Potential issues in the collaboration between customer and supplier often only become apparent at the invoice level. It’s not until an invoice cannot be automatically matched that alarm bells start ringing. But nine times out of ten, the actual problem lies earlier in the process. For optimal collaboration, it is important that the entire purchase-to-pay process runs as efficiently and error-free as possible. Christian Willemsen, (former) senior business consultant at 4CEE, and Ton Smeele, eBusiness Product Owner System-to-System at Technische Unie, engaged in a discussion with each other and the attendees during the 2023 Ketenstandaard Conference about this P2P process in the construction industry, the role of standards such as DICO, and the importance of data management.
Often, the alarm isn’t raised until one invoice after another fails to match automatically. “There’s a problem with invoice processing,” people tend to think. But that’s not correct. An invoice is, in fact, nothing more and nothing less than a summary of all the communication that has taken place between the customer and the supplier up to that point. So if an invoice is incorrect, that’s a sign that something went wrong earlier in the process.
But where exactly? “To identify the real reason for that low matching rate, it’s important to take a close look at the entire purchase-to-pay process,” says Christian. “You can’t think of a solution if you don’t fully understand the problem yet.”
It’s no coincidence that “define” is the first phase of the renowned Lean Six Sigma methodology, in which Christian has since earned his Black Belt. “Start by mapping out your entire process. Do you understand how orders are placed? What happens to the order confirmation or the packing slip? Is there a check to ensure they match what was actually delivered? If all those steps are handled properly, then the invoice will ultimately flow smoothly as well. Because, once again: the invoice is a summary of everything that happened before it.”
"You can’t think of a solution if you don’t understand the problem"
It’s important to avoid getting bogged down in assumptions and half-baked solutions. Christian: “A real deal-breaker is the idea that ‘we’ve always done it this way,’ but unfortunately, I still come across that regularly. My rule of thumb is to ask ‘why?’ five times. Why do you do this this way? And then keep asking until you get to the core of the issue. It often turns out that people have no idea why they do things the way they do. And because of that, they also have no idea where the real problem lies.”
Ton also notices in Technische Unie’s day-to-day operations that many customer questions are about the invoice. “But if you only discover an error on the invoice, it’s actually too late. The process isn’t the focus then. Why don’t we get it right the first time: get everything right right away when the order is placed?”
He mentions an example where an invoice was rejected. “We’d look at the order number on the invoice, and it turned out to be the cell phone number of the technician who had placed the order at the counter in a sales office. ‘I don’t know the order number, so just write down my phone number—they’ll call me,’ they’d say. That doesn’t work. My colleagues at the counter are no longer allowed to just hand out items like that. An order or reference number must always be recorded for the sake of the entire process that follows. If the customer can’t provide that, it means they don’t have their own processes in order. We can’t throw our own processes out the window just to solve this for them. That would create chaos.”
Another important document in the purchase-to-pay process is the order confirmation. To his great surprise, Ton has noticed that many customers don’t do anything with it. “We, as the supplier, specify exactly what we’re going to do for the customer in the order confirmation. For the planner or production scheduler, it’s crucial to know which materials will be delivered, where, and when. This information is clearly outlined in the order confirmation, yet they still don’t use it. Then we all get phone calls asking when something will be delivered. That order confirmation is worth its weight in gold,” he emphasizes.
In the construction and installation industry, the DICO standard has been established for the electronic exchange of documents such as order confirmations and invoices. Why is a standard like DICO important for smooth collaboration throughout the supply chain?
“By agreeing on standards, you know what to expect.”
Ton: “This ensures that every supply chain partner speaks the same language. It gets tricky if you speak German, while I expect you to speak French. By agreeing on standards, you know what to expect. It’s just like a Dutch electrical outlet: when you plug something in, it just works. You can count on that. Thanks to standards. The same goes for making phone calls. Whether you’re with Vodafone or T-Mobile, we can reach each other. Thanks to standards.”
In addition, standards force you to think carefully at the start of the process about what the rest of the process will look like. “Standardization helps ensure that you have everything in order from the start, so that things go smoothly later in the chain,” says Ton. “That means, for example, that when placing an order, you already ask for the contact person’s information at the construction site. That might not be relevant to the person placing the order, but the driver who has to deliver the materials the next day does need that information. Standardization ensures that the right information reaches the right person at the right time.”
But, as Christian warns, standards don’t solve everything. “DICO is primarily about the format of the message. How is an XML message structured? But it says nothing about its content. If the information is incorrect, you still have a problem. That’s why data management must be central to this entire process.”
For example, product data is very important. It has to be accurate. Christian: “The customer needs to know exactly what they’re ordering. I was recently searching for a product using the GTIN code. But out of 31 suppliers, 24 had listed a different unit of measurement. For the exact same product. How am I supposed to know what we’re talking about? Don’t turn it into a guessing game!”
Ton sums it up: “If you want to collaborate and communicate digitally, you need to consider three things. First, the data: what information are we exchanging, and how reliable is it? Second, the format: in what language do we communicate with each other? This is where standards like DICO come into play. And third, the medium: how do we exchange messages? For example, via email or already through a system-to-system integration.
In short, you can view the invoice as a fault detector: if it triggers an alert, it means something is going wrong somewhere in your purchase-to-pay process. Before you can start working on a solution, you must first fully understand where the actual problem lies. “Focus on your process and prioritize data management,” Christian strongly advises. “But the most important thing to remember is that we’re all part of the chain. Let’s not point fingers at each other—let’s work together. Together, we’re stronger.”