'Alibaba shows the potential for the digital supply chain'

Gert Slyvest
posted by Gert Slyvest
10 May 2015

In my last blog I looked at how social has penetrated the B2C sphere, allowing billions of consumers to connect easily over a variety of platforms. But this hasn’t happened to the same extent in the B2B world, which just doesn’t make sense.

Connecting companies in digital supply chains is not a revolutionary idea. Probably the most notable of companies doing just that is Alibaba. While it started life in 1999 as a B2B listing service connecting suppliers in the East with buyers in the West, it has since gone on to be the largest e-commerce platform worldwide, shortening the supply chain and providing a new opportunity for suppliers and buyers alike, with reduced cost. The company’s model was extremely simple – basically an electronic "Yellow Pages" service – but it worked because it provided a new opportunity for both buyers and suppliers on an accessible digital platform.

But the problem is that the majority of businesses still remain fundamentally disconnected. We know this because of tell-tale signs such as late payments to suppliers, a lack of access to finance for SMEs, the prevalence of inefficient and time-consuming processes – issues which remain present in most supply chains. To make the most of business relationships, companies must be able to engage easily with those they work with, from suppliers, to customers or partners. This not only makes business more efficient but also builds trust.

But why is this happening? Between paper, PDF, email, ERP data and phone calls, most communications paths between businesses and their suppliers are in a state of disarray. E-invoicing is a good example to highlight because it is one of the most widely digitised B2B processes. Out of 17 billion B2B invoices processed within Europe (EU), 24 per cent are electronic.

But if we look at this figure more closely, we can see that a substantial number of invoices claiming to be "electronic" are actually PDFs, scanned images or other semi- or unstructured formats. Only 7.2 per cent are true touchless e-invoicing. This means the majority of businesses are still pushing paper of some sort between internal and external departments – wasting time and resources – when they could be harnessing the power of digital.

In order to fix the sorry state of the digital supply chain, we need to integrate social media learning from B2C: communicate on a shared platform in a standardised language, streamline processes, remove siloed departments, reduce barriers to entry for SMEs and also change our view on how data can be used to improve matters. This will make business more efficient and in turn, improve the competitiveness of a company.

Alibaba is a prime example of how once companies are digitally connected, the opportunities for all participants of the supply chain are massive. Buyers and suppliers can take advantage of straight-through processing, fewer exceptions, increased transparency, and the opportunity to bring cheap financing options to the supply chain via financial services.

☛ Gert Slyvest is chief technology officer and co-founder of Tradeshift

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