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May 16

Unleashing the Power of AP Automation: A Strategic Move Towards Efficiency and Profitability

By Procurement No Comments

In an era where digital transformation drives sustainable business growth, one area that remains ripe for disruption is Accounts Payable (AP). AP automation is no longer just an option – it’s a business necessity that yields considerable strategic advantages, particularly for mid-market companies. This post aims to provide an in-depth understanding of the myriad benefits of AP automation to executives committed to fostering operational excellence, reducing costs, and enhancing cash flow management.

 

The AP Challenge: A Time and Resource Intensive Process

AP processes often contain manual data entry, paper invoices, and lengthy approval cycles. These processes are time-consuming and prone to human error, resulting in late payments, missed discounts, and increased operational costs. The lack of real-time visibility into AP data often leads to suboptimal decision-making, hampering growth and profitability.

The AP Automation Advantage: Transforming the AP Landscape

AP automation technology disrupts this status quo, offering a more innovative, efficient, and cost-effective way to manage AP processes.

Let’s delve into the specific benefits:

  • Time Savings: AP automation drastically reduces the time to process an invoice, leading to faster approvals and payments. This increased efficiency frees up valuable staff time that can be better utilized for strategic tasks, such as analyzing spending data or improving supplier relationships.
  • Reduced Operational Costs: Automating AP processes reduces the need for manual intervention, thereby minimizing the scope for human errors and the costs associated with rectifying them. Moreover, it can also decrease storage and postage costs associated with paper invoices. Calculate your potential savings here using SAP’s Buying and Invoicing Value Calculator.
  • Enhanced Cash Flow Management: With real-time visibility into outstanding invoices and payment dates, AP automation allows companies to optimize their cash flow. Companies can take advantage of early payment discounts and avoid late payment penalties, thereby improving their bottom line.
  • Decreased Rogue Spend: AP automation controls maverick spending by enforcing corporate policies and approval workflows. It also improves spend visibility, enabling companies to identify and mitigate rogue expenditures more effectively.
  • Improved Supplier Relationships: Timely payments and transparent communication foster healthier supplier relationships. This enhances supply chain efficiency and opens up opportunities for negotiation and collaboration.

The Powerhouse Duo: SAP Ariba Buying and Invoicing and Premikati

While the benefits of AP automation are clear, the choice of software and its implementation process is crucial.

SAP Ariba Buying and Invoicing is a robust solution offering comprehensive AP automation capabilities. It streamlines end-to-end procure-to-pay processes, enhances visibility into company-wide spending, and drives compliance and control across the invoice management process.

Yet, the success of any AP automation initiative is about more than just the software. It’s about how effectively the software is implemented and integrated with your existing systems and processes. This is where Premikati offers rapid implementation and deployment services that ensure a smooth and efficient transition to automated AP processes.

Premikati’s expertise in SAP Ariba implementation reduces the time-to-value, allowing companies to experience the benefits of AP automation sooner rather than later. Their robust training and support ensure that your team is equipped to leverage the software’s full potential.

AP automation is a transformative strategy that can significantly improve your business’s operational efficiency, financial health, and competitive edge. With SAP Ariba Buying and Invoicing and Premikati’s deployment services, your business is well-positioned to navigate the AP automation journey successfully.

Connect with us today to talk to our team.

Mar 27

Best Practices to Master Buying and Invoicing

By Procurement No Comments

CFOs and CPOs face numerous challenges when managing to buy and invoicing processes within their organizations. Efficient financial management is crucial to maintain a healthy cash flow, reducing risk, and making data-driven decisions. In this blog post, we’ll explore the top ten pain points related to buying and invoicing from a financial perspective, along with best-in-class solutions and supporting statistics.

 

Manual Invoice Processing

One of the most time-consuming and error-prone aspects of financial management is manual invoice processing. Automating this process with AI-based tools can significantly reduce the time spent on processing invoices and improve accuracy. According to the Institute of Finance and Management (IOFM), organizations that have automated invoice processing report a 60-80% reduction in invoice processing time.

 

Inaccurate Financial Data and Reporting

Access to accurate, real-time financial data is essential for making informed decisions. Implementing real-time data analytics and reporting tools can help CFOs and CPOs to achieve greater insights and improve decision-making. Companies that use real-time analytics experience a 54% improvement in decision-making speed, according to the Aberdeen Group.

 

Fraud and Compliance Risks

Fraud and compliance risks can have severe financial and reputational consequences for organizations. Enhancing internal controls with fraud detection and compliance management systems can help mitigate these risks. The Association of Certified Fraud Examiners (ACFE) reports that companies with strong anti-fraud controls can reduce fraud losses by up to 50%.

 

Decentralized Procurement and Purchasing Processes

A decentralized procurement process can lead to inefficiencies, lack of visibility, and increased costs. Centralizing procurement with a comprehensive, cloud-based procurement platform can streamline operations and reduce expenses. The Hackett Group found that centralized procurement can reduce procurement costs by up to 20%.

 

Inefficient Vendor Management

Managing vendors effectively is crucial for maintaining strong relationships and ensuring optimal performance. Implementing a vendor management system with automated vendor onboarding and performance tracking can improve the efficiency of this process. Deloitte reports that companies with efficient vendor management experience 26% faster vendor onboarding times.

 

Lack of Spend Visibility

Gaining granular, real-time insights into spending is essential for cost control and strategic decision-making. Utilizing spend analytics tools can provide CFOs and CPOs with the visibility they need to make informed decisions. Gartner states that organizations that leverage spending analytics can achieve up to 15% cost savings.

 

High Invoice Error Rates

Invoice errors can lead to payment delays, strained relationships with suppliers, and increased costs. Adopting a smart invoicing system with built-in error detection and prevention can reduce invoice error rates significantly. Ardent Partners found that companies using smart invoicing systems can reduce invoice error rates by up to 37%.

 

Slow Approval Workflows

Lengthy approval workflows can delay payments and hinder cash flow management. Streamlining approval workflows with automated routing and escalation features can expedite the process. PayStream Advisors report that organizations that automate their approval workflows experience a 45% reduction in approval cycle times.

 

Difficulty Managing Cash Flow and Working Capital

Effective cash flow management and forecasting are vital for maintaining financial stability. Implementing cash flow management and forecasting tools with real-time visibility can improve accuracy and decision-making. PwC found that companies that use cash flow management tools can improve cash flow forecasting accuracy by up to 36%.

 

Ineffective Budgeting and Cost Control

Budgeting and cost control are integral to financial success. Adopting an integrated budget management system with real-time tracking and reporting can streamline these processes and provide better insights. The Financial Executives Research Foundation (FERF) reports that organizations that implement integrated budget management systems experience a 33% reduction in budgeting cycle times.

 

By addressing these pain points with best-in-class solutions, CFOs and CPOs can significantly improve their organizations’ financial performance, reduce risk, and enhance decision-making capabilities. These improvements will ultimately lead to a more efficient and effective buying and invoicing process, allowing organizations to thrive in a competitive business environment.

Contact us to learn more!

Feb 16

Five Ways to Ensure your Sourcing Strategy Never Disrupts the Supply Chain

By Blog No Comments

Because sourcing is at the heart of any procurement strategy, it is critical to the success of your supply chain.

Poor sourcing strategies have a negative impact on the supply chain such as  downtime, low inventory, and a lack of supply chain transparency.

Here are five things you can do to protect your supply chain from disruptions:

1. Assemble the Right Team

It goes without saying that your supply chain requires people to function. More importantly, it requires the right people.

Consider the following when assembling your sourcing team; such as the ability to quickly learn, analyze large amounts of data, build long-term relationships, communicate, and negotiate.

2. Provide the Right Tools

In today’s supply chain climate, your productivity depends on the tools you make available to your team and the tools and solutions they have at hand can make all the difference.

With emerging technologies across the globe, the supply chain has never had the potential to be more efficient. 

A great example of a sourcing solution is SAP Ariba’s Sourcing tool.

3. Have a Solid Sourcing Strategy

Your sourcing strategy is used to find the most effective, efficient, and reasonably priced solution to your supply chain needs.

So, how do you identify the right product or supplier?

Here are some tips:

  • Understand the market trends. 
  • Always pick quality and time over price. 
  • Build relationships with several vendors in the market. 
  • Have clear expectations or targets. 

4. Have Multiple Vendors for Each Product Supplied

Building long-term relationships with your vendors or suppliers is extremely beneficial to the supply chain. However, if the pandemic taught us anything, it’s the importance of having backup plans.

Supply chains are more flexible, visible, and resilient than ever before. Despite this, there is still an element of uncertainty surrounding supply chains.

To be better protected, it is critical to work with more than one supplier. A great place to start is the Ariba network where over you can connect with over 40 million suppliers and growing!

5. Constantly Review Suppliers

A supplier review provides insight into the supplier’s performance.

Constantly reviewing a supplier ensures that potential disruptors are identified as soon as possible; giving you the opportunity to prevent them from causing harm to the supply chain.

To get the most out of your supplier’s performance, make a list of performance indicators. Quality, service, delivery rate, damages, compliance, innovative ideas, and cost are some examples.

Summary

Disruptions in the supply chain are undesirable. It’s not just that they cost the company time and resources, though those are significant. The unfavorability stems from the impact on the company’s customers.

What are some common disruptions in your supply chain?

One of your primary responsibilities as a supply chain or sourcing manager is to prevent disruptions. Particularly artificial disruptions. One of the most effective approaches is to develop an effective sourcing strategy.

For your procurement solutions and services, click here at www.premikati.com

Feb 16
Supply Chain Management SAP Ariba Premikati

Tips for Successful Supply Chain Management

By Procurement No Comments

Sourcing and supply chain management go hand in hand.

Successful supply chain management is the backbone behind most successful businesses. If we had any doubt, the last three years made it clear.

Here are four pointers to help you ensure the success of your supply chain and how you can manage your relationships for success:

1. Leverage New Technologies

Today’s supply chain industry is brimming with new technologies and it has never been easier to get the most out of your supply chain using tools such as:

I. Artificial intelligence and predictive analytics to aid in inventory forecasting.

II. Procurement applications such as SAP Ariba SLP.  This aids in quality control, supplier scorecards, supplier management and cost savings during procurement.

III. Digital supply chain twins, which improve transparency and decision-making in the supply chain.

2. Constant Evaluation of Sourcing Strategies and Suppliers

The focal point of any supply chain management is sourcing. If done incorrectly, it could spell the end of many supply chains.

Take, for example, this Gartner study.

74% of companies that constantly reviewed and developed their sourcing strategies increased their productivity and savings significantly.

It really is a no-brainer.

To get the most out of your sourcing, figure out which strategies work best for your supply chain and focus on them. You should concentrate on the suppliers’ credibility, capacity, and shared goals.

3. Employee Development

Employees, like other aspects of the business, make significant contributions to supply chain management. In a nutshell, they are the foundation of any organization.

It only makes sense to invest in their advancement. Especially if you want your supply chain management to succeed.

When it comes to training their employees, most businesses are afraid. They are concerned that they will leave and join their competitors. It’s understandable.

But wouldn’t it be more dangerous not to train them? And then watch them wreak havoc on the supply chain and overall business objectives?

Employee competencies are improved through training and development.

4. Enjoy the Competition

Competition is the backbone of any thriving industry. To see success in your supply chain, you must learn to enjoy the competition. 

 Why? The simple answer is competition breeds innovation. And innovation is the secret weapon of any successful business. 

 With competition, you can isolate a competitive edge, allowing you to better cater to your customer’s needs.  

 It also has benefits like improved customer service and constant business development.  

 

What are the key issues you encounter in your supply chain organization?

 

For procurement and supply chain management consultations from the global leaders in Ariba solutions please visit us at www.premikati.com.

Jan 12
Premikati SAP Ariba 2023 Procurement Trends

2023 Procurement Trends

By Procurement No Comments

Procurement in 2023 

The procurement landscape is constantly changing, and the strategies that organizations employ to ensure their success in the future must evolve to meet the needs of the modern market. As we look at 2023 and beyond, it’s important to consider the trends that will shape the way companies manage their procurement operations. 

Technology and Automation  

The first trend is the increasing use of technology in procurement. Automation and artificial intelligence are becoming more prevalent in procurement processes, allowing companies to reduce costs, improve efficiency, and increase accuracy. Automation and AI will also help companies to better manage their supply chains and make smarter decisions when it comes to sourcing and purchasing materials.  

Sustainability 

Another trend is the increasing focus on sustainability. Companies will be looking for more sustainable suppliers and will be using the latest technologies to measure and optimize their sustainability efforts. Organizations will also need to pay more attention to their supplier relationships, as well as their own internal practices, to ensure that their procurement strategies are as sustainable as possible. 

AI Implementation 

One of the most significant procurement trends for 2023 will be the increased use of artificial intelligence (AI). AI will allow businesses to automate many of the mundane tasks involved in procurement, such as data entry, document management and order processing. This will free up valuable resources and allow companies to focus on more strategic activities. AI will also enable companies to better understand their customers’ needs, allowing them to make informed procurement decisions that are tailored to their customers.  

Procurement Digitization 

Another key trend will be the move towards digital procurement. This involves the use of online platforms to purchase goods and services, as well as manage supply chains and contracts. By taking advantage of digital tools, businesses will be able to streamline their procurement processes and reduce costs. In addition, digital procurement will enable businesses to better manage their supply chains and track their suppliers. This will allow them to identify opportunities for cost savings and ensure that their suppliers are meeting their expectations. 

Change in 2023 

As businesses become more competitive and the economy continues to change, companies must find new ways to stay ahead of the competition. One of the most effective ways to do this is through effective procurement strategies. By understanding the needs of the company, the market, and the competition, businesses can create a procurement strategy that will help them get the most out of their purchases.  

 

Jul 12

Contract Cubes for Private Equity

By Private Equity No Comments

Contract Cubes For Private Equity Firms

 

Contract Cubes Offer Powerful Advantages For Private Equity Firms

Successful private equity firms know that time is something you want to have on your side. When you’re looking at supplier contracts across multiple portfolio companies, then all of your procurement and contract management habits—whether time efficient or not—become greatly magnified.

PE firms that are able to compound on good contract management skills (and good software) have a massive competitive advantage over private equity firms that are still stuck in data siloes, spreadsheets, or, worse, completely analog procurement records.
SAP’s “contract cubes” are a game changer for data-centric PE firms because of their straightforward approach to accessing contract data near-instantaneously. Here are just a few of the powerful features of contract cubes that PEs can harness to supercharge the combined power of procurement across all of their portfolio companies: 

Use Keywords To Make Better Choices Spanning Your Entire Portfolio

Even disparate portfolio companies often have areas in which they can join forces to negotiate better deals with suppliers or, in some ideal scenarios, offer sourcing amongst themselves. It becomes exponentially easier to get discounts for quantity by combining orders or to find hidden gems amongst suppliers if your database of contracts is centralized and readily searchable. Find the things portcos are buying separately through a simple search and then turn that data into cost savings or even revenue generation while other firms are still flipping through file cabinets. 

Get All of The Numbers On The Table

Data transparency and visibility go a long way toward making better choices in both the short and long term. It’s impossible to capitalize on things that you don’t know are happening. With contract cube functions, you can get all of the numbers you need via simple commands. That can include time left until contract renewals, numbers of orders, financial ratios and other history and stats which can be transformed into even greater savings, revenue gen, and better supplier relationships.

The ability to know who your best-value suppliers are is priceless. Contract cubes can help you determine this based on your own metrics of value (and across a variety of metrics). Prioritize these suppliers during contract renewals, bring them additional business, set up data sharing, and make generally better choices that are data-led. 

Additionally, use data easily pulled via contract cubes to gain insight into long-term financial trends, even as portcos come and go, so you have a big-picture view that can lead big vision (and big money) moves while competitors are still taking a myopic and segregated approach to procurement, leaving you with a clear advantage. 

Handling procurement for a private equity firm is among the most difficult scenarios for even the most seasoned procurement expert who has been working with individual companies. That’s why we at Premikati offer BPO with managed services in procurement catering expressly to private equity firms. We understand how to navigate the complexities of cross-portfolio sourcing and we have the tools and expertise to fully manage this process to the great advantage of the firms who choose to outsource to us. Our specialized knowledge and toolsets bring value to the table that would go entirely unrealized by teams with less pointed expertise.

Reach out to us today to see how we can help you advance your procurement strategy.

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Jun 13

Managed Services for Private Equity

By Private Equity No Comments

Sourcing Via Managed Services In Procurement Is A Game Changer For Private Equity Firms

Managed services providers (MSPs) bring with them a suite of finely-tuned skillsets, knowledge, and tools to the companies they serve. In an arena such as procurement, this can mean massive savings and opportunities to scale that are not readily realized using non-specialist teams and archaic, clumsy processes that allow for valuable data to slip through the cracks.

Many PE firms are now taking a closer look at existing supply contracts—on valuation, it is clear the direct link that exists between exceptional procurement capabilities and competitive advantage. 

Aided by seasoned experts, the procurement process in private equity firms can move away from limiting goals like capturing low-hanging opportunities in favor of more strategic and impactful approaches to value creation so that rapid sizing and added risk mitigation and transparency, the impacts of which will clearly converge on the bottom line.

These are some of the major benefits to managed services in procurement for private equity firms:

Sophisticated Procurement Functions Provide An Edge Over Clunky, Outdated Approaches

Procurement has matured from cost-reduction into value creation.

Procurement has been on oft-overlooked space that’s brimming with value potential. In order to get ahead, companies must leave behind old ideas about ruthlessly slashing costs and simple cost-saving actions like asking suppliers for deals. Rather, today’s procurement—when handled well, ideally via experts from an MSP—is more transformative and comprehensive.

Procurement today involves advanced spend analytics, process automations, predictive technology such as machine learning for demand planning, and a host of other intensive processes that were once reserved for Fortune 500 companies. Now, PE firms can use advanced technology and expertise to look beyond easy wins into all categories of spend to extract value that is far and beyond what could otherwise be achieved. 

Sustainable, Scalable Approach

Utilizing more sophisticated procurement strategies results in a more sustainable, scalable approach. With supply shortages hitting many industries, sustainability is a concern for all companies both in terms of classic factors like environmental sustainability, but also sustainability among suppliers. Will companies be able to get the goods they need when they need them? Is there too much reliance on one or two suppliers? 

Similarly, if a company achieves unprecedented growth, will current suppliers be able to scale accordingly or will they prove to be a bottleneck? 

Managed procurement services help PE firms navigate these types of questions—plus, they are able to see portfolios as a whole unit to achieve even deeper (and verifiable) scalability and sustainability than looking at each portfolio company’s supply strategy from within a vacuum. 

Risk Mitigation

To step back a moment to the question of whether or not a company relies too much on a small pool of suppliers for some critical product, it’s much easier to spot these sorts of risks while doing the deeper work provided by MSPs in procurement than it would be using a more scattered approach which can leave considerable risks entirely unknown.

Private equity firms are latching on to the value that mitigating supply risks provides over simply cutting costs. MSPs are also more likely to see ways to mitigate risk from amongst portfolio companies before having to turn externally.

Digitization, Transparency, and Value Optimization

Digitization is a major driver in the managed procurement renaissance. Technologies once reserved for only topmost companies are now readily available at SMB sizes. Digital systems that are nimble, agile, and simple to implement while retaining robust, enterprise-grade features—systems that come par for the course with a good MSP in procurement—are a staple of effective procurement strategies within private equity firms.

Using digital tools, managed services providers are able to aggregate data from all sources both within individual portfolio companies and across the entire portfolio and then clean and categorize this data to create a single source of truth that is free from the confines of data silos.

Then, using advanced spend analytics, machine learning, demand planning, and similar techniques, MSPs can quickly capture value for private equity firms. Electronic sourcing in particular is one arena of procurement that offers considerable benefits in terms of saving time and money.

Having the combination of transparent data and digital tools leads to value optimization that goes far deeper than what procurement pros could have expected to achieve in times past. 

Cross-Portfolio Collaboration

All of the benefits listed above become magnified multi-fold when considered from a cross-portfolio collaboration perspective. MSPs in procurement are more readily able to take on the task of cross-portfolio procurement strategies which can be among the most complex sourcing work a firm ever encounters.

MSPs can consolidate spend, look for strategic cross-portfolio opportunities to either supply each other or collaborate on sourcing and achieve economies of scale which can be achieved only through transparent data and accurate spend analytics. This collaborative approach offers unique challenges but can work to mitigate risk as well as spur exponential growth among symbiotic portfolio companies. 

Long-Game View

Rather than get bogged down in the details of any one new portfolio company, MSPs in procurement are able to help capture value in the long game by surfacing longer-term overall spend trends and executing long-term procurement strategies that can span multiple years and multiple portfolio companies. 

Managed services in procurement today is much more than outsourcing. It isn’t a replacement so much as an expansion of your team, working closely alongside the firm to understand, prioritize, and execute the most suitable strategies capture value, capture opportunity, and support rapid sizing with reduced risks, increased transparency, and far, far fewer headaches. 

See what Premikati’s managed services in procurement can do for your private equity firm. We will help you quickly see ROI through our white-glove expert team of procurement pros, advanced and agile toolsets, as well as a state-of-the-art (but simple to use!) procure-to-pay marketplace with bespoke options to onboard current favorite suppliers that are already adding value to your portfolio.

Reach out to us today to see how we can help you advance your procurement strategy.

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Sep 12
Premikati Transforms Contract Management with SAP Ariba

Premikati Transforms Contract Management with SAP Ariba

By Press No Comments

Certified WBE outsourcing firm leverages cloud-based solutions to fuel efficient digital process that delivers savings and compliance

PALO ALTO, Calif., November 16, 2016 – The cloud is where efficient contract management is happening. But many businesses lack the technology and resources to get there. Premikati is out to change this, with some help from SAP Ariba. The business process outsourcing and management consulting firm today announced that it will leverage Ariba® Contract Management Professional™ to drive an efficient, digital process for managing contracts that delivers savings and compliance.

“We have seen clients of all sizes and industries struggle with contract management,” said Marisol Buczynski Buchanan, CEO of Premikati. “Lack of tracking with respect to items such as expiration dates, renewal terms/price increases, service level agreements, notice provisions, and even counter signatures is all too common. With SAP Ariba, we can help them overcome these issues.”

An SAP Ariba BPO partner, Premikati will use SAP Ariba’s technology to perform contract management services not only for large enterprises, but for companies under $500 million in annual revenue. And in doing so, it aims to eliminate many of the barriers that prevent them from pursuing digital strategies such as a lack of resources to implement and manage software. “We can have them up and running in two to three weeks at a very cost-effective price point,” Buchanan said.

Ariba Contract Management Professional is the industry’s leading SaaS solution for contract management. Uniquely designed to eliminate the paper and ink from the creation, execution, and management of any type of contractual agreement, the offering enables companies of all sizes to efficiently:

  • Automate and accelerate the entire contract lifecycle
  • Standardize and control contract development
  • Collaborate with all stakeholders
  • Strengthen operational, contractual, and regulatory compliance

“Contracts are the lifeblood of any organization and managing them effectively can deliver strategic advantage,” said David Johnston, Senior Vice President, Partner Ecosystem, SAP Ariba. “With SAP Ariba’s technology and Premikati’s contract management expertise, companies of all sizes can get on the road to automation and drive an efficient process that lowers both their costs and risk.”

To learn more about SAP Ariba’s contract management solutions and the value they can deliver, visit: www.ariba.com. Learn More.

About Premikati

Premikati is a WBENC certified WBE Management Consulting and BPO firm that is specifically tailored to Contract Management and Procurement. Premikati helps its clients with all facets of contracting and procurement strategy as well as outsourced Contract Management Services including the drafting and negotiation of contracts.   They employ procurement executives, attorneys, contract management professionals, Six Sigma Black Belts, and certified Change Masters with extensive experience either inside or consulting with the world’s top companies.

About SAP Ariba

SAP® Ariba® is the marketplace for digital business, creating frictionless exchanges between millions of buyers and suppliers across the entire source-to-pay process. Our market-leading solutions enable companies to simplify collaboration with their trading partners, make smarter business decisions and extend their collaborative business processes with an open technology platform. More than two million companies use SAP Ariba solutions to connect and collaborate around nearly one trillion in commerce on an annual basis. To learn more about the company’s offerings and the transformation they are driving, visit www.ariba.com. Learn More.

About SAP

As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable approximately 335,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com. Learn More.

 

 

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Aug 01
Costs of Your Supplier Relationships

What are the Real Costs of Your Supplier Relationships?

By Procurement No Comments

Summary: Supplier relationships can be costly in terms of both money and time investments, and can also be rife with risk. Many businesses are turning to B2B marketplaces in order to lower cost and risk alike and instead focus on collaborative relationships, strategic partnerships, and innovation. 

When you’re in business, you have to form relationships with suppliers in one way or another in order to get the job done. However, the way you go about building supplier relationships can make all the difference to your bottom line as well as the innovative potential of your business. When seeking out suppliers and a way to interact with them, it’s important to be aware of the actual cost of the relationship, the risks involved by doing business with them, and the alternatives you have at hand.

What Are The Costs Of Your Supplier Relationships?

When it comes to supplier relationship management, the whole ordeal can be costly if you let it get out of hand. If you have too many suppliers, you risk high costs, confusion, and overcomplication in other areas of business which rely on these supplies, like production. Too few suppliers, and you’re in an “all your eggs in one basket” situation which rarely leads to good things in business or in life.

According to a study by The Hackett Group in 2012,

“It costs roughly $700-$1,400 in internal costs (i.e., labor, outsourcing, technology and related overhead) to source each supplier, set it up in internal systems, transact with it and manage the relationship on an ongoing basis.”

Among the reasons to consolidate suppliers cited in the study, is that added buying power with each supplier can lower your cost of purchase as well as your supplier management costs.

Even beyond money, dealing with paperwork manually, fixing invoice errors and discrepancies, and communicating with suppliers over inquiries costs companies about 6500 hours a year—and you can bet that they are paying someone for each and every one of those hours.

What Are The Risks Of Working With Your Supplier?

Trust, transparency, and longevity are all valid concerns when contemplating the risks of working with suppliers. Contract management alone can be a hefty ordeal, especially if you find yourself dealing with a subpar supplier, since contract renegotiation can be a long and arduous process.

Each supplier you manually add to your supply base also results in a cadre of compliance risks. How do they safeguard their data? How does their preceding supply chain look—are they reliable? Are they utilizing corrupt practices somewhere down the line like forced labor, poor work conditions, or even human trafficking? Without a process in place alongside the skill and man-hours to verify each of your suppliers compliance standards as well as consistent checks to ensure their standards are regularly updated and maintained, you run the risk of severe ethical and reputational harm to your business.

When business neglect to regularly analyze their supplier lists and consolidate where it’s relevant to do so, spend visibility also suffers. Companies may pass along orders to vendors sheerly out of convenience, desire, or cost with little further rationale—all of which can lead to costly situations down the line. Being able to monitor and have full visibility into your company’s spend is vital to healthy, low-risk supplier relationships.

Why Are More Companies Looking To B2B Marketplaces For Their Suppliers?

The middle ground between too many and too few suppliers is paring down to focus on your key suppliers and nurturing those relationships. Similarly, employing the necessary services to validate the compliance of your suppliers can save you many dollars and headaches throughout the course of your business. Both of these reasons are why many companies are turning to B2B marketplaces to source their suppliers.

B2B marketplaces enable buyers to home in on key suppliers, increase spend visibility, lower overhead costs of SRM, and allow businesses to focus on the more important aspects of having supplier relationships and with far fewer worries. Instead, businesses can spend their time developing collaborative, strategic relationships and key partnerships in order to boost innovation and profit for everyone involved.

One well-known supporter of building strong, collaborative supplier relationships as a driver of innovation is Toyota. Approximately 15% of Toyota’s suppliers can be classed as “strategic potential or actual co-developers.” They are sure to invest additional time and resources in these suppliers through activities such as attending R&D shows to spur discussion about new technologies.

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