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All around us, we’re seeing the telecommunications industry go through dynamic market changes. In the midst of this, communication service providers are keenly aware that they must become more agile and efficient to remain competitive and thrive. Consequently, they’re scrambling to transform almost every aspect of their business operations to more effectively respond to demands for new services such as mobile wallets and machine-to-machine communications.
As part of the transformative process, supply chain and related sourcing and procurement processes are key areas ripe for a major overhaul.
CSPs spend staggering amounts of money to promote and preserve their brand reputation, but little on procurement and supply chain efficiency. And while they are experts at delivering services to their customers, when it comes to their own business processes, there are critical — and sometimes costly — gaps.
These gaps and an inadequate supply chain can cause significant financial risks — such as higher operating costs, missed sales opportunities, slower cash flow, and escalating procurement costs. And, even worse, customer satisfaction can be greatly impacted.
Inefficiencies — and risk — up and down the supply chain
Most CSPs need to revamp their supply chain in almost every step of the process.
Customers are becoming more sophisticated in their selection and management of devices, and it is now critical to keep stores appropriately stocked through optimized, right-time sourcing of equipment. Equally important are the catalog services that support consumer purchasing. Customers expect these services to be razor sharp so they can buy quickly and efficiently, but many CSPs can only offer a purchasing process that is anything but quick and efficient.
The business operations segment of the supply chain is another piece that needs serious attention. Recent research on global electronic invoicing by PayStream Advisors revealed that 60% of the accounts payable departments surveyed receive more than 90% of their invoices on paper. Even though CSPs sell the latest communications technologies, they most likely are guilty of using paper-based processes for not only their invoicing, but also for other operations, such as placing and tracking orders.
Indirect spend, which can be in the billions for some CSPs, is another pitfall when not properly managed. The lack of insight in this area, which includes expenses such as contingent labor, marketing, travel, and professional services, can impede the ability to buy economically and lead to high internal costs and lower margins. This is especially true in the companies that have grown by acquisition and now have sourcing professionals in multiple locations around the world using non-standardized, disparate processes. One of the main justifications for mergers and acquisitions is the costs savings that can be derived through merging contracts, eliminating redundant suppliers, and setting up shared service centers. But for many CSPs, this is still an undelivered promise.
There are also additional risks farther down the supply chain, as poor quality vendors could wreak havoc throughout the entire chain. As an example, in July 2014, Samsung Electronics suspended a Chinese supplier because of a suspected use of child labor by one of their suppliers. This shows the difficulty in knowing second-level supply chain vendors, and how problems can not only impact production, but also brand. And for valuable brands, such as handset manufacturers and carriers, protecting the brand by complying with safety and ethics standards at all levels of the supply chain is critical in managing business risk.
Stop the leakage before it’s too late
In today’s competitive world, there’s just no room for inefficiency.
Manual, paper-based invoicing and purchase order systems, disparate financial processes, lack of compliance, and high operations and supply chain costs must be eliminated.
Whether it’s equipment for switches or cell towers, maintenance services, marketing campaigns or software, there is a better way to procure, process, and manage business and supply chain operations.
There are ways to increase profitability with bottom-line cost savings through unit price reductions, increased compliance, automated process efficiencies, and greater control over working capital and cash flow management.
The answer? For many CSPs, it’s an automated and integrated cloud-based supply chain network that can provide a more cost-effective and reliable way of sourcing of the latest technology. This kind of network can also provide better procurement and indirect spend processes, and a supporting infrastructure for new business models that will place CSPs back in a more competitive position.
Take advantage of a collaborative supplier network
In today’s competitive world, almost every business is increasingly dependent upon its external partners, whether it is suppliers, customers, or financial institutions. But CSPs are clearly laggards here.
A business commerce network — and related cloud-based applications — can extend CSPs beyond the four walls of their organizations and help them connect and collaborate with digital communities of partners, peers, and suppliers across the world. Such a network provides CSPs with:
—A back-end system for improved business commerce collaboration, including e-procurement.
—A community of trusted vendors and valued partners.
—Automated processes for collaboration and transaction processing that supports electronic catalogs, contract invoicing, electronic payments, compliance, spend management and working capital.
The results? CSPs can save money — sometimes up to tens of millions annually — and drive the greatest efficiency from their supply chain These efficiencies can translate to healthier margins, or be passed on to customers as lower prices.
Imagine automatic confirmation of orders, paperless operations for ordering, accounts payables and receivables, and on-time delivery of parts and service. Not to mention, a more efficient management of cash flow and financial reserves, improved compliance, and the integration of supply ordering, manufacturing and service.
That’s what the transformation of a supplier network can look like for CSPs. In addition, vendors that are less than reliable will be a thing of the past because CSPs will be able to research vendor reputation and quality. They will also have access to analytics and network intelligence to improve the supply chain from one end to the other.
Of course, the fact that a solution like this is in the cloud also brings other benefits as well. CSPs will find a higher value for the investment, with the flexibility to add supply chain applications in a stepped fashion as they grow their business and develop new business models.
James Marland is the VP of network growth at Ariba, an SAP company. He is responsible for defining and rolling out strategies for the Ariba Network with particular focus on Europe. He joined Ariba at the launch of the Ariba Network in 1998 after previously being a Solution Consultant at SAP America. In addition he has held the position of Director of Algorithms at Vendavo, an SAP Partner in the area of Pricing. He has a Bachelor of Science degree in Mathematics from Southampton University. Follow James’s twitter feed at @JamesMarland.
