Here Kevin Wilbur, Senior Vice President of AP Automation at Tungsten discusses with Finance Monthly the practicalities of implementing new technologies in supply chains.
Trust in business is more vital than ever today. At a very basic level, it underpins what is required to agree employment contracts, retain customers and grow a business. However, when it comes to monetary transactions for the exchange of goods and services, trust is even more crucial.
Unfortunately, even when payment terms have been set and assets exchanged, trust can often be undermined. A delayed payment from a buyer is something many suppliers will have experienced, resulting in unnecessary stress and a loss of confidence in the trading relationship. Equally, supplier challenges, where data security is compromised or orders are not fulfilled, can cause headaches for buyers.
Certain sectors face greater supplier risk than others, making it even more important to ensure they have a robust supply chain. Finance businesses in particular hold a vast amount of sensitive data, so the ramifications of poor supplier service can be significant.
Widespread supply chain failures
Worryingly, our research shows that 84% of businesses have suffered from supply chain failures such as these. The biggest supplier risks were found to be security (ensuring data security and privacy standards) and information risk (accuracy, timeliness, and security of information exchanged with suppliers).
These risks or failures can have a huge financial impact, with 30% of firms reporting a loss in revenue or business partners. In addition, 22% of buyers said they faced higher insurance premiums, damaged reputation, a loss of customer trust, and/or significant legal and regulatory fines as a consequence of supply chain failures.
Many of these breakdowns in the supply chain arise from poor supplier management processes. Regrettably suppliers are often managed on an ad hoc basis with no consistency and very little attempt made to track and monitor spend. In many supply chains the sheer volume of suppliers involved means that it can be hard to stay on top of each relationship, and with the added pressures of cyber fraud, siloed customer data, insufficient cash for investment, and legacy technology systems, there are often layers of overlapping bureaucracy and confusion.
Managing and monitoring
To manage suppliers effectively and efficiently, supplier-related processes should be measured. From there buyers are able to optimise processes, which in turn enables automation. However, only 23% of buyers in our study achieved this level of maturity, and just 12% had optimised processes.
Buyers who describe themselves as having good supplier relationships have taken the time to map supplier activity, to establish a clear onboarding process, and to define a strategy that not only makes supplier management a priority, but also establishes responsibility between themselves and the suppliers they work with. Optimised firms ensure compliance with regulations and corporate social responsibility (CSR) standards by constantly monitoring their suppliers.
Low process maturity, revealed in more than a third of businesses (35%), can lead to poor sourcing decisions, because buyers lack high-quality, up-to-date information about suppliers’ past performance when awarding new contracts.
Technology that transforms
The research, which was conducted by Forrester Consulting on behalf of Tungsten Network, concludes that for businesses to thrive, they need to be properly managed using modern tools and processes that establish accountability, reduce uncertainty, and foster trust. This in turn enables the exploration of mutual growth opportunities for both buyers and suppliers.
Increasingly sophisticated technology exists that can genuinely strengthen supply chain relationships. For example, through a secure e-invoicing platform such as Tungsten Network, buyers and suppliers can have clear visibility on whether an invoice has been received and approved, and when payment is due. This means businesses have a single source of truth for invoice status information, which is monitored in real time. It can also help remove manual processes around invoice validation and compliance. This is a good example of where technology is enabling growth across the board, through developing trust in business relationships.
Often networks such as this provide value-added services that can serve as a source of competitive advantage. For example, through analysis of the real-time data generated from end-to-end e-invoicing capabilities, decision makers can more effectively predict demand and manage disruptions. Buyers and suppliers of all sizes can also find each other more easily and can build capabilities that benefit them both. They can also experiment with managing cash in new ways, such as by negotiating more flexible payment options like dynamic discounting and invoice financing.
The winners in the digital age will be the companies that best use technology to win, serve, and retain customers, and to enhance relationships throughout the supply chain. Technology can enable buyers and suppliers to more effectively use their data and manage their interactions, removing friction from the supply chain and strengthening trust, to the mutual benefit of all.