In order for any company to function effectively in the modern business climate, it has to communicate and produce its product or service as efficiently as possible.
Inefficiency in one part can create a backlog throughout a company’s chain, and because supply chains are so interconnected, that can quickly spread throughout multiple companies.
When you have a role in making sure 2,000,000 companies have a smooth process like SAP Ariba does, you know a few things about what works and what does not.
SAP purchased Ariba three years ago. The combination of SAP’s global reach and Ariba’s cloud applications and business network allow companies to improve efficiency, performance and profits, Senior Director of Marketing Drew Hofler said.
“When you are developing a network, connecting the different parties are key,” Mr. Hofler said. “You work to automate the information flow.”
In B2B environments streamlining of communication and information flows is critical, Mr. Hofler said, but it is also difficult.
One reason is because each company has its own payment terms. While one may have a 30-day payment deadline, another’s can be as long as 120 days. In many situations, larger companies may submit 30 invoices or more in one transaction.
That is a large amount of information being exchanged within the transaction, Mr. Hofler said, more than many antiquated systems still widely employed can handle. Some payment systems based on 1970’s technology only allow between 80 and 140 characters of information to be delivered at one time.
AribaPay reversed the process, Mr. Hofler explained. Instead of attaching the information to the payment, they do the reverse by attaching the payment to the information.
This helps companies better manage their cash flow because the higher visibility allows them to track precisely where the money is at any moment, thanks to bank integration. Think Fedex or UPS.
Electronic payments are much safer, Mr. Hofler explained.
“We took the need to manage sensitive information and fraud out of the situation.”
Other formats require a supplier to give away their bank information to the receiving company, who in turn had to hold that information, Mr. Hofler explained. Now they do not have to worry about those issuues.
“If it is not your core competency, don’t do it,” Mr. Hofler stated.
Every merchant on the AribaPay network receives a merchant identification number. When a payment is made, the vendor’s number is matched with the supplier’s and it is sent to Discover. No one party sees another’s information, including Ariba.
Remove the need to take action and you remove fraud opportunities.
“This is a unique product by a factor of 10 or 20,” Mr. Hofler explained. “A large network of two million companies sharing information is the foundation of this.”
And the bigger and older AribaPay gets the better it gets, Mr. Hofler said. Years of relationship and performance data from buyers and sellers helps produce better risk assessment data.
Onboarding suppliers can be hard work, Mr. Hofler conceded, but as more companies join it becomes easier. AribaPay suppliers interact daily with companies not on the network. Participating companies can invite others to join, much like the Facebook friend process.
A new customer may find half of their business customers are already on AribaPay, Mr. Hofler explained.
“With an open API infrastructure and a chain of partners who do the work connecting, we just integrate data flows and the user experience.”
“Why reinvent the wheel?” Mr. Hofler asked. “We do some things better than anybody else. It takes a long time to build a supply chain finance platform.”
Mr. Hofler said Discover has thousands of representatives who can promote AribaPay to their regular customers as a service.
The rapid development of technology has made services like AribaPay possible, Mr. Hofler said. Where before a company had to develop their code in-house, almost all can be done through configuration on a shared platform.
As he looks into the future Mr.Hofler sees many different uses for this type of technology. Bank hedge funds could finance the purchase of raw materials used to produce finished products before they are made. Seeing, say, a solid three-year payment history, the supplier earns a lower rate to purchase raw materials.
Second and third tier suppliers will have an easier time connecting. There will be more tools available to manage big data.
“Those capabilities are becoming real,” Mr. Hofler said.