Supply Chains Need to Integrate More Closely with Purchasing Functions

Jan. 7, 2010
In 2010, companies will work harder to connect all departments in their supply chains on a more integrated level, particularly the purchasing and procurement functions

The market downturn is fueling a deep drive for integration and interaction. As a result, all companies will work harder to connect with others in their supply chains on a much more fundamental level. That’s just one of several predictions from Basware, a provider of procurement solutions, has made relative to coming supply chain trends in 2010.

Consolidation across all of the major global industries has demonstrated a desire for closer interoperation between suppliers and buyers, Basware observes. We are already seeing the rise of scalable, and open supply and payment networks, and their ability to speed up the movement of documents in the form of invoices and purchase orders (POs) between organizations will remain compelling. These networks will grow in dominance over the next few years to enable supplier discovery, the negotiation of favorable terms and faster payment–helping companies expand their global reach.

When it comes to risk management, companies will recognize the need for greater visibility of the entire purchase-to-pay function and supply chain, as well as increasingly connected purchase-to-pay processes. Identifying early warning signs of weakness in the supply chain will help businesses mitigate risk, and having better visibility to spend will allow them to improve cash management and take advantage of flexible payment terms, such as dynamic discounting.

On the topic of sustainability, procurement departments will begin to include a requirement for service and product providers to ensure sustainability in their supply chains. The concept of “global impact” will begin to feature prominently in payment processes. On a practical level, the environmental spotlight will fall upon individual processes within the finance department, increasing the appeal of more sustainable practices such as e-invoicing to replace traditional paper-based workflows. Moving 200,000 invoices per year from a paper process to e-invoicing saves enough energy in the paper manufacturing process alone to power 105 40-watt light bulbs 24/7 for a whole year.

Tightened economic conditions and a constant drive for improved efficiencies during the last few years have produced leaner, flatter organizations which have, in turn, led to increased collaboration and functional alignment within businesses. However, at the same time, business service centers are transferring responsibilities to other departments within the organization. While finance teams control policy and governance more tightly than ever before, the responsibility for some areas of cost management has transferred to individual lines of business. This opposing integration and fragmentation of processes span all company operations and will be a major business challenge over the next decade.

“The last couple of years brought a game change for businesses, and we enter the new decade with a clear view of the work needed to ensure that organizations can thrive within evolving market conditions,” says Ari Salonen, Basware’s general manager for North America.