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Supplier perspectives on the challenges of eInvoicing with the public sector

by Roman Weber created on

The PEPPOL vision is to make it easy for suppliers to deal electronically with their public sector customers throughout Europe. In an interview with PEPPOL.EU, a multinational supplier selling both to public and private sector customers sheds light on the market issues suppliers face when adopting eInvoicing and how PEPPOL can address some of their challenges.

PerkinElmer is a multinational technology corporation, focused in the business areas of human and environmental health, including environmental analysis, food and consumer product safety, medical imaging, drug discovery, diagnostics, biotechnology, industrial applications, and life science research. PerkinElmer is part of the S&P 500 index and operates in 150 countries.

PerkinElmer’s customer base includes universities, hospitals, environmental government laboratories and some of the largest multinationals in the healthcare, chemical, food and oil industry. The company uses a number of service providers for business automation depending on the country, industry and tools.

The PerkinElmer client base is composed of 30% public sector clients and 70% private sector and PerkinElmer has sales offices in most EU countries. Of the business that PerkinElmer has already automated, PerkinElmer has bilateral eBusiness trading agreements with some of their clients (25%), while they use service providers to integrate with the other 75% of their trading partners.


PEPPOL interviewed PerkinElmer because their eBusiness experience and knowledge may be valuable for other suppliers facing the same challenges when adopting eInvoicing and considering the business case for PEPPOL.

Below results of the interview are reported.

 

PEPPOL.EU: What are the key challenges that PerkinElmer faces for eInvoicing with the public sector in Europe?

PerkinElmer: eInvoicing is still in its infancy in Europe and North America, there is a lot of potential with several initiatives going on but also challenges, with so many different formats and standards, which is typical of the early development stage of the industry. We have a very skilful and dedicated team in house that focuses on Procure to Pay automations with customers. We will try to accommodate our customers whenever we can, but after 6 years of doing e-invoicing projects we can say that there are some real challenges for us as supplier.

1- The first challenge relates to the different standards and formats we have to support.

We currently support many different standards, versions of standards and formats and this is not sustainable anymore. If you look at the cost benefits of automation, supporting 4 different standards represents a break-even point for us, dealing with 2 or 3 standards would put us in a very good position, but having to support one single standard would result in huge savings, as we would realise the real benefits of business automation with minimal setup and maintenance costs. Every new format or standard requires training, learning the codes, developing and testing new code, and then maintaining it. It is a serious investment and maintenance cost.

For example, in the Nordics, governments pushed for eInvoicing and countries like Sweden mandated national standards. This is an additional burden for us, as we are told to follow a new standard.

It is very difficult for us to decide to invest in a new e-Invoicing standard or network, as
• It is a significant investment to automate for a new standard, cost wise and resource wise
• We don’t know how well a new standard or format or network will be adopted and from our experience we know that many of these initiatives and standards will disappear
• We don’t know how many more new standards will pop up in the future so it is very hard to plan and budget for this
• PO flip in a new system/environment means taking on extra work, require extra resources and accept process changes on a permanent basis. We found that, once we agreed to do PO flip, moving back to paper based invoices is extremely hard. Therefore we will reject most requests to do PO flip with new customers

Internally, we have to define criteria to evaluate every new project if it is a good investment for us, otherwise we will not support it. We are now rejecting most of the requests to support new e-invoicing formats or initiatives.


2- The second challenge relates to the business models, as there are myriad of fee structures that service providers impose and that are completely different, some of the fee structures are even difficult to understand.

There are several fee structures that service providers typically use for e-Invoicing: from free for suppliers, a fixed subscription fee, a fixed fee per invoice to a percentage fee on the amount of the invoice. So, in addition to the technical complexities we also have to evaluate the fee structure when deciding to support a customer’s request for e-Invoicing or not.
Some service providers have acceptable fee structures but there are others that for example charge a percentage of the amount of the invoice, so the exchange of a large invoice could cost us 1.500 Euro or more, even though it is exactly the same process whether you exchange a 100 Euro or a 1 million Euro invoice. This simply does not make sense economically. In such case we will contact the customer and revert back to a 100% manual process for a large invoice. This obviously defeats the whole purpose of automation for both customer and supplier but it allows us to save a significant amount of money.

In general, a fixed fee, or a fee based on the number of invoices exchanged, or on the number of relationships is acceptable, however the challenge for us is that we have to support different platforms with different fee structures, and we need to analyse the type of business we do with each customer and the fee structure we would have to pay when deciding if it makes sense to support the customer’s request for e-invoicing. If you have several service providers for different processes and countries even fixed fees can become a challenge because we incur this cost multiple times, once for every network.

Doing business electronically can benefit both sides – buyer and supplier – but if many clients choose different platforms that we have to support, it becomes impossible for us to support all of the platforms and related fees for all of our clients.

We would like to work in an open network where customers and suppliers can choose their own access points and the service providers that provide the best added benefit for them. We know that some service providers are following this route but we would like to see more of them. We would like to see all of these different closed networks converge towards an open network, because we need integration. It would be of great benefit for us if the current fragmented environment could be harmonised in terms of standards, access points and fee structures.

3- Another challenge is lack of focus on the bigger picture and the myriad of isolated initiatives

After 6 years we found that submitting invoices electronically as a standalone initiative brings little value to us as a supplier. We have streamlined our paper invoice process a long time ago so the cost of raising and sending a paper invoice is very low for us, often lower than the fee we would have to pay to the service provider. Also, we found that the positive impact on (on-time) payments is very low.
e-Invoicing becomes more interesting for us as supplier when we can have other benefits, f.ex visibility on the invoice and the payment status information, at a minimum. Ideally, we want that the customer’s purchase orders be sent electronically to us so that we can automate these. This gives us similar benefits as customers get with e-invoicing. These functionalities are present in some portals but again, there are so many portals that we cannot follow all of these portals manually. Therefore, the benefits quickly get lost, and for example cash forecasting is impossible for us.

Unfortunately, many customers approach us with a focus on e-invoicing only and there is no real dialogue possible. e-Invoicing is a lot more beneficial to us in the broader Procure to Pay or Source to Settle picture. Customers that approach us with this more holistic view of cooperation and mutual benefits will find a great partner in PerkinElmer in realizing our mutual goals.

We have to provide and maintain our company profile (VAT, company information, etc.) up to date on all the portals of our public sector clients. We have to support many portals with different profiles. PerkinElmer have thousands of customers and it is extremely challenging, if not impossible, to keep the information up to date on these different portals, where the process is always different. This is a key issue. Processes should be harmonised, even if the type of data we have to include can be different. We cannot afford to automatically interface with thousands of portals which can change overnight!

Today, in many purchasing departments, knowing which companies certain tenders should be sent to or who should be notified does not happen always automatically but simply because the purchasing team knows the right companies. Notifications to select the appropriate supplier profiles which better fit with the tender requirements should be automated. However suppliers cannot maintain thousands of profiles for different portals. The process for building a profile and updating the information should be standardised. The information to include can differ according to specific product/service requirements but that is not an issue if the process is the same (something like the PEPPOL Virtual Company Dossier).

4- The last challenge we see is that e-invoicing brings a lot of customer variance in our invoicing processes

Paper invoicing is a universally accepted practice and is a standard process for any supplier. However, with e-invoicing the checks of the incoming invoices are pushed to the supplier side and this creates a lot of business variance in the supplier invoice processes that must be managed. This business variance comes on top of the technical variance with standards and formats that we have to manage. For example, we need to manage which customers accept which standards of Units of Measure. We also see differences in how customers want to treat credit and rebills. And customers have different requirements for treating shipping and handling costs on our invoices.

In the past, customers AP teams would take care of these differences when they booked the invoice in their ERP system, but with e-invoicing suppliers are supposed to manage these business variances for all their customers.


Given these challenges we are in favour of an international or EU-wide initiative to standardise the e-Invoicing phase but also all the other pre and post-award procurement phases.

The ultimate goal for customers and suppliers should be to automate the whole procure to pay process with one single standard, the more it is standardised and automated, the better for all of us. There should be standardisation rules to comply with, both in pre-award and post-award, for example for RFP’s, e-Catalogues, Purchase Orders, eInvoicing, payments, etc.

However, if you take out only one phase of the Source to Settle process and try to automate it, this may be counterproductive. Initiatives that only take into account one phase of the procurement process will typically end up lower on our priority list than initiatives taking into account the bigger picture and value to the supplier. Having one standard for eInvoicing is beneficial if we can use it throughout the processing cycle from eCatalogues to completion of payments - fully integrated.

 

PEPPOL.EU: Could you provide an example of the challenges?

PerkinElmer:

For example, we received a request recently from a public sector client to set up our profile on their purchasing system:

Although they already have our records on file, since they are moving to a new electronic system, they will send us a setup e-mail from their marketplace with our login details where we will have to update their system with our profile details. We will then be receiving ongoing e-mails telling us to pick up the purchase orders we receive from their eProcurement system, from our new login area. We can send back an electronic invoice based on the purchase order through PO flip. Once in the system, we will also get a reminder to handle the invoice, and following notification of ‘Good Receipt’, we will get a notice to activate the payment.

This is one more ‘access’ for us to manage, another place to maintain our supplier profile and worst of all, it requires us to log in to pick up our client’s purchase orders. Currently, we receive the client’s orders by fax or e-mail with all the details readily available for our Customer Care team to process. FYI, we scan the incoming faxes as an image, they are not printed. Not to mention the challenges we would face if we would try to do PO flip in their system.

This initiative may make sense for the customer, but there is no automation, no collaboration on this new initiative and frankly, we don’t see any value of this model for us as supplier. If we would like to automate anything in this model we would likely be confronted with other standards, another access point, and a customer with little expertise, support and bandwidth.

Customers should not be surprised that they get little adoption from suppliers on this type of initiatives. This is exactly why some e-Procurement initiatives are counterproductive and hurt the progress of the overall e-Procurement landscape in Europe.

 

PEPPOL.EU: Do you face the same challenges in the US market?

PerkinElmer: In the US we see less fragmentation, 4-5 standards have been embraced and they don’t have VAT challenges as in the EU. It seems that the market there has evolved naturally with a few dominant service providers who were able to capture market share very quickly and impose their standards. Also, we see a more holistic approach in the US so we can compensate the complexities with benefits for us.

In Europe, the situation is a bit different, service providers have a number of barriers when entering a new national market and this fragmentation causes overhead for them to move to other countries. They are typically able to focus on a few countries in Europe, like Nordics. We think that this is due to different languages, different local regulations, fiscal requirements, etc. Since the process to expand business from one country to another can be lengthy and complex, there was a vacuum that allowed small, local initiatives (such us national standards, or local networks) to develop, increasing market fragmentation.

Unifying all these initiatives would be of great benefit, as the current landscape is limiting the business case for automation.

 

PEPPOL.EU: How do you see the market evolving?

PerkinElmer: We see 3 ways in which the market could evolve:

1- Market regulates itself, by means of mergers and acquisitions so we have a situation that resembles the situation in the US
2- The service providers voluntarily provide interoperability between their networks
3- Government regulation

In Europe, the level of fragmentation seems to keep increasing and we haven’t seen many consolidation or integration efforts from the service providers. Because of the differences between service providers and their different market positions, it seems that 100% interoperability will not happen any time soon, so we believe that the quickest and best solution would be to have government regulation for the public sector, for example imposing a specific standard. The public sector really should embrace one single standard across Europe. This would make e-Procurement much more accessible and affordable for public customers and their suppliers.

If PEPPOL is successful, by making it mandatory for the public sector, we believe it will be quickly adopted by the private sector. Suppliers like PerkinElmer, with 30% of our business coming from the public sector would be obliged to follow the Peppol standards for their public customers. This would ensure adoption by many suppliers. Private customers would know that, if they use the EU public standard, they will get adoption from many of their suppliers since they already have to support this standard for public customers. And supplier adoption is the biggest hurdle for any customer to overcome with e-invoicing.

Today, with all the automation efforts we have done we are still sending less than 10% of our invoices electronically using multiple standards. Having 1 standard for the public sector in EU would mean that we would send 30% of our invoices electronically with 1 standard. We, as suppliers, are looking forward to seeing this happen, and we can easily see PerkinElmer actively promote or even impose the public standard to our private customers approaching us for e-Invoicing in order to reduce overhead, costs and variances in our current invoicing processes.

 

PEPPOL.EU: How can PEPPOL address these challenges?

PerkinElmer:

1- Providing one standard for electronic documents through which we can do business with all our public sector clients across Europe

2- Reducing the number of islands of closed networks and gateways we have to support – just 1 PEPPOL Access Point to reach everyone in Europe. At the moment we have to support almost 30 points of access globally (incl direct customer interactions), and this number is increasing.

3- Indirectly, we believe that more integration will harmonise the fee structure, or the cost structure, which should be more related to the actual benefits suppliers get from the automation, this is what we are willing to pay for. There are certain service providers who require a fee simply “to be” on their network.

4- To achieve interoperability, service providers will have to play a different role. Some of them seem to be trying to keep their network closed, in order to keep control of their customer base and their revenue stream. Sometimes the discussion does not seem to be about the progress of e-Procurement in Europe as a sector, but about control of their network. With PEPPOL, we hope to see increased market competition and dynamics, where clients can no longer impose their service providers on us. We will have access to the open and secure PEPPOL network, being able to choose freely for the providers that give us the most added value. The same will be true for customers and the focus will be more on added value than on control.

5- We believe that if PEPPOL is successful e-Procurement will be much more accessible for public customers and their suppliers, even for small companies. This will give e-Procurement in Europe a big boost, make the market more dynamic and facilitate doing business in Europe.

However, the success of PEPPOL is highly dependent on the European Commission to mandate it across Europe for all public authorities. The standardisation benefits that PEPPOL brings are more than enough to justify our support. If the public sector fully embraces PEPPOL, we expect that the private sector will follow quickly.

 

PEPPOL.EU: How many standards does PerkinElmer support and what is the level of automation achieved?

PerkinElmer: We currently support 8 different standards or versions of standards and formats and it is simply not sustainable anymore. However, if PEPPOL is successful in the public sector, we will adopt PEPPOL specifications, because we see that it has a lot of potential and benefits for us as supplier.

We have automated less than 20% of our business with customers (incl Purchase orders) and with the current eProcurement market fragmentation and the added complexity with each new customer we add we believe we will not be able to get to 30% automation or more, without adding additional resources and charging costs back to customers. Unless the environment changes we will never get even close to our ideal 100% automation, it is just not possible.


If PEPPOL is successful, we will ask all of our clients and suppliers to use only the PEPPOL specifications, in the B2G and the B2B. It will reduce our complexity and costs enormously. PEPPOL will accelerate eBusiness across Europe. The EU has to ensure that all of the public sector uses it though, only then it will have enough weight to make a difference.

 

PEPPOL.EU: How difficult do you think the switch to PEPPOL will be?

PerkinElmer: It will be as easy or difficult as implementing and supporting one of the standards we already support (we already support UBL), and today we are pushing back on new initiatives. However, PEPPOL may well be an exception, because our adoption will increase its success. We will support PEPPOL because we want and even need more standardisation in order to break the current situation that is quickly becoming unsustainable.

We have had several requests and even threats to support a specific standard, or system, but it is not economically feasible anymore. The EU needs to prove that it can make PEPPOL mandatory in the public sector in order to change the current unsustainable environment completely. If the EU can do this, the rest will follow.

 

 

Interview conducted on June 2012, with Tom Vanautryve, Global E-commerce Manager at PerkinElmer.

For editorial content, please contact: Carmen Ciciriello: carmen.ciciriello@peppol.no

 

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