ERP a challenge to growth of electronic payment systems
WEX Inc. has released the results of a third-party survey to gauge views of the payments-processing ecosystem from chief financial officers and senior financial executives across the globe.
The survey of more than 900 CFOs and senior financial executives from the U.S., Europe and Asia/Oceana revealed that strong faith in the cloud prevails in this group.
Large majorities of surveyed executives (the lowest is Asia, with 76%) trust cloud-based systems more than locally hosted ERP/AP systems to keep account payables secure.
A vast majority of surveyed businesses (with Asia again the lowest, at 86%) are currently using cloud-based payments platforms.
Safety, in fact, came up as a primary concern, with 53% of American executives and 49% of European financial executives likely to be very concerned about information security as it relates to payments, compared to just 26% of their Asian counterparts.
But overall, between 58% and 68% of respondents from all regions rated security of transactions as the most important attribute of a payments solution.
The data uncovered six additional key trends:
- Not going entirely paperless just yet: Companies are still writing checks for business payments. Checks are the most common form of payments in both the U.S. and Asia. In the U.S., it's checks first (76%), then mobile payments (75%), virtual cards and accounts (73%) and traditional ACH (73%). In Asia, checks (80%) and mobile payments (71%) also dominate. In Europe, virtual cards and accounts, and BACS/CHAPS are tied for first place, with 57% each.
- E-pay on the way up: Half of businesses have an electronic payables initiative already in place; another third has one in the works. Just about half (50% in U.S., 56% in Europe and 43% in Asia/Oceania) of surveyed businesses have already implemented an electronic payables initiative, and more than one-third (37% in U.S., 38% in Europe and 42% in Asia/Oceania) have one underway. Almost all (89% in U.S., 91% in Europe and 85% in Asia/Oceania) of those who say they have a payables initiative in the works are planning to launch it in the next six to 12 months.
- Suppliers engagement is critical: Financial executives believe maintaining positive relationships with suppliers is as important as introducing new technologies. Overwhelming majorities—95% in the U.S. and Europe, 94% in Asia/Oceania—of those surveyed agree. Additionally, across the board, more than 85% of executives surveyed told us that they have been at least somewhat successful in brokering suppliers' adoption/engagement with electronic payments; more than half (51%) of U.S. executives we polled rated their supplier adoption as very successful. From the other side of the table, suppliers across markets value security and speed of settlement, as well as cost of acceptance as the most important aspects of an accounts payable solution.
- Hungry for more: Appetite is strong for further innovation and disruption in payments. Most surveyed executives agree that payments providers should offer more innovative technology (81% at least somewhat agree) and that consumer behaviours strongly influence their business's use of payments technology innovations (80%)
- Leaders of the pack: The finance/banking industry is seen as a pioneer in the payments and the new technology space. Survey respondents see finance/banking as an overwhelming favorite (54%) to be the first industry to successfully implement blockchain and is seen as the most innovative industry with respect to payments.
- Best on the block: Executives are very optimistic about the effect of blockchain on their businesses. Large majorities of surveyed executives (over 80% everywhere) feel at least somewhat confident in their understanding of the function and capabilities of blockchain and distributed ledger technologies. American executives are particularly confident in this regard, with over half being "extremely confident."
"We at WEX recognize the importance of maintaining a forward-looking perspective on what's happening on the payments landscape," said Jay Dearborn, President, WEX Corporate Payments, WEX Inc.
"The survey findings support our belief that the e-Payables industry and trend is showing no signs of deceleration, and new technologies are key to delivering faster, more secure payments and settlements to companies.
“We continue to innovate in terms of product development in order to provide our customers with the service they expect, as well as the nimble product innovation capabilities and payments security they deserve."
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”