A buyer-to-seller connection that streamlines the procurement process

By Jim Cantrell

Punchout is a procurement process used by tens of thousands of companies across almost every vertical industry. The process makes it possible for buyers to access their supplier’s ecommerce sites from within their own procurement application (ERP). Buyers leave (i.e., “punch out” from) their company’s systems and go to the supplier’s web-based catalog to locate items or services. Once buyers have selected everything required for their order, they view the collected information on the seller’s website and click a single button to transfer the order information back to their ERP. An ecommerce catalog, enhanced for this process, is known as a punchout catalog or punchout-enabled website.

The punchout process is composed of three messages:

1. Punchout Setup Request – this is a message from the ERP to the ecommerce site. Composed of numerous attributes, its fundamental role is to say, “I am so and so, here are my credentials; please let me shop.”
2. Punchout Setup Response – this is a response from the ecommerce site to the ERP that essentially says, “Glad to see you again! We recognize you and your credentials; please use this URL.” Because access is managed (i.e., specific credentials are required), sellers can provide their buyers with specific pricing and a unique, branded shopping experience.
3. Punchout Order Message – once buyers have gone through the site and chosen all the products or services, they move onto the shopping cart to view their order. From here they click a button that usually says “Punchout” as opposed to “Checkout,” which triggers the ecommerce site to take the contents of the shopping cart and transfer it back to the ERP. From this point, the order or requisition is populated and ready to be approved, if necessary, before becoming a formal purchase order ready for distribution.

Many people try to incorporate the purchase order and invoice into the punchout process, but the process ends once the order message is delivered back to the buyer’s ERP.  Punchout is a method to quickly and accurately create orders that are later approved (depending on the buying organization’s requirements) and then turned into a purchase order. Once a PO is created, the document can be transmitted using whatever method is most suitable for that relationship— EDI, fax, email.

Why the Need for Punchout?
In a word: efficiency. Buyers want to buy with little to no error. Sellers want to sell with as little “friction” as possible in the process. If an organization needs to buy the same products or services from an established vendor repeatedly, then punchout makes perfect sense. Punchout offers lower costs to implement and maintain, in contrast to exchanging catalog files (such as EDI 832), either directly or hosted by a third party. In addition, because the buyer’s ERP is communicating directly in real time with the seller’s own ecommerce site, item information is typically much more accurate, meaning fewer errors and delays once the order has been placed.

There are scenarios where punchout isn’t efficient. An example could be the item exchange between a retailer and an apparel manufacturer. In this instance, the retailer needs extensive information on a set of what could be ‘seasonal’ or fashion items. Another might be when a buyer needs significant customizations to base products or unique services. Why add complexity to a process when you don’t need to?

Two interesting statistics:

1. Companies who start using punchout typically see a 35 percent increase in order volumes.
2. Companies using punchout see a 25 percent or greater increase in sales.

These two statistics indicate that buyers buy more goods and services more frequently from punchout- enabled vendors. The obvious benefit for buyers is the ability to ensure that management has control over purchasing budgets. It also eliminates “maverick” spending. As more companies see the benefits, more are moving appropriate purchasing to punchout procurement.

Buyers normally have the daunting task of getting supplier information— products, prices, and ordering methods—into their procurement system. There are continual costs in terms of general integration as well as the administration of the integration. This also means the suppliers who want to do business with a company that uses a procurement system have to find a way to ‘plug in’ to their system. Punchout eliminates these hassles.

• Saves buyers time and effort.
• Allows management to control purchasing budgets and eliminate “maverick spending.”
• Allows purchasing to interface with other systems within the company including inventory control, shipping and receiving, and accounting.

With so much benefit available to punchout users, it’s no wonder that it is available on most of the larger ERP and ecommerce systems, including this short list of each:

• SAP, Epicor, Oracle, PeopleSoft, JD Edwards, Lawson/Infor, and now NetSuite
• SciQuest, Unimarket, Coupa, Ariba
• Magento, Volusion, Zen Cart, and now NetSuite

Punchout using NetSuite Ecommerce
A little over two years ago, Liaison Technologies enabled the first punchout ecommerce site on NetSuite. Several installs later, the system has matured and continues to increase in popularity. Liaison has connected NetSuite users to companies, various universities, and more.

Punchout for Sellers on NetSuite ecommerce is a complex solution made simple through the use of bundled services dropped into NetSuite in addition to managed services from Liaison. All translations are being done on the managed services platform at Liaison, and NetSuite users are able to support punchout connections with any format (OBI, OCI, cXML) transparently. Once the initial integration is completed, time to on-board new customers is just hours.

Punchout as a growing procurement process has benefits for both sellers and buyers, but NetSuite users who sell using punchout gain a few extra efficiencies. Because NetSuite ERP and ecommerce are tied to each other, when changing pricing, images, or other attributes, it’s an instant update to the ecommerce site(s), making it doubly efficient in terms of reduced effort and increased accuracy. Ensuring customers have accurate information whenever they need to place orders helps improve throughput and create a frictionless selling environment.

Punching “in” with NetSuite ERP
Much newer to the punchout for NetSuite family is the ability for buyers to engage their suppliers. In summer 2012, Liaison Technologies released its first system that supports the Buy-Side Punchout process.

In this scenario, the buyer navigates to the vendor list in NetSuite and selects the vendor from which they wish to buy. Once the Punchout link is clicked, the Punchout Setup Request is sent instantly to one of Liaison’s platforms where it is checked and routed to the seller in their required format.

Just as quickly, the Punchout Setup Response is sent back to the buyer and routed (In real time) to the seller’s ecommerce site, regardless of which platform is used (Magento, Zen, NetSuite, etc.). Once the Buyer clicks “Punchout,” the shopping cart is sent from the seller’s ecommerce site back to Liaison where the information is transformed into NetSuite XML and inserted as a purchase order or requisition (ready for approval) into the NetSuite buyer’s system. Using NetSuite’s configurable workflow, the buying organization can maintain complete control over who buys what, from whom, and so on.

Summary
What does all this mean? First, there’s no doubt punchout is growing in popularity. It’s cost effective and scales well for both buyers and sellers. Punchout delivers quick payback and there’s a wealth of data suggesting that sellers who use punchout increase sales. In contrast to the struggle for accurate, quick data that so many companies work toward, punchout is a real-time process that requires very little maintenance. On the flip side, the buyer gets to control spending and reduce time spent on procurement. And buyers can accomplish both of these with less IT support required (less IT spend is required for both buyer and seller).

There are many ways for NetSuite buyers and sellers to communicate catalog information with customers, but punchout offers both significantly improved control and efficiency in how item information is exchanged.

NetSuite’s ability to offer punchout helps position it to more aggressively compete against the older ERP vendors (SAP, Oracle, etc.) in the market.

As larger enterprises look to NetSuite as a solution of choice, punchout will continue to increase in popularity.

About Author

Jim Cantrell is a supply chain professional with more than 15 years leadership experience in the retail, distribution, 3PL, and supply chain sectors. In 2008, Jim formed Retail EDI, an online EDI/E-commerce knowledge portal and boutique consultancy. Retail EDI is one of the largest online collections of process information and editorials. At Retail EDI, Jim has managed projects for numerous retailers and manufacturers in the areas of EDI, e-commerce, business intelligence, and replenishment systems. Retail EDI currently has more than 5,000 members and over 100 contributing parties. Prior to Retail EDI, Jim held leadership positions for hightech, consulting, and ecommerce companies, including roles as Chief Strategic Officer, VP of Sales, and Director of Business Development for companies such as DIcentral, 16 Mile Solutions, Direct EDI, and others. Jim is the Director of Channel Programs at Liaison (formerly Hubspan) where he manages partner-related activities such as marketing and solution engineering. He was named Channel Chief by CRN magazine and awarded Supply Chain Pro to Know by SDC Exec magazine.

The statements and opinions herein are those of Liaison Technologies and not of NetSuite. NetSuite has not verified any statements or claims herein and assumes no responsibility for such statements or claims.