As is so often the case with technological disruption, the digital evolution of supply chains remains slow and steady. That's not to say, however, that the impact of that transition is subtle.
At the onset of Industry 4.0, the way manufacturers, industrial suppliers and corporate buyers connect and conduct business is not what it used to be. Historically, vendor sourcing has focused on identifying the right products and services, with the financial interaction between buyer and supplier remaining entirely separate from the sourcing and request-for-quote (RFQ) process.
While change has been gradual, finance and payments are monumentally impacting the way buyers and suppliers interact from the get-go, said Tony Uphoff, president and CEO of vendor discovery platform Thomasnet.com, in this week's Monday Conversation with Karen Webster. Increasingly, businesses are discussing the friction associated with B2B payments within their supply chains, and how strategic buyer-supplier relationships might be able to address it.
"This disruption is not only being talked about," he said. "This payments friction is now starting to give way to action. I'm seeing companies start to talk with their bankers in different ways, nurturing that relationship, and to start thinking about the relationship between buyer and seller."
In its 122-year history, Thomas has witnessed this glacial yet transformative pace of change, which Uphoff noted is now driven by the democratization of sophisticated financial technologies once reserved for only the largest of enterprises. With payments now a part of the strategic sourcing process, Uphoff identified "an engagement between buyer and supplier that we haven't seen in the last several years – perhaps ever."
Meeting Buyer-Supplier Demand
Amid this refocus on the buyer-supplier relationship, Uphoff said there is an opportunity for platforms like Thomasnet.com, which have historically focused on the corporate buyer side of transactions, to expand their efforts to ease friction for the supplier, too.
B2B payments can impact the strategic sourcing process in a variety of ways, but one of the most dramatic Uphoff has seen is in the way payment practices have impacted a supplier’s decision to respond to a large corporate's RFQ.
"In procurement, there's often a misalignment based on company size," he pointed out. "Often an engineer will spec-out a supplier who might be a small company with a unique capability, but they can't get that supplier to return their phone call."
Uphoff pointed to a vendor's past negative experiences with large, late-paying corporates that cut off potential buyer-supplier relationships before they even begin. That kind of information may not have been available to businesses in the past, but the digital transformation of businesses' financial operations has now unlocked the opportunity to promote transparency in corporate buyers' payment habits, as well as suppliers' payment needs.
Platforms' Shifting Role
With buyers and suppliers now taking B2B payments into greater account in the matchmaking process, Uphoff said there is a significant opportunity for the providers of those matchmaking platforms to step further into the payments and finance arena.
"Most RFQ [request for quote] platforms – ours included – don't get into things like payments. They get into technological capabilities. Yet how businesses get paid is inextricably intertwined with technological capabilities of the job I'm bidding on,” he said.
As Uphoff noted, Thomas is increasingly exploring this opportunity by considering the inclusion of payment requirements in its list of filters that corporates can use when searching for new vendors. The platform is also rolling out a badging system, which validates supplier information to mitigate risk for buyers – a process that could include validated financial information for those companies.
"What we're toying with is an identifier that connects to some perspective on payments that may be unique to the way a company wants to do business," Uphoff said.
And it's not just an opportunity to mitigate risk and enhance supply chain strategies for the buy-side, either. While small suppliers may lack the negotiating power to force shorter payment terms or certain payment methods on their large corporate buyers, as matchmaking platforms expand their focus to include the vendor, there are emerging opportunities to wield financial data to help suppliers more efficiently make decisions about who they do business with.
Further Disruption Ahead
The disruption stemming from the emergence of B2B payments data in elevating the product and supplier sourcing process has been significant. Technological disruption isn't stopping anytime soon, and the conversation surrounding B2B payments' impact in this space will continue to evolve.
Distributed ledger technology, for instance, could promote transparency and authentication of company information. Uphoff also identified the recent embrace of artificial intelligence (AI) among companies looking to take advantage of the digital data at their disposal thanks to the SaaS revolution, which will unlock deeper insights into companies’ financials to further guide their B2B payment and supply chain strategies.
With external forces like trade disputes driving many businesses to examine their supply chains for the first time in years, Uphoff noted that businesses will begin to uncover not just new supplier-partnership opportunities, but also emerging ways that technology can completely transform their supply chains.
"Since they had last examined their supply chains, there had been a steep change in technological capabilities opening up new ways of doing things," he said. "Now, there may be similar dynamics playing out in the B2B payments ecosystem as well."