The power of vendor portals in advancing the CPO agenda

Vendor portals provide a great tool to automate the exchange of procurement, risk and ESG vendor information.

In brief

• The supply chain has been inundated with risk due to heightened activity and demand, affecting all parts of the lifecycle, especially when onboarding vendors.
• Such sources of risk include process, financial and reputational risks – mostly impacting companies’ operations through impact to their margins and bottom line.
• However, technology, especially vendor portals, harnesses early stage advantages to realize synergies, unlock savings and drive long-term value. 

Vendor relationships are an increasingly complex matter

Globally, chief procurement officers (CPOs) are facing new challenges and opportunities working with vendors. Managing risk associated with doing business with third parties and environmental, social and governance (ESG) considerations are key areas encountering significant change. As the sophistication with which companies rely on their vendors and the associated controls are expanded, many interactions with vendors have been impacted. Onboarding, continuous monitoring and eventual offboarding now need to evolve with the changing needs across risk, contracting, procurement and accounts payable (AP). Demand for visibility into real-time vendor spend and information across vendor-related processes increases the complexity of managing vendor relationships. This results in three channels of inefficiencies for companies: fraud risks and controls (from both internal and external sources), vendor management (often siloed processes), and underdeveloped optimization of the accounting and spend information with suboptimal integrations to the finance and accounting processes. Optimization of these functions can bring significant risk reductions, along with visibility of spend, enabling more effective management of vendor relationships. 

The target state – visibility of the process and automation of controls brings significant benefits

Strategic sourcing takes risk and controls management to the next level

As sourcing functions develop into category management functions, preferred network of vendors are established. While preferred vendors for certain commodities (i.e., technology, professional services, market data and office supplies) are now standard, directing employees to where and what to buy can be challenging. One solution is having a portal that directs employees through an “online shopping-like” buying experience. Vendor portals direct employees to preferred products, vendors or resources to guide buying decisions. Such guidance is key to realizing benefits of category management. Additionally, providing information to educate buyers on how to engage suppliers and answer questions throughout the relationship is key to organizational efficiency. Extending portals to vendors allows additional benefits, such as the ability to collaborate with vendors on RFx transactions, automate contract negotiation and conduct reverse auctions, thus speeding decisions and streamlining vendor conversations.

Mature vendor management leverages fully automated and enforced workflows

Companies are facing increasing regulatory pressure to obtain more information from vendors during onboarding. Coupled with issues around fraudsters’ attempts to redirect payments into their bank accounts, vendor onboarding has become an increasingly “hot topic” among payables teams. In addition to the pressure for increased due diligence, federal authorities and states are emphasizing the importance of tax compliance along with withholding. Vendor portals resolve these issues because they gather and validate data direct from the vendor. Electronic data collection has been available through procurement platforms for several years; however, vendor portals present key innovations via real-time validation of information. Such validations bring much needed security to vendor change processes. Using these portals to gather vendor risk information, insurance credentials and other certificates further automates and centralizes vendor management.

Enterprise-wide transformation enables working capital optimization

Corporate investment in digital transformation continues to be on the rise since 2020, per the EY-Parthenon Digital Investment Index.3 We find the transformational needs of many financial services companies revolve around migration and modernization of their general ledger accounting systems to elicit a full source-to-pay process. In addition to digitizing purchase order processes and introducing internal and external vendor portals, the opportunity to leverage early payment discounts continues to increase. Even without these discounts, extending terms can bring cash flow benefits to organizations. However, companies must consider regulations in certain counties that push for faster vendor payment rather than extending payment time frames. Another such optimization is through recovery audits. Namely, recovery audits that look for duplicate payments (often due to automatic, recurring payments) for goods or services not received or rendered. Due to reduced lift absorbed by automation (located in vendor portals), recovery audits are now becoming an industry standard. The key to a successful recovery audit implementation depends on integrating vendor functions (ideally under the same leadership) so that objectives for sourcing, procurement and payables are harmonized.

Conclusion and next steps

Various motivations support vendor portal implementations. These include risk and controls, vendor management, and the optimization of working capital. However, questions must be considered when customizing a portal to fit your organization’s size, spending habits and existing maturity.

Such questions include:

• How do vendor portals provide end-to-end support from onboarding to offboarding?
• How do they improve interactions within vendors?
• How do modules that help with vendor discovery interface with external relationships?
• How much do they cost, and why should my company bear this cost?