Supplier Enablement. Converging Procurement and Accounts Payable

Transcription

1 Supplier Enablement Converging Procurement and Accounts Payable April 2008

2 Page 2 Executive Summary Amidst the pressures that plague the modern enterprise, the disconnect between an enterprise and its suppliers remains one of the top areas of concern for professionals looking to increase visibility into spend and garner cost savings. Although procurement executives have long relied on the electronic connection between the enterprise and its suppliers for procurement and sourcing efficiency, supplier enablement is crossing over into a new world: Accounts Payable (A/P). Best-in-Class Performance Aberdeen evaluated over 170 enterprises in February and March of 2008 and distinguished Best-in-Class enterprises by the following two key performance criteria: percent of suppliers enabled and percent of spend under management control. Best-in-Class enterprises: Enable 64% of supplier base, which is 150% more than their peers Place 80% of spend under management, which is nearly twice than that placed by all other enterprises Display requisition-to-order and invoice-to-payment scheduled cost 24% and 34% lower than all other enterprises, respectively Competitive Maturity Assessment Survey results show that the enterprises enjoying Best-in-Class performance shared several common characteristics with respect to supplier enablement strategies. Best-in-Class enterprises: Secure executive sponsorship for supplier enablement activities 76% more often than their peers Utilize supplier networks for catalog management, PO transmission, invoice receipt, and payment processing more often than their peers Are 67% and 41% more likely than all others to utilize p-cards for buying and paying invoices, respectively Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, enterprises must: Ignore the 80/20 rule to enable a greater percentage of supplier base Develop cross-functional coordination amongst procurement, finance, A/P and IT departments, while using leading technologies such as supplier networks Research Benchmark Aberdeen s Research Benchmarks provide an indepth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations Supplier Enablement Definitions An enabled supplier relationship includes any (one or more) of the following capabilities: Business documents (PO, invoices etc.) and communications are exchanged in an automated fashion Catalog content is easily managed online, if a catalog is available Payments are made electronically Supplier information is actively managed through an automated or self-service process (including collection, verification, cleansing, and updating) Spend under management is defined as the spend associated with contractual terms that is processed through the procurement system.

3 Page 3 Table of Contents Executive Summary...2 Best-in-Class Performance...2 Competitive Maturity Assessment...2 Required Actions...2 Chapter One: Benchmarking the Best-in-Class...4 Business Context...4 The Best-in-Class PACE Model...7 The Maturity Class Framework...7 Best-in-Class Performance Advantage...9 Chapter Two: Benchmarking Requirements for Success...11 Competitive Assessment...11 Chapter Three: Required Actions...16 Laggards Steps to Success...16 Industry Average Steps to Success...17 Best-in-Class Steps to Success...17 Appendix A: Research Methodology...20 Appendix B: Related Aberdeen Research...22 Figures Figure 1: Level of Priority Assigned to Supplier Enablement...4 Figure 2: Top Pressures behind Supplier Enablement...5 Figure 3: Top Strategies to Drive Supplier Enablement...6 Figure 4: Transaction Costs across Maturity Class Categories...8 Figure 5: EDI and XML Usage from Figure 6: Current and Planned Supplier Enablement Actions...15 Figure 7: Best-in-Class versus All Others Usage of Supplier Networks...19 Tables Table 1: Impact of Supplier Enablement on Performance...6 Table 2: The Best-in-Class PACE Framework...7 Table 3: Top Performers Earn Best-in-Class Status...7 Table 4: Average Cycle Time across Maturity Class Categories...9 Table 5: Average Cycle Times to Enable Suppliers...9 Table 6: The Competitive Framework...11 Table 7: The PACE Framework Key...20 Table 8: The Competitive Framework Key...21 Table 9: The Relationship Between PACE and the Competitive Framework...21

4 Page 4 Chapter One: Benchmarking the Best-in-Class Amidst the pressures that plague the modern enterprise, the disconnect between an enterprise and its suppliers remains one of the top areas of concern for professionals looking to increase visibility into spend and garner cost savings. Although procurement executives have long relied on the electronic connection between the enterprise and its suppliers for procurement and sourcing efficiency, supplier enablement is crossing over into a new world: Accounts Payable (A/P). Business Context The idea of enabling suppliers to an enterprise's supply chain has gained traction over the last decade. By connecting to suppliers in an organized, automated, and proficient manner, enterprises are able to share data and gain visibility into the large amount of spend funneling through the electronic gap between the two bases. This study found that the majority of enterprises have assigned high priority to this procurement and A/P aspect. Fifty-four percent (54%) of enterprises have indicated that supplier enablement initiatives are very important to the organization, while 18% noted that this process is critical (Figure 1). Fast Facts The top pressure behind supplier enablement is enabling B2B e-commerce with suppliers 52% of enterprises indicated that their top strategy for supplier enablement is to implement a supplier collaboration or supplier information management system On average, supplier enablement reduced requisition-to-order and invoice receipt-to-payment scheduled cost by 24% and 30%, respectively Figure 1: Level of Priority Assigned to Supplier Enablement Low, 15% Critical, 18% Moderate, 4% Neutral, 9% Very Important, 54% Enabling Business and Reducing Costs The majority of enterprises (58%) are most concerned with enabling B2B e- commerce with their suppliers, according to Figure 2. Effective supplier enablement allows better communication with an enterprise's suppliers, as well as improved relationships with those suppliers.

5 Page 5 Figure 2: Top Pressures behind Supplier Enablement Enable business-to-business e-commerce with suppliers Reduce procurement operating costs Reduce accounts payable operating costs Improve quality of supplier information Increase spend under management Increase cost savings from lower payments 58% 56% 37% 25% 24% 23% "As a result of our supplier enablement initiative, in the procurement department we have reduced procurement cost and improved the overall departmental efficiency by allowing FTEs to focus on more strategic tasks. Similarly, in the A/P department, we have reduced costs and errors, especially the time and dollars to correct errors. We have also increased visibility across our supply chain." ~Director, Medium-size High Technology Enterprise, North America As with most of Aberdeen's procurement and supply management research, reducing costs is a top concern for most enterprises. Enterprises feel the sting of procurement operating costs (56%) and A/P operating costs (37%), leading them to enable suppliers more effectively. More so than in previous years, there is an increased focus on the A/P side of the procure-to-pay cycle. Although the heart of supplier enablement lies within the procurement and sourcing aspects of the source-to-settle lifecycle, there is rising attention to enabling increased efficiency in invoice and payment processing by suppliers. Information: The Foundation for Enablement There are many strategies supporting the electronic connection between an enterprise and its supplier base. In the quest to fully bridge the gap over the course of the procure-to-pay cycle, information exchange is the key in ensuring effective communication and purchasing with a broad range of suppliers. Figure 3 shows that over half (52%) of enterprises are implementing supplier collaboration and supplier information management systems as a strategy for their supplier enablement initiatives.

6 Page 6 Figure 3: Top Strategies to Drive Supplier Enablement Implement a supplier collaboration or supplier information management system 52% Measure supplier enablement activities Mandate supplier adherence to standards Channel more business via electronically enabled suppliers Outsource sub-processes related to supplier enablement 29% 28% 28% 28% "Supplier enablement activities have brought us closer to our suppliers in a collaborative manner. In the A/P department we have been able to reduce headcount by implementing e-invoicing and electronic payment technologies." ~VP, Large Consumer Goods Enterprise, North America Supplier Enablement Delivers Prior to enabling suppliers, enterprises process transactions in the procureto-pay cycle mainly utilizing manual paper-based methods. These age-old methods of conducting business have left many organizations in the mire of hazy visibility, maverick spend, and missed cost savings opportunities. By electronically connecting the enterprise and its flow of purchase orders, invoices, and other information to its supply chain, companies experience a wealth of benefits. Table 1 details the many advantages that enterprises have reaped as a direct result of effective supplier enablement. Table 1: Impact of Supplier Enablement on Performance Performance Area Before After Spend under management 44% 51% Percentage of maverick spend 28% 19% Requisition-to-order cost $37.43 $28.58 Invoice-to-payment scheduled cost $32.38 $22.55 Requisition-to-order cycle time 16.6 days 9.4 days Invoice-to-payment scheduled cycle time 26.0 days 18.3 days "Supplier enablement has reduced processing time in procurement and improved accuracy of our payments. The reconciliation process is quite improved now. " ~Director of Procurement, Medium-size Enterprise, North America After the implementation of supplier enablement connections, enterprises have boosted their spend under management and greatly reduced maverick spend, requisition-to-order costs, invoice-to-payment costs, as well as saved time by trimming down requisition-to-order and invoice-to-payment cycle

7 Page 7 times. The benefits of electronic connection are very clear, and in a business age where accounts payable has been dragged from the back-office, reducing invoice-processing costs is an obvious indicator that more enterprises need to electronically enable their suppliers. Top-performing enterprises have not only been more effective in enabling their supplier base, they've also experienced higher waves of the various procurement and A/P performance metrics that are so highly sought. The Best-in-Class PACE Model Aberdeen research has shown that there is a clear relationship between pressures enterprises identify, the actions they take, and their subsequent competitive performance. All participants should examine their prioritized Pressures, Actions, Capabilities, and Enablers (PACE) selections and determine whether there are valuable perspectives to be gleaned by comparison with the PACE priorities of Best-in-Class enterprises (Table 2). Table 2: The Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Enable businessto-business e- commerce with suppliers Implement a supplier collaboration or supplier information management system Measure supplier enablement activities Executive sponsorship for supplier enablement activities Cross functional coordination of supplier enablement activities Standardized and documented supplier enablement processes Dedicated supplier enablement team Electronic purchase orders Electronic invoices Electronic payment processing Spend analysis Supplier networks Purchasing cards for buying and paying invoices Contract repository Supplier self-service collaboration tools The Maturity Class Framework Aberdeen used the following two key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations: percent of suppliers enabled, and percent of spend under management. Table 3 summarizes the average performance of enterprises within the different maturity classes for this study. Table 3: Top Performers Earn Best-in-Class Status Definition of Maturity Class Best-in-Class: Top 20% of aggregate performance scorers Mean Class Performance Percent of suppliers enabled: 64% Percent spend under management: 80%

8 Page 8 Definition of Maturity Class Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers Mean Class Performance Percent of suppliers enabled: 29% Percent spend under management: 53% Percent of suppliers enabled: 15% Percent spend under management: 22% Best-in-Class enterprises have placed 80% of their spend under management, affording them not only greater visibility into their spend but also more frequent opportunities for identified and realized savings. Topperforming enterprises are enabling 35% more of their supplier base than the average enterprises (which have just over half of spend under management control). While investigating the results achieved by Best-in-Class enterprises, Aberdeen found that top-performing enterprises owe their performance advantage to the maturity of supplier enablement activities: nearly 70% of Best-in-Class enterprises have had a supplier enablement program in place for at least two years, with 40% having their suppliers electronically enabled for more than five years. A/P: The Benefits Unfold As evidenced earlier in the chapter, enterprises are starting to shift their focus from strict procurement and sourcing benefits to those of the A/P mind frame. Figure 4 details the scope of transaction costs (for requisitions, payments, and invoices) across the maturity class. Best-in-Class enterprises are currently experiencing significantly lower costs across the spectrum of transaction types due to their high level of enabled suppliers. Figure 4: Transaction Costs across Maturity Class Categories Best-in-Class Industry Average Laggards $22 $28 $32 Requisition-to-order cost $16 $27 $23 Invoice received-topayment scheduled cost $4 $7 $9 Payment processing cost "We have witnessed significant reductions in requisition to purchase order time and improved visibility into locations (international shipment) via electronic advanced shipment notices. We have also improved delivered information via electronic order status docs. In the A/P department, we have reduced mismatches of invoices with electronic purchasing process due to improved accuracy of order and receipt information. Overall, we now witness less manual entry of data (and less errors)." ~Director of Information Technology, Large Mining Enterprise, North America

9 Page 9 Best-in-Class Performance Advantage Not only are the top-performing enterprises seeing the monetary results of their supplier enablement programs, they are also significantly cutting back on cycle times (Table 4). Table 4: Average Cycle Time across Maturity Class Categories Cycle Time Requisition-to-order cycle time Invoice-to-payment scheduled cycle time Best-in- Class Industry Average Laggards 3.7 days 10.0 days 11.7 days 15.7 days 21.1 days 23.0 days By reducing the length of cycle times for invoices, Best-in-Class enterprises have the option of utilizing any early payment discounts negotiated with suppliers, which in turn provides treasury the opportunity to optimize working capital. It's not just the end result that counts; top-performing companies are also enabling their suppliers at a much faster rate than all other enterprises (Table 5). By decreasing the time to enable their suppliers, Best-in-Class enterprises are steadily achieving savings across all of their transactions costs. "We are just piloting the supplier enablement and it has brought great value in our pilot for items such as invoice reconciliation and payment timelines, contract compliance and awareness, and selection process." ~Procurement Manager, Large Oil and Gas Enterprise, Europe Table 5: Average Cycle Times to Enable Suppliers Cycle Times Best-in-Class All Others Enable supplier for electronic PO's 21.3 days 30.7 days Enable suppliers for electronic invoices 25.8 days 33.1 days Enable punch out catalog with supplier 34.3 days 42.8 days Aberdeen Insights Strategy: Collaboration Internal cross-functional enterprise-wide collaboration involving key functions such as procurement, A/P, finance, and IT is an important attribute for managing and streamlining supplier enablement processes. Much of Aberdeen s Global Supply Management research over the past year has highlighted the many benefits of internal collaboration between key stakeholders, such as higher cost savings, reduced off-contract maverick spend and greater visibility into enterprise spend. This research found that internal cross-functional coordination occurs in Best-in-Class enterprises 55% more frequently than in all other enterprises. continued

10 Page 10 Aberdeen Insights Strategy: Collaboration For supplier enablement initiatives, external collaboration with the supplier is also a key attribute for success. Top-performing firms are over 20% more likely than their peers to regularly interact with their suppliers on strategic and tactical issues. Aberdeen research found that enterprises instituting an internal and external collaboration program have seen a wealth of advantages, such as: Greater spend under management control Lower level of off-contract (maverick) spend Reduced cycle times in procurement and A/P departments In the next chapter, we will detail the technologies and actions taken by topperforming enterprises that have led them to the top tier of supplier enablement benefits.

11 Page 11 Chapter Two: Benchmarking Requirements for Success The benefits of effective (and electronic) supplier enablement outweigh the age-old manual processes that were typically paper-laden and slow. The advent of faster enablement solutions, such as p-cards and supplier networks, have allowed Best-in-Class enterprises to decrease transaction costs across the spectrum of accounts payable and procurement / sourcing. Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) Process (the approaches they take to execute their daily operations); (2) Organization (corporate focus and collaboration among stakeholders); (3) Knowledge Management (contextualizing data and exposing it to key stakeholders); (4) Technology (contextualizing data and exposing it to key stakeholders); and (5) Performance Measurement (the selection of appropriate provider solutions and effective deployment of those tools). These characteristics (identified in Table 6) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics. Fast Facts Best-in-Class enterprises enable 64% of supplier base, which is 150% more than their peers Supplier network usage has risen and is expected to rise in the future; in % of all enterprises utilized supplier networks, which increased to 45% in 2008 Almost half of the enterprises (48%) are utilizing p-cards for buying activity Table 6: The Competitive Framework Process Organization Knowledge / Data Management Best-in-Class Average Laggards Visibility into all supplier enablement activities 41% 30% 11% Documented process for supplier enablement 57% 32% 27% Highly automated supplier communications with little to no paper 41% 30% 24% Executive sponsorship for supplier enablement activities 74% 42% 41% Cross functional coordination of supplier enablement activities 70% 45% 45% Visibility into enterprise spend across all categories 65% 35% 18% Utilize standard taxonomy for tracking spend 42% 39% 33% Completed activities related to catalog content management 65% 32% 25%

12 Page 12 Technology Performance Best-in-Class Average Laggards Supplier enablement automation technologies / enablers currently in use: 65% utilize electronic purchase orders 57% utilize electronic invoicing 73% use electronic payments 52% conduct spend analysis 36% utilize automated disbursement tool 36% utilize PO flip 70% utilize purchasing cards for buying 27% self service supplier collaboration tools 33% utilize management dashboard to track enablement activities 48% utilize contract repository 57% utilize electronic purchase orders 43% utilize electronic invoicing 50% use electronic payments 45% conduct spend analysis 29% utilize automated disbursement tool 25% utilize PO flip 43% utilize purchasing cards for buying 16% self service supplier collaboration tools 28% utilize management dashboard to track enablement activities 39% utilize contract repository 43% utilize electronic purchase orders 41% utilize electronic invoicing 38% use electronic payments 21% conduct spend analysis 23% utilize automated disbursement tool 17% utilize PO flip 41% utilize purchasing cards for buying 15% self service supplier collaboration tools 18% utilize management dashboard to track enablement activities 32% utilize contract repository Track compliance with existing signed contracts 74% 48% 37% Manage supplier score cards 45% 38% 24% Well-defined metrics, incentives, and penalties 32% 25% 17% "Electronic invoicing and payments have changed the role of A/P folks from transactional to analytical in nature. A/P has been able to scale up when business is growing without additional FTEs." ~Senior Manager, Medium-size Enterprise, Europe Process Best-in-Class enterprises have demonstrated their aptitude in having visibility into their supplier enablement activities while standardizing processes for their programs. This has allowed them to reduce the time for electronically connecting their suppliers and speed up cycle times at a

13 Page 13 transaction level. Aberdeen research found that Best-in-Class enterprises are 55% more likely to have standardized supplier enablement processes than all other enterprises. Organization Nothing is more important to an in-progress supplier enablement program than securing executive support, which a majority (74%) of top-performing enterprises have secured. With this support in place, Best-in-Class enterprises can implement new technology more quickly and secure better connections in their supply chain. Coordination, much like collaboration, is a key cornerstone for enterprises across the globe. With cross-functional coordination in place for all supplier enablement activity (70%), Best-in-Class enterprises fully acknowledge their connections to suppliers across not only their procurement and sourcing divisions, but also that of accounts payable which, in the long run, contributes to further transaction cost savings. Knowledge Management Superior catalog content management contributes to an effective supplier enablement program and 65% of Best-in-Class organizations have already completed all catalog content management activity, the initial jump-start to electronically connecting all information to a supply base. Performance Management Across all areas of procurement and A/P performance management, compliance is a critical metric. Seventy-four percent (74%) of Best-in-Class enterprises actively track compliance to existing signed contracts, proving that these enterprises are ahead of the game when it comes to supplier enablement. By tracking compliance, enterprises are able to ensure that their connections are not only garnering the negotiated savings, but also the best agreements with all suppliers. Technology Electronic payments have come into the limelight as a means of erasing the burdens of paper-based and manual payment methods. The majority of Bestin-Class enterprises are riding the automation train to higher achievements; 65% are currently utilizing electronic purchase orders for their procurement activity, and 57% are leveraging electronic invoicing to help reduce cycle times and garner cost savings on invoice-processing. Best-in-Class enterprises are also utilizing p-cards to manage spend, an effective tool for obliterating paper payments and overhauling existing A/P processes. Seventy percent (70%) of top-performing organizations are currently using p-cards for buying purpose.

14 Page 14 Aberdeen Insight - Purchasing Cards Overview Developed as an alternative to petty cash and paper-based check request processes, large corporations adopted individual corporate procurement cards as a way to better manage higher volume and low dollar transactions. Today, purchasing cards continue to be used as a low cost, efficient, electronic payment method for small dollar transactions; but, increasingly, enterprises are expanding their usage to address numerous master agreements and pricing contracts, purchase order initiated transactions, and project or recurring services purchases. The cards may be integrated into mainstream business activities and systems for groups such as payables, finance, and purchasing using targeted applications and data management techniques. The level of detail provided by different card programs varies; but, there is an understanding of the overall importance of having Level 3 data, the level of detail typically found on an invoice (including item price, description, and quantity, as well as sales tax amounts and supplier and buyer information). Benefits Purchasing cards provide greater employee convenience and superior spend and invoice visibility for low-value purchases. Transaction cost efficiencies and an opportunity to leverage supplier discounts and rebates are also benefits. Well-run card programs also enable flexible spending controls, strong audit capabilities, and the ability to leverage the invoice data in supplier negotiations. Usage Aberdeen research found that Best-in-Class enterprises are 67% and 41% more likely to use p-cards for buying and paying invoices; respectively. "P-card and PO flip have enabled us to capture more discounted payments." ~VP of Procurement, Large Finance Enterprise, North America XML: Gaining Ground on EDI In last year's supplier enablement study, Aberdeen witnessed a trend that saw Electronic Data Interchange (EDI) usage to have plateaued. As shown in Figure 5, while XML usage has increased by 20% over the past year, and more than 40% over the past two years, EDI usage has remained static over the same time period. Figure 5: EDI and XML Usage from % 34% XML 56% 39% 52% 48% EDI "XML has simplified processed and made our procurement and A/P departments more accessible to suppliers." ~COO, Small High Tech Enterprise, North America

15 Page 15 More interestingly, a very small percentage of enterprises plan to use EDI in the future. Figure 6 shows the current and planned supplier enablement activities. Out of the 48% of enterprises that are not utilizing EDI currently, only 31% plan to use EDI in the future. In comparison, out of the 52% not utilizing XML currently, 62% plan to use XML-based solutions in the near future, indicating that XML-based solutions are likely to gain further ground on those based on EDI. Figure 6: Current and Planned Supplier Enablement Actions Currently Use Plan to Use Electronic fund transfer 67% 17% P-Cards Supplier Networks EIPP EDI XML 48% 45% 38% 52% 48% 24% 32% 36% 15% 32%

16 Page 16 Chapter Three: Required Actions Whether an enterprise is trying to move its performance in the procurement and A/P departments from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements. Laggards Steps to Success Standardize supplier enablement processes. Aberdeen research found that Best-in-Class enterprises are more than twice as likely as Laggard enterprises to have documented processes that are shared both internally and externally. Additionally, Best-in-Class are 41% more likely than Laggards to have their supplier enablement processes standardized across the enterprise. Standardization ensures supplier relationships are managed in a consistent manner, which in turn allows measurement and benchmarking of enablement activities. Secure executive sponsorship toward supplier enablement activities. Best-in-Class enterprises are 80% more likely than Laggards to have executive sponsorship towards supplier enablement activities. Executive sponsorship not only supports adequate funding for electronic enablement projects, but also improves visibility into supplier enablement activities. Aberdeen research found that Best-in-Class enterprises are three-times as likely to have visibility across supplier enablement activities as Laggards. Lack of visibility begets higher transaction costs and impacts the ability to readily identify billing errors, overpayments, and unclaimed discounts in the A/P department. Measure supplier performance consistently. Maintaining supplier score card occurs in Best-in-Class enterprises 88% more frequently than in Laggard enterprises. Measuring and quantifying supplier performance facilitates weeding out low-performing suppliers and promotes aggregation of spend under top-performing suppliers which, in turn, opens avenues for greater volume-based discounts. Conduct periodic spend analysis. Best-in-Class enterprises are 48% more likely than Laggards to conduct periodic spend analysis, which allows data cleansing and improves classification of items purchased. This provides better visibility into spend which, in turn, provides opportunities to aggregate spend under key suppliers. Additionally, spend analysis drives compliance to negotiated contracts, which occurs in Best-in-Class enterprises twice as frequently as in Laggard enterprises. Fast Facts Best-in-Class enterprises are 48% more likely to conduct periodic spend analysis than Laggards Best-in-Class enable more than twice the percent of the supplier base than the Industry Average While Best-in-Class are more likely to utilize supplier networks than all other enterprises, only 45% of the Best-in-Class are currently utilizing this technology

17 Page 17 Industry Average Steps to Success Ignore the 80/20 rule of supplier enablement. Sixty-four percent (64%) of the Best-in-Class supplier base is enabled compared to only 29% of Industry Average enterprises. Enterprises that focus their enablement efforts on the top 20% of suppliers that they believe comprise 80% of spend, suffer operational inefficiencies and problems related to the remaining 80% of suppliers. By enabling a greater percentage of their supplier base, enterprises experience lower transaction cost and cycle times, as enjoyed by Best-in-Class enterprises. Enable electronic A/P transactions. Electronic invoicing and electronic payments occur 33% and 46% more frequently in Best-in- Class enterprises than in Industry Average and Laggard enterprises; respectively. Electronic transactions not only reduce paper in the A/P department, but they also eliminate error-prone repetitive manual tasks. There are many tools to automate transactions including direct B2B integration using EDI or XML, supplier networks, PO flip, and purchasing cards. Our research found that Best-in-Class enterprises are 63% more likely to utilize p-cards for buying and 45% more likely to utilize p-cards for paying invoices than Industry Average enterprises. Additionally, usage of an automated disbursement tool occurs in Best-in-Class enterprises 24% more frequently than in Industry Average enterprises. Develop cross-functional coordination among procurement, A/P, finance, and IT departments. A successful supplier enablement program requires more than just tools; it needs a collaborative, enterprise-wide approach involving key functions: procurement, A/P, finance, and IT. Cross-functional coordination occurs in Best-in-Class enterprises 55% more frequently than in all other enterprises. "Supplier enablement allows procurement to get out of the day-to-day transactional activities and focus on more strategic tasks. After implementing electronic invoicing and payment technologies, we have been able to down size the group and focus on other areas where there are needs for improvement." ~VP of Procurement, Large Enterprise, North America Best-in-Class Steps to Success Leverage supplier experience and expertise. Prior to proposing any standard or enablement tool, enterprises should review previous enablement experiences of other buying enterprises with their suppliers and make a concerted effort to understand the strategic and tactical issues from a supplier's point of view. Some suppliers are more technology savvy than the buying enterprises, and forcing a different technology standard may not be in the best interest of the supplier. Our research found that while 48% of Best-in-Class enterprises have developed strategic relationships with key suppliers, the remaining 52% either plan to engage suppliers at a strategic level in the future or don't plan on developing a strategic relationship with suppliers. Additionally, enterprises should utilize any online, self-service collaboration tools which outsource supplier-related data collection

18 Page 18 to the supplier. This promotes the accuracy and frequency of updates to the supplier master files. Aberdeen research found that while Best-in-Class enterprises are 69% more likely than all others to utilize a self service collaboration tool, only 27% of the Best-in- Class are currently utilizing this enabler. Utilize supplier networks. The definition of supplier enablement has broadened and so has its impact on various enterprise functions. In today's world, supplier enablement has a significant, positive impact on purchasing as well as the A/P department of an enterprise. Of all the available technological solutions, supplier networks are the quickest enablement tool and offer the maximum capabilities to support both the procurement and A/P department, including catalog management, PO transmission, invoice receipt and workflow, and payment processing. Not all networks support these activities. Our research found that while Best-in-Class are more likely to utilize supplier networks than all other enterprises, only 45% of the Best-in-Class are currently utilizing supplier networks to streamline enablement. Aberdeen Insights Supplier Networks: Connect Once and Forget Forever The advent of supplier networks has become a simple, manageable, and effective way of enabling an enterprise to its suppliers. Like other electronic connections, it allows an enterprise to freely share information between two trading partners; however, supplier networks are heralded as unique because of their connect once capability. An enterprise can make a single connection to a network that supports one or more points of management: catalog management, PO transmission, invoice receipt and payment processing, with numerous suppliers. Aberdeen's supplier enablement research indicates an upward trend for supplier network usage. In 2006, 36% of all enterprises utilized supplier networks, which increased to 45% in More importantly, out of the 55% enterprises not utilizing supplier networks, 58% plan to use supplier networks in near future (Figure 6). This benchmark study found that Best-in-Class enterprises are more likely to utilize supplier networks for various enablement-related functions than all other enterprises (Figure 7). continued

19 Page 19 Aberdeen Insights Supplier Networks: Connect Once and Forget Forever Figure 7: Best-in-Class versus All Others Usage of Supplier Networks Best-in-Class All Others 52% 38% 57% 48% 51% 47% 35% 31% Catalog management PO transmission Invoice receipt Payment processing Enterprises muddled with multiple connections with their supplier base should look to these networks as a means of reducing confusion in a manner that will allow them to connect once and forget forever.

20 Page 20 Appendix A: Research Methodology Between February and April 2008, Aberdeen examined the supplier enablement practices, activities, experiences, and intentions of more than 170 enterprises in a diverse set of enterprises. Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on impact of supplier enablement in procurement and A/P departments. Responding enterprises included the following: Job title / function: The research sample included respondents with the following job titles: manager (32%); director (22%); senior management (13%); staff (9%); vice president (8%); and other (18%). Industry: The research sample included respondents from the following industries: finance (11%), high technology (13%), retail (6%), mining / oil / gas (6%), and chemicals (5%). Geography: The majority of respondents (57%) were from North America. Remaining respondents were from the Asia / Pacific region (15%), Europe (22%), and rest of world (6%). Company size: Forty-eight percent (48%) of respondents were from large enterprises (annual revenues above US $1 billion); 30% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 22% of respondents were from small businesses (annual revenues of $50 million or less). Solution providers recognized as sponsors were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge. Study Focus Responding procurement and supply chain executives completed an online survey that included questions designed to determine the following: The maturity and scope of supplier enablement in their enterprise The structured and effectiveness of existing supplier enablement processes, organization and technologies The best strategies for supplier enablement Performance metrics around supplier enablement in both procurement and A/P departments Table 7: The PACE Framework Key Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures external forces that impact an organization s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers the key functionality of technology solutions required to support the organization s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)

21 Page 21 Table 8: The Competitive Framework Key Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance: Best-in-Class (20%) Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) Practices that represent the average or norm, and result in average industry performance. Laggards (30%) Practices that are significantly behind the average of the industry, and result in below average performance. In the following categories: Process What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization How is your company currently organized to manage and optimize this particular process? Knowledge What visibility do you have into key data and intelligence required to manage this process? Technology What level of automation have you used to support this process? How is this automation integrated and aligned? Performance What do you measure? How frequently? What s your actual performance? Table 9: The Relationship Between PACE and the Competitive Framework PACE and the Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.

22 Page 22 Appendix B: Related Aberdeen Research Related Aberdeen research that forms a companion or reference to this report includes: E-Procurement: Trials and Triumphs, October 2007 Supplier Enablement, April 2007 E-Payables: Advancing A/P Automation, March 2007 The CPO s Strategic Agenda: Managing Performance, Reporting the CFO, February 2007 The CPO s Strategic Agenda: Managing People, Managing Spend, November 2006 The e-procurement Benchmark Report, August, 2006 The Supplier Enablement Benchmark Report, March 2006 Information on these and any other Aberdeen publications can be found at Authors: Christopher J. Dwyer, Research Editor, Global Supply Management, chris.dwyer@aberdeen.com Amit Gupta, Research Analyst, Global Supply Management, amit.gupta@aberdeen.com Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte- Hanks (Information Opportunity Insight Engagement Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen or call (617) , or to learn more about Harte-Hanks, call (800) or go to This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc a