Category Archives: Procurement Innovation

Transcepta : Global e-Invoicing with Dynamic Discounting Support

Transcepta is an eleven year old company that provides a global supplier network for fast supplier on-boarding and e-Invoicing. Whereas many supplier networks are setup for supplier discovery, and most support e-Invoicing, not many are set-up for straight-through processing and industry-leading auto-match capability.

In addition, most of the solutions that support e-Invoicing are limited in terms of the way invoices get into the system and many can only support invoices through the portal, delivered in a specific XML standard, or pushed into the ERP system the network is integrated with. For mid-size operations, this is typically good enough, but when you work for an organization that has a very large supplier base with thousands (or tens of thousands) of suppliers that use a dozen or more different formats (PDF, virtual printers, EDI, XML, cXML, Oracle Network, etc.), it typically ends up being the case that only 60% to 80% of invoices flow through the e-Procurement application automatically and the rest have to be manually entered or converted through OCR, which just adds more invoices to the exception queue for manual review. That’s where network-based e-Invoice automation solutions come in, and the best ones can easily plug-in to your current infrastructure (through the ERP). Transcepta is no exception to this rule.

Transcepta, recognizing that if you want to achieve a maximal throughput through an e-Invoicing platform, you have to support all of the standard formats used throughout your supply base, has built a platform that not only supports just about every EDI and (c)XML format that you can think of, but also supports Oracle validate integration, virtual printer drivers (that print direct to the platform, which was not a common feature of network platforms when Transcepta first offered this capability), and advanced PDF processing capability. If the invoice PDF is created from QuickBooks (or other supported standard accounting applications), the Transcepta platform will dissect and extract the electronic properties of the PDF to obtain as much information as possible about the supplier, associated purchase order or contract, and items being billed to automatically identify the supplier (from a standard database, such as D&B), and the purchase order in the organization’s ERP.

The strength of the platform lies in it’s advanced auto-match capability. It’s a reasonably well known statistic that invoice error rates are in the 10% to 15% range. SI and SM have quoted multiple studies from Paystream, Aberdeen, etc. over the past few years that consistently report numbers in this range. As a result, most e-Invoice automation solutions will bounce 10% to 15% of invoices back to the supplier or to an AP clerk for review upon first submission. This is a rather high error rate when many of the exceptions are not a result from price or order receipt discrepancies (when the invoice should be bounced back to the supplier with a clear explanation of the necessary adjustments for [automatic] approval and payment) but from missing supplier, purchase order, or line item information that is available somewhere in the organization’s e-Procurement systems.

In their effort to increase straight-through processing, Transcepta has developed advanced PO cloud-match software that implements automated reasoning, statistical matching, and other “AI” technologies that allows the organization to upload every PO and relevant piece of supplier information for processing by an advanced matching algorithm that is able to evolve over time. Using this extra data in conjunction with advanced algorithms, Transcepta is able to match about 80% of invoices that are rejected by traditional matching algorithms. One customer that received 45K to 50K invoices a month saw an 85% improvement in straight through processing from this algorithm, going from an average initial reject rate of 15% to 2%. That’s a lot of man-hours on exception processing saved.

As hinted at in the introduction, Transcepta has a number of other strong capabilities in supplier on-boarding and dynamic discounting, and for more information on these, see the recent and upcoming pieces on Spend Matters Pro (membership required) by the doctor and the prophet.

Cap Gemini IBX – Closing the Loop on Source to Pay

Cap Gemini is a one of the world’s largest multi-national consulting companies headquartered in Paris, France that focusses on management, outsourcing, and technology-based consulting and specializes in strategy, digital transformation, finance, marketing, IT strategy, solutions design, big data / analytics, and supply chain management consulting. Of course, we are primarily interested in the latter and, in particular, any technology underpinnings.

As part of their technology underpinnings, Cap Gemini has three primary offerings. Spend Analysis, powered by Spend Radar; Procurement Intelligence, powered by Microsoft’s Strategy Companion; and the IBX Business Network that implements their Source-to-Pay platform with e-Sourcing, e-Procurement, and supplier (portal) support. This is what we’re going to cover briefly in this post.

The solution is a seamlessly integrated Source to Pay Solution with a global supplier network, where suppliers can self-register, manage their customer interactions through a portal with a single integrated view, and even manage their invoices that originate outside of the IBX platform (which is a unique capability that will be discussed later on). If you consider the classic Sourcing and Procurement lifecycle, first diagramed by the doctor on SI back in the doctor wants to remind you it’s Sourcing and Procurement, a good S2P solution needs a lot of capability, especially if you want to capture low-volume purchases and spot-buys (and, in particular, catalog management needs to underlie the requisition through the approval process). The IBX platform contains, to some degree, almost everything indicated in this diagram (with the exception of true strategic sourcing decision optimization, which we know is currently limited to the six samurai) plus a lot of cool supplier network, catalog management, and spot-buy features, including a few that you will not find in any other (best-of-breed) platform on the planet.

In this post, we’re going to focus on spot-buy and the invoice management dashboard, as they are the most unique offerings in the platform. The new spot-buy functionality allows a requisitioner to create a requisition for anything they need, fill out as much information as possible (including expected pricing), suggest one or more suppliers on the network, and route it to Sourcing for identification of the proper products and/or services. A (senior) buyer in Sourcing will validate the request, choose the appropriate sourcing process (RFX, auction, third-party catalog offering), make a selection, and return it to the buyer for final acceptance and submission, at which time it will be routed to the appropriate approvers. Note that we say Sourcing, not a buyer, as it contains rule-based workflow management that allow it to be routed to the buyer with the proper authority with the smallest workload to minimize processing time.

The new invoice management dashboard, designed for the supplier, allows a supplier to sign in and see on one screen the status of every invoice sent to every customer on, and off, of the IBX network as well as drill in and get as much related information as there is for IBX platform invoices (including, but not limited to, conversations, buyer requested corrections, goods receipts, purchase orders, etc.). The system supports uploads from standard AP and ERP systems for suppliers to get this information in the system. Being able to log into one portal and service all their IBX customers through one login and one interface is great, but being able to manage all of their invoices, which is something that is always top of mind for a supplier, is even better still.

There’s a lot of other cool and powerful features in the IBX system, and they are covered in detail in the recent piece by the doctor and the prophet over on Spend Matters Pro (Part 1 of 2, membership required) which gives one of the most in-depth and balanced reviews of the system that you are going to find anywhere.

Boost Your Procurement Value Engine

As per our last post on the subject, Procurement does not exist to buy stuff (which was its origins, but thanks to the Internet, everyone can buy stuff), but to provide value to the organization. But the identification of organizational value is not always straight-forward. Every organization is different, and every Procurement function has a different level of organizational maturity. As per the classic Hackett Hierarchy of Supply, a supply organization could still be at the level of supply assurance, could have moved on to analyzing landed cost, may have begun its entry into the modern era with an analysis of TCO, might be poised to become a leader with a foray into demand management, or, and this is the highest level of maturity, may be focussed on the art of value management.

But delivering value first requires understanding what value is to the organization (and how Procurement can contribute to it) and then requires getting a mechanism in place to repeatedly deliver that value at regular intervals. There are various mechanisms that can be considered, but regardless of the mechanism you choose (and whether it is process-based, platform-based, or a hybrid approach), it needs to be powered by an engine. And in particular, that engine, which needs to keep on churning out value like a real engine keeps churning out power, needs to be efficient and effective.

One has to keep the productivity plateau in mind. An organization that only focusses on efficiency will, at best, fail slowly. Similarly, an organization that only focusses on effectiveness will, at best, survive. But what an organization really wants to do is excel, and that requires the right intersection of efficiency and effectiveness. In particular, the organization has to focus on effective goals, implement them as efficiently as possible, and then use the savings to take on even more effective goals.

So how does a Procurement department improve its productivity? Generally speaking, the Procurement organization increases its value (for money, VfM), and the basic formula for that is simple:


Value Increase = Reduce Input + Increase Output + Reduce Energy
 

while focussing on categories important to the business

And how can it do that? In a category-agnostic way, it can:

  • reduce demand
  • increase Spend Under Management (SUM)
  • decrease contract costs
  • increase contract compliance
  • decrease storage and utilization costs
  • reduce risk

And how can it do this efficiently? In a general way, it can:

  • implement systems to improve cycle times
  • implement processes to reduce maverick spend
  • manage market dynamics better

And how can it translate the general to the specific? That’s a harder question to answer, but one that is addressed in considerably more detail in a new white paper co-authored by the doctor and the procurement dynamo, sponsored by Pool4Tool, on how to Boost Your Procurement Value Engine. Part I of a II-part series (with Part II coming out in Q3), this paper will give you the insights you need to understand the various levers you have to deliver true value and how you can do so in an efficient, effective, and sustainable manner.

It’s Time To Rev Up Your Procurement Value Engine. But Do You Know How?

Procurement doesn’t exist to just buy stuff. Procurement exists, at least if it’s a modern Procurement organization, to identify and deliver organizational value. Long gone should be the days when Procurement, staffed by the island of misfit toys, existed only to process the paper work that allowed manufacturing to buy the parts it needed or the back office the paper and calculators required to do the day-to-day accounting.

But the identification of organizational value, as long-time readers of SI know all too well by now, is not always straight-forward. Every organization is different, and every Procurement function has a different level of organizational maturity. As per the classic Hackett Hierarchy of Supply, a supply organization could still be at the level of supply assurance, could have moved on to analyzing landed cost, may have begun its entry into the modern era with an analysis of TCO, might be poised to become a leader with a foray into demand management, or, and this is the highest level of maturity, may be focused on the art of value management.

However, delivering value takes more than just realizing that your function is to deliver value. It is understanding what value is to the organization and how Procurement can contribute to it. Simply put, one way of defining value to the organization is whatever allows the organization to increase its revenue potential. (More sales, more market share, more brand recognition and brand love, and so on.) One way of assisting the organization in the capture of this value is to deliver products, services, and knowledge that will assist the organization in strengthening its Unique Selling Points (USPs) or Unique Value Propositions (UVPs) that give the organization the competitive advantage it needs to increase its revenue (or profit) potential.

It is not easy to do, especially since a Procurement organization has to understand not only what it must do, why it must do it, and how it will achieve it, but how to be good at it. Few organizations get demand management under control and step up to the highest level of the pyramid. Fewer still can stay there as they will struggle with the how. And even if they occasionally understand the how, they may never master the art of being good.

If one wants to be good and drive to success, one has to have a vehicle powered by a finely tuned engine that can deliver value lap after lap around the sourcing track. Such an engine must be efficient, effective, and sustainable. Only then will Procurement be able to get good and stay good. So what does such an engine look like, what sort of value will it deliver, and how will it deliver that value?

For the answer, check out the new white paper co-authored by the doctor and the procurement dynamo, sponsored by Pool4Tool, on how to Boost Your Procurement Value Engine. Part I of a II-part series (with Part II coming out in Q3), this paper will give you the insights you need to understand the various levers you have to deliver true value and how you can do so in an efficient, effective, and sustainable manner.

Claritum – Medicine for the Procurement Soul, Part II

As per part I, while Claritum might sound like the latest miracle drug for the sinus, it’s really the latest miracle drug for Procurement — and when SI says miracle, it’s because, properly used, it really does work.

So what does Claritum cure? As per Part I, Claritum is the cure for SOOM. (SOOM, not VOOM.) Spend Out Of Management. How does it cure this? By providing a platform for spend not typically captured by the traditional Sourcing or Procurement platform so that the spend can become spend under management. This way, unless it’s spend that has to be made off site (at an event, during travel, etc.), or the buyer wants to keep the spend out of the system (because he doesn’t want the preferred product or wants to hide what the spend truly is for as long as possible), it can be made through the system that supports a process to get the right product or service at the right price.

Claritum provides a consumer shopping site solution that can be offered by the organization’s Procurement department, their service provider, or GPO. This shopping solution offers the traditional product catalogs that you will find on consumer sites like Amazon and competing provider catalog sites. It also contains standard rate-card service requisitions that you will find on (contingent and service) labour management platforms. Plus, it contains (the ability to create) template requisitions for all standard tail-spend categories, which can be searched and added to the “cart” as easy as standard catalog items. And, as expected, it contains free-form RFX ability for buyers to requisition anything not already covered. Basically, everything that can be bought through a platform can be bought through the platform and the only spend that should not be captured is on-site T&E spend (tickets for travel can be requisitioned through the platform, and the senior buyer responsible for T&E can process the request, create the PO, and then there is a PO to match the p-Card payment to) and on-site event spend, which should be a very low amount of tail-spend.

Now, this might not sound that special, as providers like IBX and Deem offer a lot of this capability, but this is just the surface of the Claritum platform. First of all, the Claritum platform was designed with multi-organizational use in mind and can be administered by a GPO who manages contracts for multiple clients, who can customize the catalog and offerings to the need of each client individually. Second, the RFX management process, which is tightly integrated into the catalog, is very deep and the requisitions can be set-up to make sure the right requests go to the right buyers and then the right approvers, and the right buyer can select the right suppliers, manage the process, select the winner, and send it back to the requisitioner who can then complete the process (and confirm the need) by adding the award to the cart, and checking out, which sends the request to the proper approver(s). Third, the API allows the platform to be integrated with all organizational ERPs, AP systems, and supplier catalogs, to make sure the right data gets into and out of the system. And fourth, and this sets it apart from all its competitors, it has the ability to manage stock inventory within the platform. Items come from the stock-room (or supplier store-room) first before requests for new shipments are made. And that stock-room inventory, including automatic replenishment rules, can be managed by an internal inventory manager, the GPO, or the vendor, depending on where the stock is located and who is (contractually) required to manage it.

Considering that many big organizations use GPOs or service providers for at least a portion of the tail-spend, it only makes sense to have a platform that can be managed by those same providers for the portion of tail-spend they manage. The Claritum platform is the only one that SI has seen that truly has these three components. The buyer store. The deep sourcing and procurement platform (which can be internal to Procurement, external in the GPO, or managed jointly). And the full featured supplier portal.

So if you want to get your tail spend under management, the doctor recommends that you check out the Claritum platform today. It really is worth a close look, even if you already have a S2P platform, because the extensive API will support integration and the ability to capture organizational spend outside of Procurement is the next big savings opportunity in many organizations. And if you have the choice of platform, Claritum is the one that should be Stuck With You.