Updated: Nov 24, 2022
The Covid 19 pandemic has been causing widespread disruption across global supply chains. However, it has also highlighted pre-existing issues with procurement and forced leaders into rethinking their processes. In particular, the optimisation of long-tail supply chains, which had already been a long time due, is now top priority.
For many companies, the main priority over the past half a year has been to stay above water by reducing costs as much as possible. But even in these deeply uncertain times, there are also long-term opportunities to be realised. The modernisation and standardisation of long-tail procurement won’t just help now – it will also help drive growth long after the pandemic.
In particular, the need to work remotely has emphasised the importance of new procurement operations, such as online purchases, paperless operations, and automation of Accounts Payable. By harnessing the potential of buying online, businesses can promote greater efficiency, transparency, and adaptability to the constant pace of change.
Drive digital transformation of procurement
An increasing number of companies are offering their products and services digitally, whether it’s software-as-a-service (SaaS), online stores selling physical goods, or subscription-based payment models.
Long-tail suppliers typically account for around 80 to 90% of a business’s supplier portfolio. Yet despite this huge figure, these long-tail suppliers only account for an average of 10 to 20% of the company’s total spend. With new digital tools available, combined with the increasing capabilities of many suppliers, companies can now manage their long-tail spend more efficiently and with the same rigour they do for core spending.
By digitising online payment processes, employees can request and complete purchases no matter where they are. Automated online procurement ensures that employees must get an approval before making purchases, thus reducing maverick spend. Whether approval happens automatically according to business rules or by a manager is up to the business. Complete audit trails ensure there’s no missing information, thus reducing the back and forth between employees and accounting teams. Accounts Payable having to do detectives work to try and link countless invoices to the right buying employee in the organisation is a cumbersome administrative process that many enterprises struggle with on a daily basis.
Simplify Accounts Payable processes
Late and incorrect payments have been a recurring side effect of the pandemic, as companies struggle to navigate around furloughs, remote work, and fewer employees. For example, the UK experienced a 209% increase in overdue payments since the beginning of the pandemic.
Through online payments, suppliers are paid instantly. This means enterprises no longer need to spend a significant portion of their time onboarding long-tail suppliers and manually handling invoices from them. Decreasing the workload on Accounts Payable will significantly free up their time to focus on strategic procurement, which is what matters most during Covid-19. By contrast, long-tail procurement should be as frictionless and automated as possible. Accounts Payable should not have to track down employees to link to invoices that pile up. And they certainly should not spend time creating long-tail suppliers in comprehensive accounting systems based on simple online payments. Automating long-tail procurement is an efficiency booster that enterprises cannot ignore - and for online purchases there are huge benefits to reap. Moving spend to online payments can greatly simplify procurement processes all the way from purchase request to posting of invoices and eliminates the expensive and time-consuming process of onboarding long-tail suppliers.
Ensure compliance and auditing