It Takes Two to Tango – How Supplier Satisfaction Impacts Your Profitability

 

Sub Optimal Selection Process

Larger companies that face procurement inefficiencies, such as the abundance of data errors, lack of supplier compliance, fraud, or slow invoice processing, often look for automation solutions, of which there are many in the market. 

The decision-making process around which solution to implement is not unlike that, which might take place in other areas of the organization – perform some research, perhaps consult with a trusted source, select the best-known names, and conduct some discovery calls.  In the end, organizations are made of people, and people minimize risk by going with what is familiar.

But does this approach always lead to optimal results?  Companies often end up going through a lengthy and expensive implementation process and significant organizational change, only to find several months later that their decision did not yield the desired results, at best.

When it comes to Source-to-Pay (S2P) automation, most solutions do not deliver a reasonable ROI because they are too expensive to implement, and in the end, do not enlist participation of most suppliers.

It Takes Two to Tango

For an S2P automation solution to be effective, it must involve the participation of most of the company's suppliers – not the current industry range of 5%-30%, which is negligible.

To achieve close to 100% supplier participation rate, an automation solution must focus on the needs of suppliers at least as much as it does on the buyer.  It must provide them with process transparency; automated, real time, and intuitive guidance; immediate error or discrepancy identification; discrepancy resolution support; and much more – ultimately, saving them time and effort, and enabling them to get paid faster.

As with any software solution, the time, effort, and cost of implementation should be kept to a minimum so that suppliers can continue focusing on their business, and not on the implementation of new systems – particularly if each customer requires the use of a different one.  They are far more likely to comply if they can continue working in familiar environments with minimal or no additional financial investment.

If suppliers participate – buyers benefit. 

A New Approach is Needed

Let's go back to that selection process.  You've gone the safe route and have chosen a leading brand, but frankly all the vendors you considered sounded the same.  After spending anywhere between four and twenty-four months to implement the new solution, including countless manhours and hundreds of thousands of dollars – your AP team seems to face the same problems, and your company's profitability does not improve.

A new approach is needed, which focuses on both sides of the story – buyers and suppliers.  One that is simpler, faster, and more cost-effective to implement, which enables participants to maintain existing systems and processes and that is intuitive to use.  A system that automates a full range of activities by looking at the entire process, and not at its individual components.  In the end – a system that makes it easier to do business, that speeds up processes, improves supply chain and contributes to competitiveness.

Such a solution exists.

Ilan Friedman, August 15, 2022