In my conversations with mid-market companies looking to implement supply chain improvements, supplier adoption routinely ranks near the top of concerns. It only makes sense. A good portion of the value provided by automating procurement and payables processes comes from the labor and cost savings generated from fewer errors and less manual work. A large amount of focus for these systems has been on return on investment (ROI) calculations. Most times the calculations are based on existing transaction volumes, or, in some cases, projected increases in transactional volumes based on the the premise that an automated system can process and move data faster than a manual one. If it is to deliver on that promise, however, the supply base has to get on board. The procurement portal has to have enough transactional volume running thru it. And that means supplier adoption is key.
If you’re the size of the world’s largest retailer or electronic device maker, or even the government, supplier adoption can be an easier equation to solve. For companies of this size and influence, supplier adoption of the procurement portal simply becomes a criteria for inclusion in the company’s approved vendor list (AVL). But for the rest of us, it’s not as simple. We aren’t in a position to mandate supplier adoption. Often times we have to also incentivize and encourage suppliers with more balanced benefits…benefits of time and cost savings that they too can enjoy. There are some options for integration with top tier suppliers via electronic data integration (EDI), but that remains one of the more expensive solutions and also does not offer some of the dashboard management and notification benefits of today’s emerging solutions. Capturing the value of today’s procurement portals requires that a broad base of your suppliers adopt and use the system to drive a healthy level of transaction volume.
So what can the remainder of companies, and especially those in the mid-market, do to increase supplier adoption of a new portal or supply chain improvements?
Four Steps to Increase Supplier Adoption
Step 1: Talk to your own company’s sales staff.
If you want to understand what will make sales people want to use a new tool (i.e., the staff you most often interact with at your suppliers), start with your own sales staff. Learn about what goes well and what doesn’t go as well for them. Ask them to share the frustrations and roadblocks they have with your company’s customers. Find out what makes some of your customers easy to do business with (and ultimately more profitable) and others…not so much.
Here are a few questions to ask:
- How much manual work do they routinely do?
- How many different customer order portals do they have to log into?
- How much double data entry is required (i.e., acknowledge the order in the customer’s system and then enter it into your company’s ERP)?
- How many different ways do orders arrive (i.e., email, phone, fax, portal)?
- How difficult is it to keep up with change orders?
- How much time is spent fixing errors before and after shipment
- How often are orders late or how often are they prevented from committing to an order because of inventory issues?
- How much time is spent answering questions from accounts receivable to fix issues with invoices?
Step 2: Ask your suppliers.
Once you have a good general understanding of the daily frustrations of a sales person, you can focus on your supply base. Begin by identifying what would motivate them to use a portal. Part of this requires taking the edge off the relationship – in other words, as much as practicable, make it a bit more like a mutually accountable partnership than a traditional customer/vendor relationship. You may pick up on this from your conversations with your own sales staff. There are big picture value items to explore, such as increased visibility and accelerated invoice payment, however there are also smaller, every day task-related features that can go a long way in getting them on board with your improvements.
Here is a mixture of big and small picture features that could help you more quickly understand their value map:
- Integration between the portal and their own back office system: this allows sales orders to be auto created/updated in their system once the purchase order is acknowledged in your system.
- Control over when the sales order is created/updated: this allows them to select when their sales order is created, booked and updated rather than waiting until their acknowledgement is reviewed and approved in your system.
- Mobile device access: this allows them to review, acknowledge and update orders regardless of location.
- Complete, real-time order visibility: this links all activities related to an order (order, shipping/fulfillment, invoicing) together into a complete package with continuously updated information.
- Integrated shipping with transportation/logistics systems: this allows more seamless order fulfillment with detailed tracking information to avoid orphaned shipments.
- Automated invoicing: this auto creates an invoice based on an event, such as outbound shipping or your goods receipt notice (GRN).
- Ability to manage their own users and notification groups.
Step 3: Identify common areas where you can adjust business practices for suppliers willing to use the portal.
This increases the perceived value and encourages higher rates of adoption. This strategy can encompass a variety of options, but here are a couple to consider (feel free to contact us directly for more ideas):
Adjust payment terms/allow billing based on an earlier event (billing sooner): Sometimes a few days can make a big difference to a supplier.
Offer a quarterly rebate for 100% of transactions running through the portal.
Step 4: Offer a portal solution that delivers additional benefits to suppliers for their own operations.
If you are asking suppliers to use a new tool, it’s important that it deliver value beyond retrieving and acknowledging orders. Chances are they have other customers, likely some larger and more influential, that are also asking them to use a portal system. Yours will need to be very user friendly as well as deliver added benefits.
Fortunately, there are a variety of solutions available that now make it possible for a buyer organization and a supplier organization to both be directly linked into a procurement portal, so both can benefit from automation. Some of these systems are more supplier-friendly than others. The more the solution can help suppliers the more likely they are to ‘want’ to use it. Here are a few areas to focus on:
- Saved time in sales order entry and order management.
- Faster notification and greater visibility to changes in orders.
- Feedback on performance and quality through report dashboards.
- Faster ways to get paid.
Supplier adoption is a critical component to the success of any improvements in the procure to pay process. Fortunately, solutions are now becoming more supplier-value focused so all parties can reap the benefits of automation and process enhancements. By investing some time in understanding the value map of your supply base you can ensure the highest level of adoption possible for your portal or other automation/collaboration system.
If you’re interested in learning more, please feel free to contact us.