Source-to-Pay: The importance of supplier enablement

Source-to-Pay: The importance of supplier enablement

Dico van Dijk Blog, Procurement, SRM

With more and more companies transforming and digitizing the Source-to-Pay (S2P) process, the demand for a tighter supplier enablement during an S2P process is also increasing

Within S2P implementations, the supplier enablement process is often overlooked or underestimated. Companies do not always seem to be well engaged with their suppliers. Of course, they have a “very good relationship” with their main suppliers, but what about the rest of their suppliers?

The question rises; why is supplier enablement often underestimated and why therefore, is it so important?

Benefits of good supplier enablement

What is supplier enablement? This differs depending on who you are asking. But you can say this will cover the majority of the answers: building, engaging and maintaining the relationship with your supplier, making sure your supplier is part of your procurement journey – specifically when you are transforming to a (new) technology for your procurement function. Adoption of your new way of working is key.

According to a study performed by the Aberdeen Group: “best-in-class enterprises, which have 78% of spend under management compared to an average of 44% for all other peer enterprises, enable 50% of their suppliers, versus the 23% enabled by their peers, are 25% more likely to document and share their best practices, and are almost twice as likely to have full visibility into enablement activities, while decreasing transaction processing costs.”

All-in-all supplier enablement is all the interacting with your supplier. These days this will all be in an electronical way, via a network solution, (provided by a P2P system solution). Having your supplier onboard your electronic platform will improve your S2P cycle times – efficiency and effectiveness. It will increase transparency, and “your spend under control”. And also importantly, it will improve your compliancy – as all spend will go through one system and is under control.

Suppliers are incentivised to collaborate because the buying organisations’ users are directed through the S2P tool to source and buy from enabled suppliers – thereby reducing fragmented, maverick spend and therefore making the time and effort a “win/win” for both parties.

Tail-end suppliers

“Historically, procurement organisations have been focused on trying to manage their strategic spend, the 80% of spend that represents around 20% of their suppliers. While companies have been striving to manage those strategic suppliers, they’ve left the large group of smaller suppliers — the ‘tail-end’ of the spend — unmanaged.”

The tail suppliers might initially not be that important for your business if you look at the spend, but they do have often a high number of transitions. In the end, they can frustrate your purchase process, if they haven’t been engaged within your S2P journey. Therefore, it is important that you include them in your enablement process, and they will adopt your way of working.

Vendor master data

Generally, the vendor master data will come from different legacy systems and is outdated. Outdated can mean the contact names are no longer available. Contracts are expired or non-existing, and very often for the tail suppliers.

With digitalising your procurement function, up-to-date vendor master data is key. Engaging with suppliers is more important than ever. Do you for example know who your contact person is? “Yes, I do” is often the answer, but it depends on who you are asking. For the category manager, this might be the supplier’s account manager, for the buyer, who is dealing with the supplier on an operational level this is the sales person/order administrator. And the latter is the contact in the legacy system, as these are the people involved in the supply chain of your business.

What to do 

All S2P platform providers are offering some kind of supplier enablement. Generally, what this means is that they send an email to your provided supplier list and request them to join their supplier network.

But when transforming your procurement to an all e-procurement environment there is more to do. Building a relationship with your suppliers, know who they are and what they are capable of doing. Category managers need to be ruthless around tail suppliers and be very clear on the strategic / preferred suppliers. And next to all that, it will also be an excellent moment to thinner your supplier base. Focus on the suppliers you really need and who you can build a deep relationship with. Additionally, ensure clarity on the supplier segmentation strategy, and use to drive the style of engagement with your supplier.

When you are in transformation, create a dedicated team who will focus on your supplier base. Start cleaning the list and engage with suppliers, for example during a supplier day – explain what your company is going through, what your procurement strategy is, and that you want your partners (read suppliers) to join you in this exciting (S2P) journey that procurement can offer…

At 4C we have experienced consultants who can support and guide our clients in the supplier enablement journey they go through. Our consultants have the knowledge and experience to support you and ensuring not to make mistakes that others have fallen for.