Connecting with suppliers and maximizing the benefits of having more spend under active management (Part 1 of 3)

September 11, 2013 Jay Keough

Why many Oil and Gas companies struggle to connect with their suppliers and the implications for managing spend.You're not alone.

Industry trend analysts have documented a prevalent trend in Oil and Gas – they are leveraging their profits oil-and-gasto invest in projects that boost operational efficiency – using today’s profits to strengthen foundations for the future. The uptick in interest in supplier self-service and dynamic discounting (putting cash into more profitable investments such as funding early payment discounts on approved invoices from your suppliers) we have seen the past several years mirrors this trend, and we believe that investing profits to ensure you remain lean and prepared for the long haul is an excellent use of resources.

One of the benefits of interacting with a variety of oil and gas companies is that we get a glimpse into the various challenges companies face with supplier self-service portal projects. For example, while there is keen interest, most companies have not invested heavily in supplier portals and those that have invested have not been able to achieve critical mass in terms of adoption for their on-premise or SaaS portal projects. The highest portal adoption rates we have seen for on-premise solutions land somewhere between 10-15% of the supply base. While our experience is anecdotal, it mirrors related analyst metrics that suggest spend on discounts or actively managed spend averages about 12%. In most cases, these connections are only with the largest suppliers, leaving the rest of the base out of the actively managed loop. So why does connecting with the broader base of suppliers continue to be a challenge?

As part of our standard analysis and project delivery approach, we have the opportunity to review the vendor master database, spend characteristics, buyer policies and infrastructure (including existing supplier portals) across a wide number of organizations and we have noticed common issues with regard to connecting with and retaining suppliers. Some of the most significant include:

  • The vendor master database is missing contact information, in particular e-mail addresses, for a large portion of suppliers.
  • Past EDI and other e-Invoicing initiatives have had very limited success primarily due to buyer and supplier technical restrictions, internal resource constraints and limited electronic connection options for sending and receiving transactions such as POs and invoices. A single e-Invoicing approach does not work for all when it comes to large, medium and small suppliers.
  • The existing portal does not deliver enough value/benefits to supplier to encourage portal adoption. For example, the portal may only provide transaction visibility and perhaps limits visibility to only those transactions that came through the supplier portal. Portals limited in functionality hinder supplier adoption.
  • Poorly designed user interfaces. B2C like interfaces are essential if you want suppliers to embrace the work environment.
  • Clumsy and burdensome onboarding process and underfunded onboarding programs (lack of internal resources for campaigns). Also the lack of a sustainable process for collecting contact information and driving new suppliers to the portal on an ongoing basis after go live.
  • No or poor internal change management, communication and training (applies to buyer and supplier staff) for the portal, its use, benefits and expectations for suppliers.
  • Policies, standards and expectations for portal usage are not established in writing, communicated to suppliers and internal employees or enforced.
  • Setup and Transaction Fees - Most suppliers will not adopt portals with setup and transaction fees. When suppliers become a sales target for new revenue (a common vendor practice for portal and e-Invoicing transactions) rather than a stakeholder, adoption suffers.
  • Lost discounts due to inefficient invoice submission methods.

Stay tuned for Part 2 coming out next week.

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