Digital transformation of the supply chain was underway before the pandemic struck in 2020, but there’s no doubt that COVID-19 has accelerated the process significantly ‒ yet the move towards creating hyper-connected supply chains is not without its challenges.
Here, we look at the barriers that can deter suppliers from embracing digitalisation and explore the incentives organisations can offer suppliers to help overcome these problems.
We sought the views of industry experts from different sides of the supply chain fence: Christophe Lemaitre (CL) is Team Lead, Onboarding Strategy, with Tradeshift, a cloud-based business network and platform for supply chain payments, marketplaces, and apps.
Maria Rey-Marston (MRM), meanwhile, is Managing Director and Supply Chain Innovation Global Lead with Accenture, the multinational professional services company that specialises in IT services and consulting.
What happens when suppliers stick with old ways of working rather than becoming part of a digital network?
CL: A truly digital network is a compelling value proposition because sellers benefit every bit as much as buyers. Unfortunately, that’s usually not what’s on the table.
The fact is that most enterprise software solutions designed to connect buyers and sellers aren’t up to the task. Rather than making it easy for businesses to connect with one another, the majority of digitisation projects fail because they’re designed in islands. Every one-to-one connection is a project in itself, requiring significant time and effort from both the buyer and the seller. The user experience is terrible, and there is often a significant cost attached for the supplier.
It’s not that suppliers are digital laggards but that change almost inevitably means cost. They need to learn a new programme, build a new process, and integrate another system. All that takes time, money, expertise and effort. Many suppliers weigh up all that extra hassle and feel it’s simply not a price they’re willing to pay.
MRM: Technology is not the main barrier today to a digitally connected supplier base. Companies have, by and large, embraced digital POs (Purchase Orders), contract management systems issue requisitions, manage negotiations, and, in the majority of industries, companies have adopted digital procurement practices.
Perhaps the key challenge is more about ways of working for some buyers and the addressing of their concerns related to data privacy, data security, data platforms and data lakes to exchange information in the digital supply network.
What incentives can organisations offer to encourage suppliers to onboard?
CL: Tradeshift started as a free e-invoicing tool for suppliers, so seller value sits at the core of our technology proposition.
We understand that when it comes to convincing suppliers to digitise, they care about three things above all else: simplicity, transparency and speed.
The way Tradeshift is designed takes inspiration from social networking sites like LinkedIn that make it very easy for individuals to join and start exchanging information with multiple connections.
When sellers connect to Tradeshift, they unlock a wealth of insight into their relationship with their customers. Being part of a digital network also means sellers can collaborate with buyers in real-time, leading to faster issues-resolution and reduced payment cycles.
Our network model also means we’ve been able to build and roll-out a growing range of value-added fintech services to sellers on Tradeshift, from early payment options on existing invoices to help with cash flow, through to virtual credit cards for one-off purchasing.
MRM: Yes. Many companies incentivise suppliers to join control towers and provide digital records of transactions that can be tracked and traced.
Incentives include faster payments, access to platforms to enhance the supplier’s visibility of the network and greater access to the customer’s information and future business intentions.
How do businesses convey the benefits of digitisation to suppliers when there are thousands of them in the value chain?
CL: We onboard around 40,000 new suppliers every month, so it’s absolutely possible for businesses to achieve their goals at speed and scale.
Automation plays a key role in identifying, personalising and engaging with suppliers at scale. Our adaptive onboarding approach creates fully personalised invitations for sellers, and in each invite, we provide a real-time status update on outstanding invoices, giving sellers a taste of the value they’ll get using Tradeshift.
We recently started working with a large customer in the transport and logistics space. We were able to show them that roughly 50% of their suppliers were already active on the Tradeshift network. Connecting with these suppliers is then simply a matter of plugging into the network.
MRM: The scalability of solutions based on blockchain, visual analytics and conversational platforms has increased ten-fold in the past few years.
Companies that have a robust cloud backbone for their connected applications and visibility of their network can handle, by design, thousands of suppliers in their supply network.
The evolution of data lakes and analytics has removed the scalability challenge for supplier connectivity. Today, the challenges are more related to strategy, security, data privacy and willingness to co-operate across the network.
What are the main benefits of suppliers being part of a digital network?
CL: The relationship between buyers and suppliers is still largely governed by the exchange of paper-based documents. These heavily manual processes mean finance teams spend the bulk of their time on pretty low-value processing tasks and virtually no time understanding the financial health of their supply chains.
The lack of shareable real-time data also means that finance and procurement departments are often forced to operate in silos. So, when CFOs are tasked with looking at options to increase cash flow, they are often forced to base decisions on fragmented information.
Digitalisation gives teams on the buyer’s side better data to make informed decisions and, ultimately, more time to understand the impact that any decisions they take will have on suppliers.
Plus, the robust data these systems provide on buyer and supplier relationships opens the door to innovations that offer value to suppliers ‒ from increased access to curated marketplaces, where they can seek out fresh commercial opportunities, to digitised financing options that help them unlock faster access to working capital.
MRM: Visibility is king! New Accenture research shows how to design and operate resilient supply networks, and visibility is foundational to that. Supply chains have always been data-rich ‒ full of transactional information that collectively visualised and analysed to help companies make sense of an operation’s status and create live digital twins of global, regional and local operations.
About Accenture Supply Chain Services
Accenture's global team of experts in end-to-end digital supply chain transformation work together at speed to help companies build future-ready intelligent supply chains that create change and drive value.
Tradeshift is a cloud-based business network and platform for supply chain payments, marketplaces, and apps. A total of 1.5mn companies are connected on the platform.