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3 Tips For Strategic Sourcing Through A Supplier Portal

Cash FlowSupplier relationship managementPurchase to PayCost and Cash ManagementFinance CollaborationSpend AnalyticsTechnology Implementation+-
virtual_supplier_management.jpg

In this guest post, Procurement Leaders invites Taulia’s Joe Hyland to share tips from the recently released whitepaper, Managing Supplier Cash Flow.

 

“The way we pay and the way we finance payables has a dramatic impact on the relationship and the commercial things you want from a supplier.”
- CPO at a market-leading company

 

We’ve seen it time and time again: your finance team discovers the need for a supplier portal and early payment program, and since the actual change management falls on the chief procurement officer, you need to adapt processes to maintain and evolve supplier relationships.

 

And as a procurement professional, you prefer to be the lead for any project related to your supply chain and in this case, payables – as it will affect negotiating payment terms, discount rates and pricing structure, while still maintaining strong supplier relationships.

 

With an early payment program, you’re able to automate discount negotiations by allowing your suppliers to constructively manage their cash by choosing to be paid early to meet their cash flow needs.

 

Giving suppliers the option to be paid early on any invoice, as soon as it’s approved, simply put, fosters a stronger supply chain. Early payment financing is a way for your suppliers to avoid costly lending options and therefore improve their bottom line, as they can use additional cash flow to hire, grow, and develop their business. These are real savings for your entire supply chain: for example,last year a mom-and-pop supplier of a large US food manufacturer reported savings of $40,000 because they switched from factoring to dynamic discounting.

 

But can there really be a way to strengthen supplier relationships, while saving millions? The answer is yes. Let’s explore how it’s possible.

 

Success Tip #1: Procurement’s involvement from the beginning is crucial

 

Even if your finance or accounts payable teams manage the day-to-day communication with your vendors, your involvement from the start is critical to the success of an early payment program.

 

Why? No one knows your suppliers better than you and your payables team. You both have the knowledge and power to formulate a strategy for rolling out an early payment discounting program that will be adopted by your entire supply chain.

 

One of our manufacturing customers aligned their procurement, accounts payable and treasury teams prior to implementing the program, and the results speak for themselves. When we first took a look at their analytics, it was no surprise they 1) had the program up and running throughout the company faster than any other customer, 2) gained rapid adoption among their suppliers, and 3) achieved ROI in less than 3 months.

 

Beyond financial ROI, the existing relationships you have with your suppliers will be stronger and more valuable because of this type of solution. And while it’s difficult to put a price on being a favorite customer to all your suppliers, you can certainly realize the savings captured from an early payment discount program.

 

Success Tip #2: Supplier adoption is directly proportionate to the ROI of your program

 

A program like this would not be successful without the participation of your suppliers. You want this program to stretch throughout your entire supply base--the more suppliers on board and participating, the higher the ROI.

 

Leading organizations are constantly looking for ways to increase portal adoption and participation because they know that widespread adoption of the portal and awareness of the discounting program ultimately leads to millions added to the bottom line. If you can illustrate the value of the portal to your suppliers, you’re already one step ahead of the curve.

 

Success Tip #3: Learn from other procurement professionals who already have an early payment discounting program in place

 

Learning from your own mistakes can be expensive. So learn from others instead in this newly released report, Managing Supplier Cash Flow.

 

The report covers:

  • Why more and more procurement organizations are implementing a supplier portal in conjunction with an early payment discounting program
  • Strategic mistakes from different procurement executives at Fortune 500 organizations during the implementation phase
  • How to continuously grow supplier adoption rate and capture more discounts

 

Don’t make the same mistakes. Download your copy of the report for free here.

 

Joe Hyland is chief marketing officer, Taulia.

Jon Webb
Posted by Jon Webb

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