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Webinar notes: Leveraging a Supplier Network for Procurement Excellence
This week’s featured webinar was the combined effort of Hubwoo, SpendMatters, and CONSOL Energy. The event was a fair balance of product info, background on supplier networks and then the case study by CONSOL. You can listen to the event on demand or download the slides by visiting Hubwoo’s site.
The complexities of implementing P2P automation solutions (P2P = procure to pay or purchase to pay) have resulted in an increasing number of companies working with third party networks in order to get more from their ERP investments. The unexpected complexities include cost, content creation/maintenance, balancing flexibility with visibility, and the residual ‘paper’ challenges to be faced.
- Supplier Enablement and Onboarding: Not only does supplier/contract data need to be captured but validated and maintained over time. This effort is both complex and time consuming, and affects the internal (procurement, finance (AP), legal) and external (supplier) parties to an agreement.
- Catalog and Content Management: This includes data (such as pricing and payment terms) that may change frequently. You will know that catalog solutions are appropriate for your company when project expectations include Google-style searching capabilities, minimal IT involvement, and buyer kitting/bundling.
- Invoice Automation and Connectivity: Presents the opportunity to reduce paper and increase efficiency for AP, particularly for tier 2, 3, 4 suppliers not already being managed through integrated systems.
The Supplier Networks of Tomorrow:
- Will allow for greater standardization within systems so a supplier can update their information once and have it reach all customers
- Will address both commerce and compliance
- Will support mutually beneficial relationships between buyers and suppliers
- May function as ‘Apps’
Case Study: CONSOL Energy
First, a little info on the company itself, as their size and purchasing profile was a large component of why their opportunity for savings was so significant.
- Diversified energy company (coal and gas)
- 2011 Revenue: $6.1B
- 9,000 employees
When their eProcurement project started in 2007, they had high transaction volume, multiple systems, and lots of paper which led to a ‘broken chain’ source to pay process. What they wanted was electronic processes, less systems, and sustainable/measureable savings that would create value for both them and their suppliers. They implemented SAP with Hubwoo’s SRM solution, deciding to work with a third party because they didn’t have the skills in house.
The eProcurement project has committed to an ROI of $25M in 3 years, and they reached it in less than 2.5 years. By August of 2011 (4 years in), CONSOL had realized an ROI of $44M and reallocated much of their team to working more strategic opportunities. In addition to the savings they negotiate, they are also able to take credit for any process automation savings they put in place as they sign new contracts.
The CONSOL project was wildly successful, and yet they still had some learnings to share:
- Get input from suppliers
- Keep in mind that high transaction volume is both good and bad
- Mind the lag (time required to migrate in process contracts from old/paper processes to ERP