PROCUREMENT OPTIMIZATION BLOG

Enabling 10,000 suppliers across the globe and incorporating them into a new procurement system is no easy task. While companies may be eager to load their suppliers into a new system and begin transactions within different channels, they tend to underestimate the high-level efforts involved before, during and after a global rollout.

Global 1000 companies have great buying power and well-established buying policies, yet can be limited on the knowledge and expertise needed to prepare for a smooth global supplier enablement, which inevitably causes complications and impacts the new system’s effectiveness. Supplier vetting, consistency across numerous regions, and different compliance and invoicing regulations are just some obstacles organizations may face when enabling suppliers on a global scale.

As discussed in our August blog, supplier enablement efforts require proper preparation, firm requirements and consistent alignment within the core team to be successful. Without these key elements there can be delays in commencing supplier enablement and will result in low adoption rates among suppliers after deployment.

So how do we apply these success factors to enable suppliers on a global scale? In this blog, I will address a six-step end-to-end approach to facilitate global supplier enablement and ensure its success.

1. Establish the Core Team

The first step in the supplier enablement process is to assemble the core team – typically a combination of the vendor setup, sourcing and purchasing teams if there is not yet a supplier enablement team. There should be a global lead that oversees all different regions and regional leads who perform daily jobs within the procurement realm. After establishing the core team, the following activities will need to be executed:

• Kickoff Meeting – Holding a kickoff meeting with all team members is imperative to starting off on the right foot. In the kickoff meeting, roles and responsibilities need to be clearly defined and agreed upon by all members.

• Key Performance Indicator Development – The core team will also need to brainstorm and finalize a set of measurable performance indicators for supplier enablement, such as how many PO backed suppliers and how many catalogs will need to be enabled every month. These should be measured on a regular basis (typically every three months) to gauge whether the strategies need to be adjusted or updated.

• Create a Governance Model – The core team will also need to work out a governance model that serves as a guide/checklist throughout each step of the enablement process. The governance model should include timelines, key milestones and owners of each task, etc.

In the case where there are hundreds of regions (countries), it is best practice to take a phased approach to enabling suppliers. It is critical to assemble the right team at the right time, while addressing the above.

2. Analyze Supplier Spend

After the core team is assembled, it is time to perform an analysis on the supplier spend data. You may wonder why it is necessary to spend time doing analysis work upfront. This is in fact the backbone of the supplier enablement process which will support the decisions you make down the road. The following analysis can be performed to prioritize suppliers and provide a base for further segmentation:

• Supplier Segmentation – The analysis should be focused on the volume/spend of all transactions and certain key categories. For example, you can build a pivot table with columns including commodity, transaction volume and spend within the past 12 months.

• Identify Key Suppliers – Depending on which criteria is more important to your organization, you can either focus on volumes/spend from high to low or on key categories based on commodities. From here, you can proceed to identify key suppliers by your defined criteria for prioritization.

For a global rollout, this step poses more challenges when looking at multiple regions due to different criteria or standards. It is best practice to establish a standardized and global framework for analysis with a buffer to incorporate exceptions. For some smaller markets with average to low transaction volumes, categories might be top criteria to consider.

3. Develop Supplier Enablement Strategies

Now that you have all your suppliers sorted, the next step is to develop strategies based on the analysis results to make sure all core team members are aligned in terms of business requirements, integration specifications and campaign strategies. Along with the core team, the AP, Contract, Legal and Integration teams will also need to participate in the strategy development sessions to ensure internal alignment of all requirements and expertise. I emphasis and encourage team workshops that focus on the following topics:

• Strategies for Supplier Load – The vendor setup team will decide on a strategy to cleanse and prepare necessary supplier data, including buying channels, invoicing channels, and order contact information. If supplier data is going to be integrated in the new system, the integration team will also need to communicate the plan and strategy for loading suppliers.

• Strategies for Catalog Types – The two most common catalog types are Hosted Catalogs and Punch-out Catalogs. The purchasing team will need to decide what the criteria will be when determining which catalog type to use for each supplier.

• Strategies for Document Exchanges – There are different channels for document exchanges, as noted in last month’s blog. On one end of the spectrum there is the email method, which is easy to setup and requires less maintenance. On the other end, there are cXML/XML/EDI integrations, which require more resources upfront and ongoing maintenance, yet can automate document exchanges to the largest extent. The core team will need to understand the pros and cons for each channel and establish a methodology to decide which is the best fit.

• Knowledge for Legal Requirements – It is critical to understand regional legal requirements upfront so that any specific requirement can be taken into account during the subsequent campaign and communication phase. For example, Mainland China and Taiwan require physical copies of government issued invoices, which render electronic invoices to be illegal. Whereas the Mexico government requires both PDF and XML invoice formats, which limit the options for invoice document exchange.

• Strategies for Communication and Campaign – With strategic suppliers, it is encouraged to set up a meeting/conference call about the new changes. For other suppliers, it is most efficient to have mass communication with clearly written instructions and expectations. Note that the different types of suppliers should have tailored messages.

4. Execute the Communication Strategy and Run the Campaign

The best advice when it comes to executing a communication strategy is to be flexible and patient. The following are ways to be effective in your communication strategy with suppliers.

• Value Proposition and Business Case Justification – When communicating to suppliers, your message should include the goals of the supplier enablement project, new rules/changes in the business process and values that the new system can bring to the suppliers. For example, some procurement systems offer free supplier networks allowing suppliers to track order and invoice status, which could be a real benefit for suppliers concerned about cost.

• Action Items and “Need-by” Dates – Within the communication process, you should always include clearly defined action items and “need-by” dates so that the suppliers know what is needed from their side and when to respond.

• Supplier Training and Education – When necessary, training and education needs to be provided to suppliers to ensure they understand the new system and the impact it has on their own business. Companies are encouraged to conduct webinars or publish training documents to the suppliers.

One fundamental factor that needs to be taken into consideration when enabling suppliers across the globe is any barriers to communication throughout the various regions. Regional leads should be prepared to translate all information through training materials written in local language to eliminate any misunderstanding and ensure precise communication.

5. Move to Production

We have come a long way in the global supplier enablement process and are now on to the production step. The following steps are crucial in the production process once the integration team has loaded the “to be enabled suppliers”:

• Facilitate Test Transactions – Before the actual “move to production”, catalogs should be loaded to a “test” environment and transactions should be tested for integrated suppliers like cXML/EDI integration.

• Smoke Test in Production – The smoke test here is to have small transactions in production to test catalog works as expected and whether orders are transmitted successfully.

• Communicate the Go Live Date – It is essential to inform your suppliers of the go live date a few days in advance so that they are prepared to make transactions within the new system.

• Track and Report Results – Tracking adoptions among users and suppliers for the new system will add great value in communicating to your stakeholders in “yet to go live” regions. Measuring against the defined key performance indicators can help improve the supplier enablement approach in the long run.

6. Continue Supplier Enablement to Maximize Supplier Adoption

As mentioned in the first step, it is best practice to take a phased approach to global supplier enablement. When doing so, subsequent regions will have more time to communicate to internal stakeholders about the new system and can provide feedback from the “pilot” regions. By following the established end-to-end process, the core team will now have more experience and can transfer knowledge to the dedicated supplier enablement personnel or even supplier enablement help desk to facilitate the ongoing enablement efforts and support.

There are ample challenges when performing a global supplier enablement rollout, yet by applying an end-to-end (phased) approach with a constant core team alignment, you are sure to have continuous success throughout the process.

If you would like to know more about how Shelby has helped organizations succeed in their Global Supplier Enablement efforts, please contact info@theshelbygroup.com.

Qingyu Zheng
Senior Consultant
The Shelby Group
qzheng@theshelbygroup.com