How Do I Choose a Third-Party Electronic Network to Invest In?
In Part I of our series, we focused on the importance of understanding third-party electronic networks—including the many benefits they offer and the best ways to leverage them for your business. In Part II, we'll talk about what you should look for in a network in order to reap the greatest rewards.Though your customers may require you to join particular networks, you can pick and choose which of these networks merit the extra time and effort needed to maximize your eCommerce capabilities on them. You can also evaluate other electronic networks to determine if it's worth joining them independently. Below is a list of key characteristics the best networks provide.
- A broad range of services and capabilities. Networks that enable you to communicate and transact electronically with customers across the entire business process lifecycle—including everything from marketing and promotion to ordering, invoicing, receivables financing, and payment—will deliver the best ROI. Rather than having to visit multiple sites to conduct different activities and tasks (such as one for order administration, another for invoicing, and yet another for marketing), these networks let you do everything in one place. As a result, you save significant time and effort over the weeks, months, or years that you use them.
- A clear return on investment (ROI). Another key consideration is the cost of doing business on the networks you join. While it's tempting to only consider free networks, the real question to consider is how much value they deliver. If a fee-based network offers capabilities that generate a faster, bigger payoff for you in terms of higher sales, lower day sales outstanding (DSO), and measurable efficiency gains, your resources will be better spent there. To accurately assess bottom-line value, you should weigh any fees against the monetary value of such benefits as:
- Reduced order and invoice processing costs
- Faster payment from fewer lost or disputed orders and invoices
- Higher purchasing volume from customers due to less maverick spend
- Lower error reconciliation costs via automation
- Savings on costs of capital through online cash management tools
- Supplier account management services. The best third-party electronic networks invest significantly in supplier account management. Look for those that provide bundled packages to help you promote your business, benchmark your performance, and meet your goals. Before joining a network, ask to talk with its supplier program experts or those who handle supplier solutions. They should be able to review your business, analyze and assess your current activity against best practices, and develop a strategic business plan with your integration and marketing teams that supports your key objectives. This is crucial in helping you take advantage of the right programs to quickly ramp up efficiency and productivity.
- Support for expedited payment. While most modern networks provide procurement functions, eInvoicing and ePayment capabilities are essential as well. Networks that allow you to bill and receive payment electronically eliminate the time and expense of printing and mailing paper invoices. They also ensure you get paid faster by removing the delay of waiting for paper checks to arrive in the mail. Networks should also help you manage your cash better through automated receivables financing, early payment discounts, and similar services that you can easily set up online.
- Demonstrated investment in attracting high-quality buyers. Networks that offer innovative products and services oriented towards attracting reputable buying organizations and partners—and that continually improve and develop those benefits to meet changing marketplace requirements—are more likely to achieve the critical mass needed to drive effective eCommerce and major savings for both buyers and suppliers. Look for networks that show a pattern of steady growth as opposed to those that seem to always have the same number of participants. The more buyers who join, the greater your opportunities for expanding your business portfolio by connecting with and winning multiple new customers.
- Low cost of entry. Through minimizing potential cost barriers to using the network—not just for you, but for buying organizations as well—the best electronic networks will attract higher usage, which translates into more sales opportunities for you.
- Sales and marketing assistance. A few electronic networks are now providing opportunities that make it easier for you to market your business to potential new clients. Buyer-supplier discovery and matching tools deliver a critical service to both you and your customers, reducing the time and expense normally required to find and establish mutually productive business relationships.
- Comprehensive, global support. Electronic networks should also provide extensive support services free of charge in every time zone and geographic location. Look for those that offer expert technical and business process assistance to ensure you and your customers have the help you need at any time.
- Diverse capital management capabilities. Seek out networks that provide a variety of different ways to help you better handle cash management through early payment discounts, dynamic discounting, receivables auctions, third-party financing options, and similar tools. This is essential in enabling you to reduce risk, lower your cost of capital, and effectively manage your cash flow throughout good economic times and bad.
