Implementing e-invoicing at Walgreens
Implementing e-invoicing at Walgreens
New information technologies are upcoming and revolutionizing companies in all kinds of industries. One of these new technological developments is e-invoicing. E-invoicing brings can bring a lot of advantages with the technology.
For our Digital Transformation Plan we described the feasibilities of implementing e-invoicing at Walgreens. Walgreens has publicly stated they have aspirations to revolutionize their entire IT strategy, with the goal of building a community around its suppliers. E-invoicing technology can do this by making Walgreens’ supplier network more transparent, accessible and makes its invoicing analyzable. For example, e-invoicing transforms supplier billing, compliance, procurement and supply chain management and finance operations.
Walgreens is America’s largest pharmaceutical retail chain. It owns 8,309 stores in 2014 of which 8,207 are drugstores. Walgreens current supplier network is intentionally highly diverse. They do so to be more responsive to customer demand. In this network Walgreens interacts with its suppliers using data synchronization technology, sourced from WorldSync1, that incorporates standardized trade item numbers and location information. Using a global data synchronization network (GDSN) Walgreens attempts to build information transparency among its suppliers, making restocking and data communication an ongoing process. What we proposed in our report is implementing automated invoicing using a web intermediary/operator that handles all of the incoming and outgoing invoices. As found in the prior analyses, Walgreens is active in a competitive market with high pressure on margins. The technological transformation strategy is intended to help Walgreens position itself better by creating transparency in its spending, while significantly cutting down on costs. Doing so will strengthen Walgreen’s positioning against the five forces. A major theoretical perspective used in this e-invoicing proposition is transaction costs economics as proposed by Williamson (1979).
Key-elements of the new technology
In this overview we state the key-elements of this new technology.
- Reduction in necessary FTEs for processing invoices.
- Reduction in required invoice exceptions, meaning less intervention and more automation
- Faster invoice approval cycle, which creates a larger window for supply chain financing
- 24/7 Real-time insight of every invoice leading to control of liabilities, cash flow forecasting and spend analytics. Spending can be analyzed in real time online-item-level invoices
- Accountancy accuracy enhancement
- Faster, easier and more accurate auditing and fraud prevention
- Buying partners can extend payment terms as Walgreens can offer off balance sheet, non recourse financing
- Procurement automation and compliance
- Secure and guaranteed invoice delivery
- Ability to scale F&A departments
However there are some negative aspects that has to be taken into account when implementing e-invoices. There are mainly two risks sectors that are affected by e-invoicing.
Using a third party operator by implementing the e-invoice technology, negative aspects can be found within the dependency theory and organizational learning theory. Firstly, dependency theory describes how companies attempt to increase their power relative to other organizations in its environment (Barringer & Harrison, 2000). Although Walgreens will get more insight in invoice, procure-to-pay status and process and the other benefits priory noted, it must be mentioned that the operator between Walgreens and Walgreens’s suppliers holds the critical resource; the e-invoicing technology and capabilities. The same problem can be argued from organizational learning theory (Barringer & Harrison, 2000). Arguably, there is a longer-term risk for Walgreens as interacting with the e-invoicing operator can turn into asymmetrical learning. As the operator grows in clients it becomes better and can understand Walgreens better through its analyses. Walgreens on the other hand will lose this capability to do these analytics themselves and in turn thus become dependent on the operator.
The effects on the supplier network is that Walgreens’ entire supply chain needs to adapt to the new technology. Being more efficient means handling more volume, downsizing and assigning some new tasks throughout the supply chain. Therefore the implementation should not be underestimated. A sufficient active participation is necessary for the project to become a success. Dependency on other partners in the supply chain can be a risk. If not converted appropriately the implementation will bring extra costs. Also suppliers will only adapt to the new system when they can see the benefits for their business. In some cases this can be unclear for the suppliers. (Bowsher, 2012).
Barringer, B. R., & Harrison, J. S. (2000)’ Walking a tightrope: Creating value through interorganizational relationships’, Journal of management, 26, 3, pp. 367-403.
Bowsher, A. (2012) ‘Mandatory vs. non-mandatory e-invoicing: what works best for you and your suppliers?’ Sharedserviceslink.com [Online] Available: http://www.sharedserviceslink.com/blog/mandatory-vs-non-mandatory-e- invoicing-what-works-best-for-you-and-your-suppliers [12 Oct 2015].
Williamson, O. E. (1979) ‘Transaction-cost economics: the governance of contractual relations’, Journal of law and economics, pp. 233-261.