How green do you want your supply chain to be?

Today’s tougher economic conditions, cost reduction and ways to enhance productivity may be dominating the boardroom agenda. But environmental issues are still in sharp focus.

Take car maker Honda for instance.

According to news reports, the company has faced numerous procurement challenges, from last year's earthquake and tsunami in Japan to flooding in Thailand. Now Honda is powering ahead to make its procurement operations greener and improving the sustainability of its supply chain.

There’s momentum behind environmental issues here in the UK too. Around 90 business organisations are backing next month’s Climate Week, Councils, charities and cultural groups are involved too.

Meanwhile, small businesses are being warned that they could lose out on profitable contracts if they cannot fit into a green supply chain.

But would your organisation be more attracted to suppliers because their green credentials … rather than price alone? And do you have any way of making it happen easily – for instance, by comparing two identically-priced products but knowing which is greener?

If you’re interested in exploring the possibilities, then contact EGS.

How important is it … that your suppliers are local?

When procuring goods and services, price comparison is essential. But it may not be everything – to every buying organisation.

Take the Indian government for instance. According to web site Purcon, the furniture giant IKEA is holding off on plans to enter India’s burgeoning retail market because of the country’s procurement policy.

The site says that when India recently allowed foreign companies to have full ownership of stores selling a single brand – there was a condition. Single-brand stores must source 30% of their materials from local firms.

There’s an obvious logic at work. The Indian government wants local businesses to share in the success of overseas-based firms. A potential win/win.

Back in the UK, local/regional public sector organisations may feel a desire to support their local economies at one level or another.

Businesses may also be more inclined to ‘think local’. On one hand, they need to cut costs in the current economic climate but, on the other, there’s the company brand and reputation to think about. Should ‘social responsibility’ extend beyond global environmental concerns to supporting local businesses? After all, many companies already support local schools, hospitals and other good causes.

But favouritism with contracts can equal unfair competition – and fall foul of legislation.

So perhaps the onus is on local suppliers?

They need to prove why being local is of value. When responding to tenders, perhaps their close proximity or local knowledge may result in a better service? They may also team up with national organisations, adding value by being local. Points like these could make a more compelling submission.

That way, buying organisations could be justified in choosing a local submission over any other – but only if strong business reasons make this possible.

NB: If buying organisations have the right e-procurement system, then local, regional and national suppliers of all shapes and sizes can offer their goods and services on a level playing field.

EGS ‘athletes’ get a great run for the money

If you didn’t get a ticket for the Olympics, never mind. It’s the taking part that matters most … especially if there’s money raised a good cause.

EGS’s super-fit … or rather, super-enthusiastic … team of runners put their best feet forward in the Hyde Park Jog to raise funds for the British Heart Foundation (BHF).

As well as clocking up the kilometres, we’ve also been collecting donations and sponsorship for this excellent cause. EGS is also kindly offering to double what we raise as a team.

Once the aches and pains wear off, we may even be at it again! No promises yet. But the BHF are lining up a season of runs and jogs across the country for anyone wanting to take part. What a great idea.

Is this the end for ‘bonkers’ procurement?

“It is bonkers for different parts of Government to be paying vastly different prices for exactly the same goods. We are putting a stop to this madness which has been presided over for too long.”

That’s the Cabinet Office minister Francis Maude, quoted in The Daily Telegraph, as the government targets billions of pounds worth of savings in procurement.

Public bodies have been paying as little as £350 and as much as £2,000 for the same laptop, according to Mr Maud, says the Telegraph.

The problem of paying too much for the same thing made headline news last autumn. Sir Philip Green’s Efficiency Review sounded the alarm – and this blog provided its own insights.

The right tools and mindset is required to achieve big savings. And it’s been happening for years in local government. A lesson surely for central government?

Do you have a hunch you’re paying too much? Would you like to benchmark the numbers?

EGS has helped organisations reduce their key commodity costs by an average 20%, thanks to our Cost Reduction Analysis service. This compares like-for-like goods and services with those available in nationally-agreed contracts. But unlike most services of this nature, which simply hand you a report together with a bill, EGS will take it a step further.

The nationally-agreed contracts are all on EGS’s e-marketplace. So not only will we tell you which contracts will save you money, we will connect you to them online instantly. Savings start straight away. And there’s no need to go out to tender.

Contact EGS for a case study on our Cost Reduction Analysis service if you’re interested.

Why invoice scanning and OCR is no more than an interim solution

The following article first appeared in Peter Whent’s blog “Small Business Syndrome”. Peter Whent is Chief Executive of EGS Group Limited. You can follow his blog here: http://small-business-syndrome.blogspot.com/

Invoice scanning together with Optical Character Recognition (OCR) – digitising paper documents to you and me - is presented by many as the answer to everyone’s electronic invoicing prayers. In fact one company which I won’t name, which claims to be a leader in e-invoicing, is actively promoting it as their strategy. There are several reasons why invoice scanning is not the answer and represents only an interim solution.

The holy grail in the world of e-invoicing is that an invoice should go from creation, to delivery, to approval, to payment without a piece of paper being created. In other words machine to machine with software doing the work along the way. Not a pipe dream at all. Today we deliver hundreds of thousands of true electronic invoices a year that follow exactly this path. And with some ground-breaking new interfaces and tools currently in testing, we expect that number to increase sharply in the months ahead.

Invoice scanning and OCR (in the context of invoice processing) became popular because companies couldn’t persuade enough of their suppliers to adopt a truly electronic method of submitting invoices. This meant they found themselves in no man’s land – paying for an e-invoice solution but still having to retain a small army of employees to handle paper invoices. Scanning and OCR takes the paper, scans it and uses OCR technology to lift the data off the page so that it is useful and uses it to create an electronic invoice. But here is why it is no more than an interim solution:

1. It is at best an inaccurate process. OCR software vendors will tell you they can read characters from paper with 99% accuracy. That may be so with a simple text document in a medium sized typeface. But when it comes to small print on invoices, the reality is that it is a lot less accurate. It only needs to read one character incorrectly in the wrong place for the invoice to fail in an electronic approval process. Someone has to manage these failures and exceptions. People involved in the process? Not what was promised from “electronic invoicing”.
   
   
2. OCR on its own is not enough. The next thing a well run AP department will want to do is validate an invoice before it goes into an approval process so that it doesn’t get lost within the approval process. Validation, which is an automated process, includes all those pre-flight checks before starting an electronic approval process – is there a Purchasde Order (PO) number? Does it relate to an existing PO? Is there a supplier reference? Is there a VAT number? Does the invoice add up correctly? And so on. Even the most sophisticated solutions with people checking every invoice struggle with this. Suddenly the failure rate has risen. More inaccuracies and exceptions to manage. More people involved.
   

Of course the net result of this is that you or your outsourced provider has to incur some real costs to bring this error rate down. Guess who ends up getting stuck with those costs? So suddenly your business plan doesn’t look so good. Where you were expecting to drive the cost of processing each invoice down below £1, human intervention has resulted in costs being much higher.

Scanning and OCR has its place. Even allowing for the absurdity of taking an electronic file, printing it out on paper as an invoice, sending the paper to your customer for them to use an expensive process to turn it back into an electronic file – it has its place. But only if you build your business case based on there being a concerted effort to migrate from scanning and OCR to real electronic invoicing. You should aim over a three year period to turn a ratio of 80% scanned and 20% electronic on its head and have 80% submitted electronically. This is all about being good at persuading your suppliers to send you electronic invoices or online invoices. That is a whole subject on its own!

To see how a good e-invoicing deployment works download a case study here which shows how Essex County Council released 20 AP staff and will save £2.5 million next year by understanding the important distinction between scanning as a means to an end versus scanning as the answer. They now process tens of thousands of real electronic invoices – those that go from creation to delivery, to approval to payment without a piece of paper being created. Invoice scanning was merely a stepping stone which helped them to get there.

Suppliers rail against payment delays

If you’re seething about late trains … what about late payments? The rail industry has them both.

According to The Daily Telegraph, Invensys Rail has told key UK contractors they will have to wait up to twice as long to be paid.

No leaves on the line this time to delay a trip to the bank – or chequebooks buried under the wrong kind of snow.

But, rather, it’s a case of bringing payment terms ‘in line’ with company terms … which means payments two months after the month in which the invoice was raised, according to the report.

Of course, this shunts cashflow pressures down the line to the smaller companies that are coupled to the business.

And they’re feeling it. The Telegraph quotes one supplier saying: "Invensys was already one of the worst payers on 55 days and now it's another 30 days."

Fortunately, EGS has a solution that doesn’t leave suppliers waiting in the cold, agonising over unforeseen delays.

With our electronic invoicing solutions, our customers’ suppliers have multiple methods for submitting invoices incredibly quickly and electronically.

Likewise, our customers find it easier to pay their suppliers within the time agreed within established contracts. Invoice approval is highly automated and becomes a streamlined, hands-free process.

It’s fair, accurate, transparent and predictable. Put simply, everything runs on time.

Why Sir Philip should shop locally for the big answers …

I read about Sir Philip Green’s Efficiency Review with great interest – although the wasteful procurement practices in Central Government made for grim reading.

Sir Philip’s key findings included:
• Identical goods being purchased from the same supplier – but at different prices
• A lack of control and accountability over large budgets

I support the findings. But I would, however, make two points that I feel are important if the report is to have a tangible impact.

Firstly, the Government must move quickly to set out the next steps: highlighting inefficiency is one thing, doing something about it is another. The report has given the issue momentum and there is now a once-in-a-generation opportunity to make a real change to the way that Central Government procurement is conducted.

The second is that giving Central Government the tools to self-heal is not enough – there must be a change in culture before anything else can happen. Sir Philip highlights a culture of “no motivation to save money or to treat money as your own”. This can be overcome to some extent by using the right tools, but the mindset must change as well.

My experience of working with Local Government is that changing culturally deep-rooted processes and introducing tight control through the deployment of technology is the way forward.

Only then can organisations centralise procurement for commodity goods, enforce the necessary controls to ensure compliance and achieve huge financial savings.

Collaboration can play an important role too. Organisations – such as councils – that share services can achieve economies of scale and buying power that are normally only available to much larger enterprises. And this has happened across regions of the UK for EGS’s customers.

If Sir Philip’s report describes the ‘before’ state of affairs for Central Government, I would offer some of England’s County Councils as what the ‘after’ picture may look like.

Sir Philip states that: “the prize for the tax-payer is too huge not to chase”. I welcome this message and encourage the Government to look no further than Local Government to see a clear example of what can be achieved by embracing a centralised approach and procurement technology to introduce efficiency and control.