Better late, than never – As part of our Technology Adoption series which ran this past summer and fall, we thought it would be helpful to capture and share the perspectives from a few industry leaders who face the challenge of technology adoption on a daily basis. Today we are pleased to share this contribution from Hubwoo and their Vice President of Market Strategy, Andrew Goldberg.

The 3 Secrets to Supply Management Technology Adoption (Part 1)

The road map to technology adoption and automation can be a challenging one with obstacles along the way. However, it is has certainly been proven by numerous procurement organizations that procure-to-pay (P2P) technology and process automation such as eProcurement, Supplier Networks, Catalog Management (Procurement Content), etc. can have significant impacts on KPIs such as realized spend reduction, spend under management, contract compliance, and purchasing efficiency. But why have so many companies either not pursued these supply management technology solutions, or implemented and failed to successfully adopt them within their companies?

Based on experiences with many procurement leaders, the answer to this question falls into three categories of challenges: 1) inability to integrate well with existing ERP and procurement systems, 2) challenges in on-boarding a significant number of suppliers, and 3) shortfalls surrounding end-user ease of use and internal policy follow-through for end-users. Without addressing these three categories, the route toward technology adoption to support ongoing cost savings and spend management initiatives may be a long and windy one. The following discussion includes examples of how leading companies have addressed these typical hurdles (Note: The third challenge will be discussed next time).

1. Inability to integrate well with existing ERP and procurement systems

The goal of “seamless” and “transparent” supply management integration with back-end ERP systems such as SAP ECC, and eProcurement applications such as SAP SRM is vitally important to most companies — but we all know that integrations have their challenges. These may include multiple ERP instances across company locations, maintaining application integration throughout ongoing ERP software updates/upgrades, and various P2P applications with different standards and protocols. And, up-front P2P application customizations lead to more customizations in the future, and increase the challenges associated with ERP integrations.

To minimize some of  these hassles, companies that have successfully implemented P2P solutions have found that SaaS (cloud-based) multi-tenant solutions often allow companies to drastically reduce the time and effort (i.e., time to value) associated with on-premise installations. Because these on-demand solutions are hosted and maintained as a service, the costs associated with software upgrades down the road are drastically reduced, if not eliminated. However, because not all SaaS solutions address the ERP integration demands, it is important to consider solutions that have standardized integration adapters supported by the ERP vendor, allowing for efficient integration projects. Down the road, these connectors are certified to work as the ERP systems are upgraded/updated.

In addition, P2P solutions have the ability to lighten the manual effort demands of keeping supplier related item master and catalog information current. This is possible through a supplier driven and centralized catalog approach — managing indirect spend catalogs outside of ERP, Plant Maintenance (PM), Materials Management (MM) systems, and then integrating with these systems to allow for real-time synchronization.

 2. Ability to on-board and support suppliers (in large numbers!)

Integration with back-end systems is critical, but without connecting with the majority of your preferred suppliers, you are missing a vital link in the process automation chain. Many organizations make the effort to integrate a few of their largest suppliers through point-to-point technologies (EDI, etc.). Given the time, resources, and complexities with these types of integrations, connecting with all or the majority of your indirect spend suppliers seems absurd, and an effort not worthy of meeting ROI thresholds. But, without electronic connections with your supply base, the vision of getting the majority of spend under management becomes unattainable.

Solutions that allow you to on-board all of your suppliers in mass deployment fashion take you to a new level of supplier enablement. This can be achieved by leveraging a supplier network – a centralized “hub” to connect buyers and suppliers, whereby supplier connections can be made through integrations or via web portals, all connecting through the hub. Supplier network providers can take over the burden of determining which of your suppliers should be enabled via web portal versus direct integration. Then, mass on-boarding can happen in months, not years.

Take, for example, Shell, a global leader in the oil and gas industry. They had relatively few indirect spend suppliers electronically enabled. By working with Hubwoo, they were able to gain assistance in mass enabling over 2,000 suppliers to drive over $2B of spend through Hubwoo’s supplier network.

The on-boarding of suppliers does not bring finality to this important activity. Suppliers require ongoing support and assistance as they transact with buying companies. Many P2P technology providers have the experts on staff to support supplier on-boarding and ongoing supplier support 24×7, with support of over a dozen languages. The do-it yourself costs that would be associated with this support infrastructure are an inhibitor for most companies to enable the long tail of a global supply base.

These electronic connections also provide suppliers with tangible benefits, such as more automated and better linked check points in the transaction process (such as PO to purchase order receipt, advanced ship notice to goods receipt, etc.), less manual errors, and in turn, less disputes, earlier payments, and enhanced buyer collaboration that supports effective inventory management and order responsiveness. CONSOL Energy, a leading diversified fuel producer in the Eastern US with annual revenues of $5.2B, leveraged a supplier network solution to enable electronic order to invoice processing. They implemented electronic catalogs integrated with their on-premise SAP SRM module. Among the many quantifiable results reported, they were able to drastically reduce manual processing, decrease blocked invoices from 60% to 3%, and in turn, pay suppliers earlier and take advantage of early payment discounts. By the end of 2011, CONSOL had realized $44M in savings as a result of the project.

Hubwoo is the world’s leading provider of Cloud Procurement solutions powered by SAP® software.

Tagged in: Adoption, eProcurement, Guest Contributor, Networks, Outside Experts, P2P, Solution Providers, Suppliers, Technology