Supply chains are evolving into complex networks of commercial interactions
Espoo, Finland 28th March 2012 – Global finance executives are concerned that the interdependency between suppliers, partners and customers, a consequence of increasingly complex supply networks, is creating commercial risks for buyer organizations, according to a report by Basware.
The second chapter of The Cost of Control – Disrupted Networks report, the third annual study commissioned by Basware, provides insight into the opinions and priorities of over 550 finance executives around the world. This chapter looks at the impact that the increasing complexity within any web of commercial interactions is having on buyers and suppliers and the implications of late or erroneous payments.
As a positive consequence of this networked commercial world, buyers are beginning to recognize suppliers as equals and take into account suppliers onward commitments to their own suppliers. Concern, however, exists around the impact of tight credit lines and late or erroneous payment as it puts pressure on suppliers and directly impacts the buyer. According to the report, finance executives believe 15% of invoices remain unpaid past their payment terms yet two thirds understand late payments cause problems for their suppliers, and 38% acknowledge that their late or erroneous payment to suppliers impact the suppliers’ commercial performance to the same level as it would their own business.
Concern also exists around the visibility of activity within the supply chain. 59% think the visibility of supply chain activity and supplier payment is becoming more difficult due to the increasing complexity of the networks. 64% believe that the transparency of an open and collaborative supplier network helps to overcome some of these challenges and provides a more effective basis for sustainable cost savings than closed or exclusive network environments. To take advantage of this networked world and to work effectively, transparency for all parties and automation is key.
When asked what the most significant challenges are when making improvements to purchase-to-pay (P2P) systems, 46% of finance executives’ state the biggest challenges are the lack of flexibility of these systems and that changes made can disrupt complex supplier networks. However, 62% claim connecting disparate parts of the purchase and payment process within their business is critically important in the next 12 – 24 months.
Esa Tihilä, CEO, Basware comments: “Supply chains have become a complex web of commercial interactions and each organization that is part of the network has a role to play in minimizing commercial risk. Finance executives are aware that late or erroneous payments will create problems for their suppliers, yet late payments still exist. Businesses are recognizing buyers as ‘equals’ but the quality of this relationship is held back by a concern for the commercial risk on their own organization. To navigate the complexity of these supply chain networks successfully, buyers and suppliers need to focus on building collaborative relationships and sharing information.”
Taking a deeper look at how organizations can improve collaborative interaction, 56% deemed shared information and e-commerce systems to be the most effective methods of enhancing businesses collaboration across disparate supply chains and improving the way companies interact on a commercial level.
Esa Tihilä, CEO, Basware continues: “Cash flow visibility continues to remain a key priority for finance executives. An open network creates a more effective basis for achieving this visibility and therefore sustainable cost savings. In a closed network complete visibility is challenging and the supplier can incur increased and unpredictable costs. An open network approach embraces every size business and enables all parties’ access to multiple automated formats, so there are no restrictions over the size of company an organization can do business with.”
Peter Smith, Editor & co-Managing Director, Spend Matters UK / Europe: “The Basware report is interesting for procurement executives in that it gives a clear view of how senior Finance people see buyer / supplier networks and the key issues around them. It gives a good sense of both the positives, around greater inter-connectedness of buyers and suppliers, and some of the risks and challenges that such closeness can bring. Not surprisingly, the report also shows that CFOs are very aware of cash flow and payment issues, but that’s an area Spend Matters believes many procurement organizations need to focus on more strongly than they currently do”.
For a full copy of the latest Cost of Control Disrupted Networks report please visit: http://www.basware.com/knowledge-center/cost-of-control-report-2012-disr...
About the research
The Basware Cost of Control research features insight from 550 FD and CFO level respondents, across USA (100 interviews), UK (100), Scandinavia (100), Germany (100), Australia (50), Benelux (50) and France (50). Respondents had a minimum of 1000 employees and were screened for decision making responsibility and budget management on behalf of the entire organisation. Respondents were screened via telephone and participated in an online survey.
Basware is the global leader in cloud based e-invoicing and purchase-to-pay solutions with more than 1,000,000 users in over 60 countries. Basware’s B2B Cloud solutions and services provide an open, secure and global ecosystem for buyer and supplier collaboration, connecting more than 1.9 million buyers and suppliers globally. The solutions are architected to meet the needs of SMEs and global enterprises and are built upon Basware’s deep knowledge and experience of B2B financial processes, coupled with intelligent cloud connectivity and the Open Network. With Basware, organizations benefit from more efficient procurement, accounts payable and accounts receivable processes, sustainable cost savings, better insight to cash flows and improved buyer-supplier relationships. The solutions are available via the cloud, on-premise or through business process outsourcing in Europe, the US, and Asia-Pacific through an extensive network of Basware offices and business partners.