One of the key aspects of an Electrical Wholesale business is that products are purchased to be sold, not as raw materials for manufacture. Wholesale customers can typically buy the exact same product from multiple sources. Therefore, it is critical to managing the complete supply chain as a single entity from sending a purchase order to a supplier all the way through to sending an invoice to a customer.
In the previous blog, I looked at the role of the Transactional Finance Manager in bringing together the AP and AR departments. I will now provide some examples of how the Transactional Finance Manager can use supply chain transformation to become a better customer of their suppliers and a better supplier to their customers.
The aim of these examples is to support the objectives of sustainable growth by improving profitability and service excellence. They focus on the elimination of manual tasks and the reduction of errors through automation, making the organization easier to do business with by freeing up staff to focus on increasing sales and responding faster to supplier and customer inquiries.
One of the additional benefits of automation is the removal of paper from the supply chain which contributes to sustainable business practices through the reduction of an organization’s carbon footprint. The reduction of CO2 results from not just the reduction of paper, but by removing the impact of transporting paper from one organization to another.
Electronic Document Exchange
I deliberately used the term Exchange rather than Interchange as I’m referring to more than just EDI. In the first instance though, Electrical Wholesalers can become much better customers and suppliers by introducing EDI into their supply chain wherever possible.
However, it is important to be aware of what trading partners can cope with in terms of documents and their contents. Electrical Wholesalers are not like typical customers as they order significant quantities of products for the stock, often delivered to multiple branch locations. In addition, there are one-off orders, often placed back-to-back based upon their customer’s needs, with time-critical delivery requirements.
As a result, it is important to work with suppliers to understand what their systems can cope with and how best to use EDI for orders. For example, specific delivery instructions for certain products may always need manual intervention.
Alongside EDI, PDFs are used for a significant number, often the majority, of purchase orders and invoices. Many organizations use OCR or PDF scrape technology to convert PDFs into EDI orders. To become a better customer and a better supplier, Electrical Wholesalers should consider the layout of their PDF documents to ensure that they are easily machine-readable. Selection of fonts, the position of boxes and the text within those boxes (not too close to the edge), images, etc. can all make a difference to what is easy to machine read and what’s not.
Finally, the use of eCatalogs can make an Electrical Wholesaler easier to do business with. It can ensure that branches place orders for agreed items at agreed pricing and that the wholesalers’ customers can easily purchase products from them.
Purchase Orders and Invoices, But What Else?
Alongside Purchase Orders and Invoices there are other documents that Electrical Wholesalers can incorporate into their supply chain documentation to make them easier to do business with.
As a customer, the introduction of Debit Notes can enable an Electrical Wholesaler to be a better customer by facilitating the payment of incorrect invoices quicker and on-time. Rather than requesting a Credit Note with the associated delays of waiting for one to arrive, issuing a Debit Note and paying the balance of the invoice allows funds to be paid to the supplier ahead of resolving issues around the incorrect invoice. Debit notes also enable the Electrical Wholesaler to maintain the correct data in their ledgers.
As a supplier, sending electronic proof of deliveries with an invoice makes it easier for an Electrical Wholesaler’s customers to process the invoice and can have the added benefit of accelerating the payment of invoices for the wholesaler.
Other documents that allow Electrical Wholesalers to become better suppliers are Purchase Order Acknowledgements and Advance Shipment Notices. These can ensure that that the original purchase orders are correct in terms of specific information such as part numbers, pricing, units of measure, and minimum order quantities. However, again it’s important to point out that it is important to know if your customers can make use of such documents and data, especially when they are sent as EDI documents.
Automating Supply Chain Processes
There are a number of processes within the Electrical Wholesaler’s total supply chain where automation can improve the service they deliver as a customer and as a supplier.
One example to improve service as a supplier is to be able to provide stock data from its own suppliers. With near real-time stock information available, an Electrical Wholesaler can provide its customers with delivery times for products that are out of stock in its branches or warehouses, increasing product availability at the time of ordering.
With the majority of orders being sent by Electrical Wholesalers for stock to be delivered to multiple branch locations, goods receipting becomes much more important. Three-way Matching of invoices and purchase orders with goods receipt notices can be significantly more complex than for a typical customer. Automating these processes and in particular, the handling of exceptions can reduce the number of errors and disputes that need to involve the supplier and accelerate the time to pay invoices.
I hope that these examples have provided some food for thought, our experience has shown they will contribute positively to profitability and service excellence. In my next blog, I’ll drill deeper into automation and KPIs, looking at what is best-practice and how to avoid common pitfalls. As always, I would welcome your feedback and comments.