PROCUREMENT OPTIMIZATION BLOG

One of the key success factors when implementing a new Procure to Pay (P2P) transformation is the imperative to connect electronically with suppliers. When working with suppliers to enable them to transact via a P2P system, there are a wide variety of channels to do so.

At one end of the spectrum is the use of email for Purchase Orders (POs) and Invoices. This is easy to set up and requires next to no maintenance. Then there are supplier networks where suppliers and buyers can exchange documents over networks maintained by third parties. There are a wide variety of platforms, some are cost free and others charge a fee per transaction. Generally, customers and suppliers are not responsible for the network. For deep integration, customers and suppliers use cXML, xml and EDI integrations. However, these channels require more resources for up-front configuration and on-going maintenance.

In practice, identifying suppliers and choosing the appropriate channel to enable each is a primary requirement for P2P transformation supplier success.

At Shelby, we have found that the 3 commonalities of successful Supplier Enablement efforts are:

1. Preparation
2. Firm Requirements
3. Cooperation

Preparation

Successful Supplier Enablement answers these two key questions early in the project lifecycle:

1. Which suppliers should we enable for the best results?
2. How should we segment suppliers into waves or groups for implementation?

Identifying suppliers for enablement is deceptively challenging. Successful Supplier Enablement programs identify suppliers with a combination of spend analysis and stakeholder interviews. Though each approach can arrive at different target populations, they both have their own advantages. Stakeholder interviews provide a reality check on data-based conclusions and the comprehensive nature of spend analysis can validate stakeholder assumptions.

For example, with one of our clients, the spend analysis suggested an overly ambitious program of enabling several suppliers for cXML – which generally requires a high resource commitment. When the client’s stakeholder provided input, an alternative list of suppliers was constructed based on new partnerships that had not been reflected in the historical spend data. The combined approach ensured that supplier populations selected for enablement were aligned with the future organizational strategy.

Once suppliers are identified, segmenting them paves the way for designing targeted communications and forecasting resources.

As discussed in an earlier blog post by Laura Mahoney (see Supplier Enablement: A Strategic Roadmap for Success), segmenting suppliers and enabling segments in waves allows the Supplier Enablement team to tailor the enablement approach to each supplier segment. Typically, strategic vendors are enabled first, followed by larger transaction volume suppliers and then low volume suppliers.

The benefits of preparation, enjoyed by our clients, are economies of scale. Investing time and effort to identify and segment suppliers enables communication and training templates to be leveraged for segments with similar populations.

Firm Requirements

Most suppliers want to comply and work with you to achieve your organization’s goals. Without firm requirements, suppliers frequently follow the path of least resistance.

The simple matter is that when Supplier Enablement compliance is mandatory, enablement rates increase by factors of 10 compared to those that are optional. The difference between encouraging and requiring your suppliers to comply is dramatic.

To succeed, mandatory Supplier Enablement must be communicated early on to:

1. Cover enablement options available for suppliers
2. Present a timeline
3. Set clear expectations

Suppliers should be reminded of these mandates several times throughout the project window. Solicit feedback to identify suppliers that may have difficulty complying with the change and challenge them to find solutions.

Cooperation

No sole enablement method works for all suppliers. Design your strategy to reflect the differences among your suppliers. When they provide goods and services available from a wide range of sources and the substitution is easy, demand the best method for your organization. Be more flexible with strategic suppliers and work together to identify the best channel for enablement.

For example, the major punch-out vendors – CDW, Staples, Insight, SHI and Amazon are great candidates for cXML integration, whereas regional firms may be more inclined to supplier networks or exchanging PO’s and Invoices by email. Single option approaches work best for suppliers that are easily replaced and for others, alternative solutions may be needed. Fortunately, in between, is a wide range of options. Cooperation will yield the best results for your Supplier Enablement efforts, so be certain to also cooperate with your suppliers.

Investing the time and effort judiciously will maximize enablement rates. Factor in the relative power of suppliers into your enablement strategy – apply the carrot where effective and strategically use the stick on suppliers where alternatives exist. Selecting the best channel for both parties will minimize the impact of incompatibilities and increase Supplier Enablement rates.

To meet this challenge for Managed Supplier Enablement services, companies often rely on their P2P providers and partners to bring the needed expertise and resources on a just-in-time, on-demand approach. This optimizes the buying organization’s total cost of P2P ownership and increases its success.

If you would like to know more about how Shelby has helped organizations enhance business value with its Strategic Supplier Enablement expertise, contact info@theshelbygroup.com.

Phil Zaczek
Senior Consultant
The Shelby Group
pzaczek@theshelbygroup.com