One of the biggest costs in transactions with suppliers and customers is the physical act of getting paid.

Most businesses still rely on the tried-and-true method of paper checks (and taking advantage of features like mail float time — or being frustrated by the same).

But there’s hard proof that moving away from paper and handling more transactions electronically is more efficient, easier to do, and even safer than using checks.

First, there’s the inherent complexity of the payment process itself. In a 2008 Aberdeen Group study, 76% of businesses described A/P operations as either complex or somewhat complex.

(A complex transaction, in this case, involves two or more banks and more than three payment types.)

Across the board — including Best in Class operations down to industry laggards, electronic payment processing costs were noticeably lower than handling paper-based checks.

• Best in Class companies spent an average of $10.84 on each paper-based check transaction, compared with an average electronic payment processing cost of $6.71 — a savings of 38%.
• Below average operations spent an average of $11.33 on each paper-based check transaction, compared with an average electronic payment processing cost of $8.42 — a savings of 26%.

OK, many of the Purchasing & Procurement folks already know there’s money to be saved by pitching paper. These are some stats to back it up.

But the biggest fear — one that hampers efforts to turn transactions into electronic time-savers — is that security can be compromised, creating chaos for all parties involved.

Here’s some ammo to help shoot down that argument.

When businesses experiencing payment fraud were polled as to the source of that fraud, here’s what they said:

• paper-based checks — 42%
• commercial cards — 33%
• ACH — 6%
• wire transfers — 4%

(Admittedly, there are more paper-based frauds reported because there are more paper-based transactions. But you get the idea.)

What’s behind all this shifting corporate philosophy, and how does it affect Procurement and logistics?

Well, it ain’t love for Mother Nature. (Big surprise, huh?)

As is so often the case, the force behind “going green” in logistics is a different kind of green. Some folks even call it cabbage. 

It’s money.

At least that’s the conclusion of the 2008 Trends in Transportation and Issues in Logistics and Transportation Report.

The top 5 drivers behind “going green,” according to the report:

1. Priority of CEO
2. Reduce costs
3. Pressure from customers/consumers
4. Improve public relations, and
5. (drum roll, please) Reduce or eliminate hazardous or toxic materials

Well, the good news is that direction is coming from the top. Also, the environment did manage to make the top 5 list.

Going green often can go hand-in-hand with saving money. For instance, many shipping materials — from Styrofoam peanuts to pallets — are good for more than one use, but a lot of businesses are still dumping them.

It won’t cost you a penny to brainstorm with Procurement and logistics staffers for other ways to “go green” — in both senses of the words.

While many companies struggle to stay on an even keel, and procurement operations cope with waning demand for product but increased demands from customers, there are bright spots.

Video game hardware and software sales shot up 18% in the U.S. in October.

The big winner: Nintendo’s Wii console. More than 800,000 unites flew off the shelves.

There was plenty of wealth to go around: Microsoft Corp.’s Xbox 360 sold 371,000 units in October, up from 347,200 the previous month. One factor contributing to that was that Xbox cut the price of its basic to unit to $50 less than Wii’s shelf price.

Popular games like Fable II, Wii Fit and Wii Play are selling like proverbial hotcakes, too.  

So the next time one of your carriers pushes you onto the back burner, it might be because there’s a video game company on the other end of the delivery. Carriers know who they need to keep happy. They figure you’re not going anywhere anyway.

Better yet: Maybe you should consider proposing that your company expand its product line — to include video games and accessories.

Last fall, 10% of businesses were pessimistic about economic prospects. This spring, it was 21%. Now, that tally has hit 29%.

The three biggest fears:

• Higher energy costs (74%)
• Possible recession (71%) and
• Price inflation (65%)

Higher energy costs (starting with transportation expenses) and the weakening economy are forming a double-whammy for many Procurement/Purchasing functions. The short-term result is more companies will feel compelled to increase the prices they charge customers.

• 65% say they expect suppliers’ prices to go up over the next six months
• 47% of Procurement/Purchasing pros expect to pass that along to customers.

The snowball effect of these problems is frosting the credit market, according to the survey.

Is it more difficult to get credit now that it was just this spring?

• 25%, compared with 18%, say it’s more difficult to get credit.
• Only 7% say credit is easier to get, compared with 14%.

 More than half of the businesses surveyed already have a game plan for blunting this economic impact.

Five tactics:

• Increase shipping prices (including surcharges), cited by 25%
• Offer flex work options, by 22%
• Change delivery procedures, by 21%
• Cap services, by 14%, and
• Change hours of operation, by 12%.

At the top end of the preparedness scale, you’ll find logistics and trucking company Ryder System Inc.

Ryder has an emergency communications systems that tracks employees and keep them up to date. The system collects contact information on individuals.

When it comes to planning your own disaster-reaction plan, experts advise, assume the worst. That way, you’ll be ready to adapt to the worst-case scenario, should it occur.

One of the most universal and likely hardships you can expect is loss of electrical power. Determine now how your company handle this: Wait for power to be restored? Use generators for core operations?

Electricity, natural gas and most fuels are the most basic building blocks. Without power or mobility, most businesses remain shuttered until the lights go back on.

A quick recounting of the impact of Ike on logistics illustrates a few of the other impacts you might want to consider in your planning:

• Most area trucking companies held shipments and closed plants
• Pickups and deliveries were suspended in five Texas cities including Houston, and cargo was held in Dallas
• Expected recovery time from suspended services: Usually two or three days to catch up with deliveries, and
• Railroad shipments were delayed by about two to three days.

Port closings for a few days didn’t have a big impact on deliveries since many customers had a “buffer in the system.”

Still, other customers waiting for specific deliveries saw disruptions.

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To get the job done right, you know it takes more than getting the goods delivered.

What good does it do you to get everything in time — if the quality of the goods is subpar, or even worse?

An industry services provider recently asked a cross-section of customers about the most serious supplier quality challenges facing manufacturers.

The top five concerns:

1. The need for performance-based scorecards, and the managerial reluctance to adopt and implement them.
2. The lack of systems that would accommodate and encourage more efficient and centralized reporting of quality issues.
3. The failure of top-level managers to get involved or take more of an active role in supply quality management.
4. The ongoing disagreements between supply quality management and supply chain management.
5. The failure to develop risk-based analysis for assessing supplier quality.

At the same time, it’s critical to scrutinize expenses more carefully than ever before. That’ll help maintain or even improve your cash flow.

Four key action steps you can focus on:

1. Old inventory costs you money, each day it sits on your shelves — so get rid of it. Set deadlines and sell old stock, at a discount if you must. Check with other departments at your company for suggestions or ideas.

2. Broaden your contacts and relationships with suppliers. Keep the door open all of the time with your suppliers. When you need a favor or a break (or they need one in return), it’ll be a lot easier to get their attention.

3. Discounts. Look for them. Ask for them. Barter for them.

4. Pay creditors just in time — and not a moment sooner. This might even be reason enough to set up electronic funds transfer, if you haven’t done so already. The longer you hang on to your company’s money, the more your company makes on it.

Finally, don’t be afraid to go against the grain when shopping. That means that the best price isn’t always the best deal.

Make sure you know first exactly what it is you’re looking for, then begin comparing prices. A low price that saves you a couple of bucks now but costs you more in the long run isn’t a very good deal.

And if you’re not doing it already, take a hard look at inventory levels. Do you really need to have 100 widgets on the shelf? Or can you get away with 30? How many are gathering dust?

Can you increase the shipment frequency, or even piggyback it with other inventory shipments?

Well, as you’re aware, it ain’t working like that anymore.

The economic slowdown have a ripple effect: Your shelves are starting to groan with inventory. While some stockpiling can protect you in unpredictable times, the cost of carrying extra stock is growing way too high.

So how do you know where to begin putting on the brakes?

One easy way to get started: Take the white glove test.

Explore your inventory area, and check for accumulated dust (you don’t really need a white glove). Take a fresh eye to what’s piled up in the corners and cluttering your aisles. How long has it been there? Do we still need to keep it so handy?

Once you’ve put together a “hit list,” there are two strategies you can try:

Bargain basement sale. Talk to Sales and Marketing. Is there some way to package this inventory to make it more appealing to customers? Maybe it’s a “buy now pay now” discount. It could also be a “buy three get one free” promotion. They’ll have a better idea of what customers will go for.

Help from the source.  Are any of your suppliers willing to reward your good history as a customer? Maybe they can “take back” some of the inventory and store it for you. That way, you can get it on a just-in-time basis, and keep your shelves clear. This not only makes room for other inventory, it also spares your staff from counting and tracking it — time and money.

And if you can’t reconcile what you have on hand with what you’re supposed to have on hand, it’s liable to come back and bite you in the wallet, sooner or later.

It’s always at the worst possible time that you learn you need more of a certain item than you actually have on hand — production slows, costly expedited shipping is incurred, and it’s likely you’ll have dissatisfied customers on your hands. Do it enough times, and those folks will be ex-customers.

But there are five steps you can take, before and as part of your next inventory, that’ll help pick up problems before the pop up on the floor and stall your count-in-progress.

All five steps concern actions you can take before the actual counting begins. This way, people can hit the ground running on Counting Day and keep momentum going.

Take over publicity. Tell everyone, loud and long, ahead of time, that Inventory will be closed at a specific time for you to count what’s there.

Whether it’s your internal customers or external customers, let them know far enough a head of time that people can grab what they need. That way, work flow is less likely to be interrupted and outsiders won’t be throwing you off with “emergency” requests that aren’t really emergencies. Of course, you’ll still be able to accommodate true emergencies.

Post signs at several locations, and send e-mails to Sales and Production. Remind people when you see them. By the time you actually do close the doors — say, Wednesday from 9 a.m. to 2 p.m. — everyone should know what’s going on.

Review your layout. Is everything labeled — shelves, boxes, bins — that should be labeled? If not, do it far enough ahead of time, before the count. Break down products into more useful chunks, by manufacturer, by function, by customer, etc.

Make room for errors. There will be mistakes. As we all know, nobody’s perfect. But turn those mistakes into learning opportunities. Whatever system you use to record results, be sure to leave enough space to where you can write or type in an explanation for the error. (Could be broken, missing pieces, damaged articles, etc.) Closely tracking the errors is the best way to solve them and prevent repeat problems in the future.

Testing, testing. Check any equipment you’re going to use — usually calculators and/or scanners — before the day of the count, to make sure everything’s in working order. And locate back-up power sources, too — batteries or AC adaptors.

Create a labeling system. You’ll want a way that the people who are counting can mark specific problems they come across, without breaking the work flow. Most pros find that color coding is the best way to do this. You can use colored stickers or markers to label problems such as: damaged product or something that needs a manager’s attention; you should also find a way to label goods that already have been counted. As with everything involved in physical counts, the simpler it is the more successful it’ll be.