So You’re Getting Orders through the Ariba Network...Now What?

 

Austin Whitehead, Senior Product Marketing Manager, Seller Solutions

 

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John Sanborn, a regional distributor of construction material with 1.2M USD in annual revenue, earns the majority of his sales from seven key customers—one of which recently asked John to start taking orders through the Ariba® Network. The recent uptick in the economy has boosted orders and made business extremely busy, yet John doesn’t want to add staff or make any big moves till he’s sure the higher volumes will continue. When he finally sets up his Ariba account, he completes only the required fields and chooses email as his preferred order routing method, requiring no real change to his current process. Relieved to have met his customer’s demand so painlessly, he crosses this off his list and turns back to more pressing matters.

 

Everything’s great, right? Well, yes and no. On the surface, John delivered what his customer wanted—giving the appearance of providing e-commerce without really investing in the process. But he also left money on the table, because his approach short-circuits his chance to realize major top- and bottom-line gains through e-commerce. He also risks losing business to competitors who offer true e-commerce, providing the real-time visibility, accuracy, and efficiency his customers seek. Yet with just a bit more effort, John could reverse this scenario and turn e-commerce into a powerful competitive advantage.

 

The E-Commerce Catch-22

If your e-commerce approach resembles John’s, you may share a common dilemma: you realize that embracing e-commerce could help you delight customers and eliminate many of the day-to-day tasks absorbing your time and resources, but you’re too busy completing those tasks to develop a proactive e-commerce strategy. The result? You stay stuck in reactive mode…and miss out on the big benefits e-commerce can deliver.

 

Removing the Catch: Four Simple Steps to Success

Here’s the good news: you don’t need a fancy multi-year strategy to take your e-commerce results to the next level. Here are four steps you can easily take in the next 12 months to greatly escalate your e-commerce ROI.

 

Step 1: Start Getting Your Ariba Orders Online

Choosing to receive orders online through the Ariba portal, rather than email or fax, allows you to effectively manage all order-related tasks through a single location: your Ariba Network account.

What will it give you?

  • Centralizes access to useful online features that let you:
    • Easily view and search orders
    • Gain real-time visibility into order status, including changes and cancellations
    • Automate order confirmations and ship notices
    • Quickly troubleshoot order problems and fix issues up front
    • Take advantage of e-invoicing capabilities that let you “flip” an order into an invoice with one click

How do you do it?

Go to the administration navigator tab in your Ariba Network account, click “Electronic Order Routing” under “Network Settings,” then choose “Online” as your preferred routing method. This will send orders to your Ariba inbox, where you can easily retrieve and manage them directly through your Ariba account.

 

Step 2: Replace Paper Billing with E-Invoicing

Once you’ve started to receive and manage your orders online, your next step should be to replace paper billing with some form of e-invoicing.

What will it give you?

  • Fewer errors through automated processing and elimination of manual re-entry
  • Faster settlement through:
    • Automated processes and approvals that cut weeks out of the order-to-cash cycle
    • Alerts about invoice problems at the point of submission, so you can instantly correct them and resubmit
  • Real-time visibility into invoice and payment status, so you know when you’ll get paid
  • Detailed remittance advice telling you what payments are for, streamlining reconciliation
  • Online access to early payment discounts, enhancing cash flow

How do you do it?

Ariba offers multiple e-invoicing options, from easy-to-use direct entry and PO-Flip to total invoice automation through integration. You can find basic definitions of each method—along with guidelines to help you choose the best one for your business—by reading this article on e-invoicing. To set up your e-invoicing preferences, go to the administration navigator tab in your Ariba Network account and click “Electronic Invoicing” under “Network Settings.” You can also read detailed information about e-invoicing under “Invoices, Payments and Remittances” in the “Product Documentation” tab of the Help section in your Ariba Network account.

 

Step 3: Measure Your Results

Another key step is to track your results and compare them to industry benchmarks so you can determine the effectiveness of your e-ordering and e-invoicing capabilities.

What will it give you?

  • A clear picture of the business value you’re realizing through e-commerce
  • Awareness of areas where you need to improve
  • Facts and figures that help build internal buy-in for ongoing e-commerce initiatives

How do you do it?

Conduct a “before and after” set of measurements for customers with whom you implement e-commerce. Compile pre-e-commerce information on various KPIs (key performance indicators) to get a benchmark, then measure your results again after 12 months. Below are some suggested KPIs to use:

  1. E-ordering via Ariba portal
    • Basic KPIs:
      1. Percentage of POs received through e-commerce vs. other methods
      2. Percentage of POs with errors, by mechanism (e.g., phone, fax, portal, electronic)
    • More advanced KPI:
      1. Time required to resolve PO errors, by mechanism
  2. E-invoicing
    • Basic KPIs:
      1. Percentage of invoices requiring manual intervention, by invoice type (e.g., paper, paper with PO, electronic PO)
      2. Average DSO, by invoice type
    • More advanced KPI:
      1. Processing time, by invoice type

 

 

Step 4: Assess Potential Benefits

At the beginning of year two, you’ll be ready to add new e-commerce capabilities. But how do you decide where to focus your efforts? The Directional E-Commerce Value Calculator can help.

What will it give you?

  • Ability to pinpoint the e-commerce areas likely to deliver the biggest payoff
  • Accurate information about the ROI you can expect to gain in five benefit categories:
    1. Higher customer satisfaction
    2. Greater visibility
    3. Increased sales
    4. Lower costs
    5. Increased velocity
  • Input to help you determine the level of investment that makes sense in a specific e-commerce area (e.g., if your estimated benefit from e-commerce efficiency is 2.4M USD, a 1M USD  investment is not only justifiable, but may well be the smartest strategy for your business)

How do you do it?

Open the online calculator and enter high-level metrics about your company. Depending on the data you enter, the calculator then shows how your results compare to third-party industry KPIs of best-in-class e-commerce organizations in up to four areas:

  1. Working capital improvement
  2. Efficiency improvement
  3. Increased wallet share
  4. Increased customer retention

Next, click on the “Results Summary” page to see a tally of your overall e-commerce opportunities plus a callout of the specific area where your ROI is likely to be highest. You’ll also see a list of your estimated gains in each of the five benefit categories mentioned above.

 

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The Results Summary page offers a detailed breakdown of where and how much e-commerce will benefit your business.

 

Questions?

To learn more about how you can target your e-commerce efforts to maximize ROI and collaborate more effectively with customers, please contact me at mwhitehead@ariba.com.

 

This article is part of the current issue of Ariba Supply Lines. Ariba Supply Lines is a quarterly newsletter that provides valuable tips, best practices, and the latest thinking to take your online business relationships with your buying customers to the next level.

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