Purchasing Insight

Purchase to Pay, Purchasing & Procurement Process, Electronic Invoicing

Browsing Posts tagged China

Purchase to Pay, P2P and Dynamic DiscountingThe supply chain world is changing. The disruption in Europe recently caused by the grounding of aircraft as a result of the volcano in Iceland; the soaring labor costs in Asia and the far East; the green and ethical agenda that has taken hold in much of the developed world. Doesn’t it tell you something?

The New York Times published an insightful article on the impact of rising labor costs in China on Apple’s supply chain and the iPhone in particular. In response to cost increases Foxconn Technology is reported to be moving hundreds of thousands of workers away from this country’s dominant electronics manufacturing center in Shenzhen toward lower-cost regions far west of here, even deep in China’s mountainous interior. It was Foxconn who, in response to complaints about working conditions that had driven some employees to suicide, increased pay by 20% (The Guardian). It begs the question, how sustainable is the global sourcing model? At what point will consumers say “No” to Apple – even for the sexiest gadget on the planet. When will the cost of risk mitigation tip the balance towards local supplies. And when will there be another Eyjafjallajökull?

Changes in consumer demand, cost and supply chain models that are becoming non-viable and supply risks inherent in globally dispersed supply chains means that it’s time for sourcing to change its mind set: “Think Global. Act Local”

Purchase to Pay, P2P and Dynamic DiscountingIn a recent report by Celent they report the surprisingly low rates of adoption in parts of Asia. China, Japan and India in particular are relatively slow to integrate electronic invoicing.

Why is this suprising?

The reasons for the slow adopting include tardy implementation of purchase to pay processes and importantly, a general hesitancy for business to engage closely with their banks as technology partners. But these issues should not be seen as problems. Rather, they are opportunities.

In the 1990s, the huge boom in business in what was described as the technology sector, stole swathes of market share from established competition largely because new businesses were able to take advantage of new technology without the cost and distraction off having to decommision legacy systems. Using established marketing and business practice and attacking mature pre-existing markets, they were able to leap frog the established competition by standing on their shoulders and launching themselves into the new millenium. This is exactly what China and India can do now.

Electronic Invoicing – With or Without the Banks

Fully automated and integrated purchase to pay processes utilizing electronic invoices to integrate and streamline the financial supply chain  - with or without the banks (see Dynamic Discounting – Kicking the Banks When They’re Down) – is much easier in a growing economy compared to establish economies with legacy business processes and legal frameworks and provides a platform for business with an even lower cost base than Asia enjoys today.