Expert Guide #2: eTrading for the Construction Industry
The second blog in our series of e-trading for the Building & Construction industry by COINS P2P expert David Bullock. Find out how to manage the business transformation process of electronic trading and explore some of the 'gotchas 'and things to avoid. Improve your e-trading by attending the COINS Conference where David Bullock will be delivering a variety of sessions on topics such as eProcurement
Expert Guide 2 - Managing change when implementing an electronic trading solution
As we discussed in Expert Guide 1 the rewards for both your business and those of your supply chain partners are profound when adopting an electronic trading approach using construction software. This business transformation should not be underestimated and in this guide we will discuss some of the challenges ahead.
As with all business change, careful consideration is required to manage the scope and speed of change. Planning, communication and buy-in are key steps to effective project management and/or change management within any construction organisation.
At the start of the process we undertake an initial readiness assessment exercise to identify key areas of concern and gather relevant information, to assist you (and us) in developing an implementation plan; this prepares the ground for what is to come in implementing an e-trading construction software solution.
Successful change management relies on achieving buy-in and sponsor vision across the construction business. To manage this effectively COINS will assist in planning a series of keynote/sponsor sessions and developing sponsor messages to be communicated across your business. It is important to keep everyone informed, at every step - nobody likes surprises so timely and effective communication is essential.
COINS work with you to help create an effective communication plan utilising a range of communication channels, from emails and surveys, to workshops and webinars. Providing a high level ‘this is what is coming’ message to your internal teams and supply chain partners is paramount to success - after all, they are a key component of this, and need to be included in the process.
We also work with construction businesses to formulate key answers to the ‘usual questions’ which is helpful to avoid initial potential resistance. COINS also recommend setting up a ‘steering group’ amongst the user base to help identify e-trading champions for the implementation process.
Often we adopt a ‘forum’ approach using tools such as SharePoint and Teams to disseminate information, provide updates and allocating tasks. A risk-register which is updated and reviewed at our regular project management meetings, also helps to keep everything on track.
Finally, we always aim to improve what we do; we will work with your construction companies on ‘lessons learned’ and ask for feedback from across the business.
Things to look out for when implementing electronic trading within a construction business
When we implement our electronic trading solution (COINSetc) we typically start with the invoices received as this is often seen as a ‘quick win’ in terms of the time and cost savings.
However, trading electronically is not quite as simple as turning on a tap, it is like having multiple small projects to onboard your supply chain partners. Based on our years of experience we have outlined below the main areas requiring attention when implementing electronic trading solutions, and COINS approach to managing and mitigating risk.
Procurement in Practice
Every company is different when it comes to procurement; how we raise and deal with purchase orders, goods received notes (GRN’s) and invoices are different, even though they may follow a similar pattern.
Electronic Trading is not about flicking a switch - it relies on communication, collaboration and knowing exactly how your business ‘ticks’. It is more than converting a supplier file from a pdf and sending on an XML file, it is about how an organisation manages its processes through the use of software systems, what happens to the financial data when it hits the ledgers, what specific rules can be applied, and how we can feed intelligent data back to suppliers.
This is true electronic trading, and one that requires some thought to be most effective and therefore most beneficial to your business.
To really understand how your business operates, COINS undertakes a ‘Procurement Review/Audit’ which helps to identify those areas which are specific to your construction business that may need special attention. We often refer to these as the ‘gotcha’s’. These are the areas that may come un-stuck if we just fire across any old XML file and hope for the best!
Onboarding of suppliers
On-Boarding electronic trading partners is a key function of any e-Trading Solution and COINS have a wealth of experience at supporting this process.
The Pareto principle (also known as the 80:20 rule) states that, for many events, roughly 80% of the effects come from 20% of the causes.
Experience tells us that our construction industry customers tend to gravitate towards this principle and receive 80% of the volume of documents, for example invoices, from just 20% of their supply chain. We can work with you to identify the 80:20 split across your supply chain, and also identify suppliers that are already trading through the COINSetc hub. These are the ones we work with first; they can be onboarded and begin trading with the minimal amount of time and provide a very quick return on investment. After that we focus on small, controllable batches of suppliers in a managed approach to minimise risk and disruption.
How we onboard suppliers with you
A typical COINS eInvoicing project is delivered in three phases:
involves engagement with existing COINSetc suppliers, starting with the 80:20 rule. We work with each supplier to ensure paper invoices are replaced with electronic transactions in a timely manner. At the same time the COINS eCommerce module will be configured, and training provided to key users.
- Key steps within this phase include:
Supplier communication – ensuring that both yourself and your suppliers are fully aware of what is happening and importantly why it is happening.
- Supplier engagement – bringing on suppliers in managed bundles to ensure a smooth transition from paper to electronic means.
- Mapping process – ensuring that your supplier invoices (and importantly the key data elements) are effectively mapped to the correct data fields.
- Testing – not to be overlooked, it is so important to understand the data coming in from your suppliers and how it affects your ledgers
- Feedback loop – deal with identified issues to resolve individual supplier problems and learn from the process
- Acceptance – all good, then we can switch over to business as usual for these suppliers already on the COINS system
Phase 2 involves engagement with your other key suppliers. We work with you to jointly host supplier seminars to explain the eInvoicing project that is being undertaken. We then engage with these suppliers to ascertain their capability and sign them up as members of COINSetc construction erp.
Phase 3 involves receiving as many electronic invoices as possible from all other suppliers. This can be achieved by one, or a combination of, the following methods:
- Providing PDF invoices which can be converted to XML eInvoices
- Purchase Order Flip
- Manually keying invoices at the Hub
In addition, we assist you by taking part in marketing events and meet the buyer days in order to educate your supply chain on the benefits to be gained by trading electronically.
Lack of Supplier Contact Information.
For a major roll-out the biggest single barrier, when thousands of suppliers are involved, is the inability to communicate with the correct individuals at each supplier, be they the people that provide authority to proceed or the technical contacts. This can seriously affect the onboarding of the supplier and delay the whole project.
Our advice to mitigate this… is that a thorough review of supplier contact information must be undertaken. This is especially important when the volume of invoices exchanged per annum with a supplier is a low number, as this could equate to many hundreds (even thousands) of smaller suppliers.
Survey your suppliers.
We would normally recommend surveying suppliers once correct contact detail have been established. This will help to identity technical capabilities and, more importantly for complex organisations, the account structures the supplier holds.
For larger suppliers this is rarely an issue. However, as we progress down your supply chain, either due to lack of understanding or lack of resource, compliance reduces.
Our advice to mitigate this…Implementation of a strict cut-off date and process. Inform all suppliers in scope that you will not process non-electronic invoices after a given date. This can lead to resistance or reputational issues, so you will need to manage this process. We often assist this process by creating some ‘quick win’ and ‘benefit statements’ for use with the supply chain.
When a supplier that is in scope sends a non-electronic invoice, you need to send back a consistent message stating they must submit their invoices electronically and that paper invoices cannot be processed for them. You may provide some leeway for AP teams to process a single invoice to ‘help’ the supplier but with a warning that no further invoices will be processed unless electronic. Again, we can help establish this communication process and provide sample messaging.
Lets ‘walk in your shoes’
Converting a document into a standard XML format that others can read is the simple part. What is often overlooked are the nuances and vagaries of your business. We work closely with our construction industry partners to understand exactly how you work. We like to '‘walk in your shoes’ to discover the real issues and the peculiarities of how you operate ensuring a smoother transformation project. Adopting electronic trading is only the beginning. By understanding your vision and strategy in terms of procure 2 pay and your ‘bigger picture’ we are able to address your challenges together and ensure we are both heading in the right direction.
The COINS 2019 User Conference, 'Building Value Through Collaboration' is on 12th and 13th June 2019 at The Lowry, Salford - book tickets at constructioninnovation.com
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