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The Market Speaks: Customer asks and challenges of the SxM digital procurement world

Spend Matters

By Nancy Clinton, Spend Matters

In a new series of interviews Spend Matters is speaking with representatives from the procurement world of practitioners, tech solution providers and consultants to discover the word on the street about ‘turning digital.’ We aim to find out what the day-to-day pain points are for the tech users and their processes, what’s causing the low-scale uptake of procurement tech and preventing the elevation of the tech game. In other words, what do practitioners really want from their solution providers?

We spoke with Costas Xyloyiannis, CEO of HICX whose supplier experience management (SxM) platform removes the friction from supplier relations. He shared his experience of the SxM user’s wants and needs according to his customers and prospects.

He began with an example of a very recent encounter with an organization wishing to replace its S2P system. “When it comes to customer demand,” he said, “many organizations don’t really know what it is they want – or need. Companies feel pushed into doing more digital transformation, yet what we are finding is that often they don’t really know what that means to them.

“Simply replacing one S2P platform with another will not make a substantial difference; a slicker interface won’t improve your processes or drive better adoption with your suppliers. This is something that many procurement practitioners have yet to realize. When tech selectors go back time and time again to the same digital solutions, they are jumping from one provider to another without clear articulation of what will drive real value for them.”

A faster horse or a car?

Costas uses the analogy of: “does the customer want a faster horse or a car?”

He explains that the more mature organizations in terms of digital procurement have been through a few cycles of P2P implementation before and have grown to accept that they are better off with a multi-tool environment rather than a suite. “These people want the car now,” he says. “The less mature just want a faster horse; they still believe they can do everything within a suite.”

But the real question, according to Costas should be: “how can I orchestrate the processes of these tools to work better together and connect the data?”

User experience tops the priority list for practitioners

The work of the procurement practitioner is far more cross-functional than ever before. It’s no longer just procurement that touches the supplier or supply chain, and the challenges of ESG, risk, quality and all the other areas that procurement is now taking on do not sit in procurement’s wheelhouse alone. “This cross-functional way of working requires functionality,” says Costas, “and that is what has driven the development and proliferation of these tools. Practitioners are starting to (and need to) care more about the experience of using tech.”

This is the type of challenge and demand that vendors are witnessing. The question is: how are they addressing it?

“One problem,” he says, “is not that the individual tools don’t speak to each other, but that the modules within suites don’t either. Some suites do it better than others, but the majority don’t because they’ve been built from acquisitions that have not yet been, or can’t be, fully integrated.”

“Tech selectors are suffering from a lot of confusion. The notion of a portal is misleading. More often than not, the P2P workflow is internally facing. Yes there’s an element of the PO going to the supplier, and there’s invoice submission from the supplier, but the majority of the workflow is internal from buying to invoice approval.

“So we have these predominantly internally facing tools to automate internal workflow, which all use a piece of the same portal we are encouraging our suppliers to log into. This is actually creating confusion from a supplier experience perspective. Internally AP or quality management might not notice it, but to the supplier it causes a lot of friction and inefficiency. Not all supplier portals are the same and aren’t necessarily set up for the sole purpose of invoice submission or supplier enquiry.

“Solving this kind of experience problem is a big task, and one that we are tackling right now.”

A real-world user experience scenario

In one scenario, a long-term customer wanted to show status of invoices in their HICX portal. When they went live they had 50,000 suppliers logging into the portal daily — they saw immediate adoption. Had they opted for a separate portal, they would have gone through a long journey of enabling all suppliers, because changing the channel can be very disruptive. So what drives real value for the customer can actually come from not replacing all your systems: the faster horse isn’t going to make a huge difference; what matters is a priority on supplier experience. We would suggest that rethinking your processes is real transformation, not taking legacy processes and moving them to a new tool.”

Shift in priorities with data as the backbone

Alongside a fresh emphasis on ‘practitioner useability and user experience’ comes a shift in both CPO and business priorities – as the recent Spend Matters co-authored Deloitte CPO survey found when it interviewed about 400 CEOs. Top enterprise priorities in 2023 include enhancing ESG; ranked seventh on the list in 2021 it has shot up to the second top enterprise priority. But the top two CPO strategy priorities are supplier collaboration and digital transformation.

“Historically, many of the CPO studies highlighted cost as a number-one priority for businesses. The focus on tools and spend management, with cost as the driver, has centered on the transaction. But the transaction shouldn’t be your system’s backbone. Your system should focus on the relationship and a central portal for suppliers where you can plug and play other tools. It takes time to establish such a channel, so you don’t want the disruption of trying to change. It’s a massive task to move suppliers to a different channel. A single channel can drive a huge amount of value in rapid adoption and user experience, and then you can deploy new digital capabilities and see value very quickly.”

There’s certainly a shift in priorities from more than P2P transactions. The focus now is at the macro level, including relationships and cross-functional working. “Supply chains are hugely interconnected,” Costas continues, “and their interdependencies are something people have come to understand since they’ve been exposed to the disruptions caused by pandemic, war, natural disasters and so on. Macro events changed consumer behavior and our assumptions of it and have led to a greater focus on ESG, with consumer expectations from the corporates.

“With ESG now a top priority, whether brought about by regulation or consumer demand, c suites need supplier data more. CPOs whose functions are responsible for supplier relations are best placed to lead that. The biggest challenge though is mapping the supply chain and seeing vital links, because no-one really understands how everything in the supply chain is connected. This pushes brands to ask suppliers and their suppliers for more information. But getting it is far from easy.

“Outdated processes, which are well entrenched, thwart suppliers from handing it over. What this means is that you have to make it as easy as possible for suppliers to furnish you with the information you need. But it’s hard for businesses to drive change internally, let alone externally in a supply chain over which they have far less control. The trick is convincing suppliers they need to help you to manage the ecosystem, but only by improving supplier experience can we improve supplier adoption. These are the issues we are hearing now. And the tools people are using need to address them.”

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