and they will come mentality. In particular what the market likes to call Reverse Factoring or Supply Chain Finance, which sells Libor plus based finance, is no slam dunk. I had one Vice President in charge of , Working Capital Finance at a large conglomerate tell me.

From my perspective what it takes to be successful, the amount of follow up, amount of time with individual suppliers is more than I thought or planned. And maybe taking a look at Supplier Universe like ours, we should be excited to see x percent of top tier in spend, but we are not finding the Big Fish will jump into the water. Certain suppliers on par with us as far as their borrowing capabilities and risk profile. We have to do five times the work to get the volume of Big Fish.

As I mentioned in the prior post, I see onboarding divided into three main functions: Front, Middle and Back Office. Today, let’s focus on two key Front Office activities- Supplier Education & Awareness and Supplier Deal Negotiation. Both can involve a significant commitment.

Supplier Education-  What is the best way to reach your supplier base – webinars, one on one calls, visits, thought leadership pieces, etc? Webinars may not reach the right level of the supplier / vendor to make a decision, but it does have the capacity to have some bi-directional exchange and reach many at one time. One on one calling is expensive but provides a great way to address questions and concerns. If we are talking suppliers which the buyer spends millions with, nothing beats a visit.

Of course all of this is dependent on who is taking the lead – is it the Buyer’s procurement department or is the vendor / bank? Bear in mind Procurement owns the relationships but may not want to put in the resources necessary to have the highest sign up rate. After all, is there really a direct benefit to them? Maybe it’s Treasury that accrues the benefit and they get the soft benefit of helping smaller suppliers. That’s pretty soft and in today’s brutal world, may not cut a big dedication of resources.

Deal Negotiation – Early pay options really boils down to selling money for a price. Sometimes that price is fixed and it’s take it or leave it, and sometimes it can be negotiated. Who will do that? In addition, suppliers may have issues related to their other forms of finance. For example, their receivables for this respective Buyer could be pledged to secure loans, securitization programs or commercial paper programs. Or suppliers are in factoring or bank agreements in which they cannot exit or do not desire to exit.

Having suppliers get bank releases can open a whole pandora’s box with their banker to trigger a review. And that may not be something they are keen on.

So you see, the front office is critical. In the past, I have looked at the commitment of various organizations to monitor their sales force effectiveness here. When benchmarking effectiveness, take at look at metrics such as:

  • Targets and sales call benchmarks
  • Detailed sales budgets and breakdowns by items and per-rep investments
  • Compensation data by position and performance level
  • Training costs and hours for different positions
  • Sales force headcounts and staffing ratios

Tomorrow we will explore the Middle and Back office activities related to onboarding.

In addition to Spend Matters PRO research, David can provide onboarding benchmarking and diagnostic work to help organizations understand the resource requirements to onboard and to improve their onboarding infrastructure to make it more effective and more efficient. Contact him directly to learn more: dgustin (at) tradefinancingmatters (dot) com


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