How Sainsbury’s keeps its thousands of suppliers paid
Supermarkets deal with masses of goods from a multitude of suppliers— that’s pretty much their thing.
Ranges are constantly changing, prices are competitive, and choices abundant. That’s all great news for the customer, but all those individual deals leave behind a blizzard of invoices that must be tracked, verified and paid on time if the wheels are to keep on turning.
Sainsbury’s is the UK’s second-largest supermarket chain— it stocks hundreds of thousands of different products (or SKUs [Stock Keeping Units]) from 4,000 suppliers.
All this business, across food and non-food products, amounts to five million supplier invoices a year, and it’s the accounts payable team’s job to ensure their employer is only paying for stock that it has actually received, and at the contracted price.
“You certainly don’t want to be manually handling those volumes over a year!” says Anthony Robinson, Group P2P Manager at Sainsbury’s.
Instead, Robinson explained that the supermarket chain relies on an automated invoice matching solution, which allows a team of just 25 people to handle 400,000 invoices a month— only ten percent require any manual intervention.
“Our process is very well configured,” Robinson said. The supermarket requires all of its suppliers to send invoices via Electronic Data Interchange (EDI), and 95 percent of invoices are received this way and fed straight into its system for matching on receipt.
At the same time, all store receipts are interfaced directly into the system from Sainsbury’s network of 26 depots around the country or − in the case of deliveries of high-volume goods “like bread and milk” − straight from the company’s 1,800 supermarkets and convenience stores.
The system, called Didos, runs every night matching thousands of invoices with receipts. Just over half of Sainsbury’s invoices are a “perfect match” with the goods delivered. For the remaining half, the software uses logic to automatically identify discrepancies and resolve as many as possible, automatically raising debit notes, undercharges and quantity extracts, for example, where only part of a delivery has been invoiced and a further invoice is expected.
With that resolution system in place, the supermarket can automatically achieve a “massive” ‘match and clear rate’ of 90 percent. The remaining 10 percent are handed over for manual processing, with discrepancies or errors flagged for the team to manage.
The ability to automate invoice matching and resolution is one of the forces that allows the supermarket chain to work as efficiently as possible across such a large number of locations, suppliers, and transactions.
“We are fully geared up for extremely high volume and we really push it,” said Robinson.
But the process also helps maintain strong relationships with clients— with a clear audit trail, Sainsbury’s can ensure all partners are paid correctly, and the supermarket is compliant with industry standards, such as those set by the Groceries Code Adjudicator.
Given the amount of stock it works with, it may not come as a surprise that one of the UK’s ‘big four’ supermarkets has such a system in place, but in other industries, manual processing of agreements and contracts can be a black hole for resources.
According to a report for 4C, large tech companies invest 84 hours per month processing agreements, with 15 percent spending more than 200 hours on the task.
That lost time amounts to an average of £17 million (US$20.9 million) per year, per company.