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The route to logistics software harmony for finance, AP and procurement

Wednesday, April 15, 2020

5 minute read

The route to logistics software harmony for finance, AP and procurement

Historically, software vendors haven’t always played together nicely. But that’s all about to change. This blog post reveals how an ecosystem approach of collaboration rather than competition can fight the threat of poor visibility (one of the main causes of low margin, inventory and spend analysis capability).

 

Those responsible for, or involved in, influencing the automation of purchasing and invoice processes in a logistics organization know that software can often create as many problems as it solves.

You only have two choices: a brief history of logistics software

Traditionally, many transport and logistics companies have solved software-related problems with on-premise solutions. Indeed, until recently the only way to manage the complex movements of goods required the need to choose between best-of-breed software or a single end-to-end platform.

Option 1 was a ‘jack-of-all-trades and master of none’ solution, often only available at an exorbitant price. Option 2 was using a selection of smaller, tailored solutions that couldn’t communicate with each other. And, while option 1 was often the preference initially, over time, one best-in-class solution has become many.

The nature of mergers and acquisitions, the drive to maintain a competitive advantage and increase market share and market value, and the ever-present challenge of cost-reduction combined to create an untenable solution; what Magnus Bergfors from Spendmatters calls a ‘frankensuite’.

How do you get data out of a frankensuite? You don’t.

The frankensuite of multiple ERPs, CRMs and CMSs creates an increasingly complex web of data with distorted mini-views rather than true visibility. There is a huge amount of information… somewhere… but almost no insight. Everything from accounts payable metrics to spend analysis, sourcing information and invoice-purchase order matching becomes a blur.

At least, that used to be the case…

The time of choosing between a behemoth and a plethora of solutions is over

It may seem ironic, but in order to fight complexity, research leaders such as Gartner are advocating the use of diversity to gain control. Last year Gartner announced their conclusion that today, “most enterprise adopters of public cloud services use multiple providers”, a term commonly known as multicloud computing, or hybrid cloud computing. Indeed, the Gartner survey revealed that 81% of respondents are working with two or more providers.

The ultimate driver: innovation that improves financial visibility and shareholder value

Ultimately, the question is: how can accounts payable, finance and procurement leaders influence working capital, shareholder value and innovation? The answer often lies in increased visibility which provides confidence in an organization’s predictions about its future earnings, based on industry benchmarked purchase-to-pay (P2P) KPIs.

Today, a paradigm shift in tool connectivity means that predictions can increasingly be based on data, rather than educated guesswork. For example, software with powerful visibility analytics tools allow stakeholders to drill down to the details about processes, people and functions, to observe and make plans to remove bottlenecks. Think of it as a multi-plug adaptor that connects data across your supply chain to super-charge it: giving you insightful intelligence so you can take action, make change, and create or influence a process.

Transparency leads to better-informed decision making

According to a recent Harvard Business Review Analytic Services report, 90% of executives say increased business transparency leads to better-informed decision making across the entire organization, and 26% say transparent finance and procurement processes would lead to an 11% to 20% cost reduction.

The better visibility you have at the top, the better an organization is positioned for optimal performance: whether this results in aggregating supplier metrics, influencing buying behavior or making hundreds of other smaller process changes that, when combined, move the needle of profit. In fact, Deloitte’s 2018 CPO survey found that procurement leaders are using analytics for cost optimization (50%), process improvement (48%) and management reporting (45%).

At Basware we talk about a concept called Visible Commerce: the embodiment of true visibility. But, being pragmatic, we realize that the data that can and should inform business change has to come from somewhere – software tools and systems, no matter where the data lives. While we have powerful analytical and e-invoicing tools that show transactions at all levels and help companies gain control of spend, we realize that’s not enough. That’s why we integrate with other software, to combine data and give you the bigger picture, and why we like to see things from a different perspective…

Turning the source-to-pay data collection flow on its head

The traditional process improvement wheel starts from sourcing, through the purchase to pay (P2P) cycle. However, we believe that a data-led approach means that the wheel should actually start the other way around: so that data collection begins with invoicing, and the insights collected from real-world data mean that sourcing comes at the end. By using all the data from disparate systems, it is now possible to see what’s being bought, where, and use that data to inform sourcing, then use contracts to change buying behavior.

Insanity is repeating the same behavior and expecting different results

Does a new world of data mean that transport and logistics firms fundamentally have to change the way business is working? Perhaps? But it is possible to amend processes, step-by-step, to be in line with how other industries are being run today to gain competitive advantage. So, what is the solution?

It’s very easy to recommend software solutions that could solve your problems, but that’s not the real problem that needs to be resolved. Begin by analyzing what’s really going on now with a process, people, and function review. Then consider how you can improve your processes and consult many different software vendors to advise (and challenge) you. You can then combine their experience and offerings in a way that helps you mitigate your business challenges most effectively.

Conclusion

In short: it’s time to fight the complexity inherent in the supply chain by embracing software diversity. This means being brave enough to take a long, hard look at what the numbers are telling you, and using that information to re-imagine business processes for the future.

What should you do next? Get in touch with us to arrange a free consultation and process review. Or download this list of P2P performance benchmarks to figure out where to get started and how to evolve.