PEPPOL, which stands for Pan-European Public Procurement On-Line, is an EDI (electronic data interchange) protocol, designed to simplify the purchase-to-pay process between government bodies and suppliers. Put simply, PEPPOL facilitates electronic ordering, invoicing and shipping between government organisations and private companies.
The need for PEPPOL has arisen from historic inefficiencies and limitations in the way that government bodies procure from their suppliers. Typically, a government body would have a small set of approved suppliers – familiar and able to meet their order processing and fulfilment needs – and rarely reach beyond these. Traditional purchase processes have evolved little over the last few decades, the advent of PEPPOL seeks to shake things up for the better.
PEPPOL is notably the EDI protocol chosen by the National Health Service in the UK (NHS) to achieve efficiency improvement and meet the government initiative of saving £22bn by 2020.
What problems does PEPPOL solve?
In the context of the NHS, PEPPOL is seen as improving procurement efficiency through the enablement of electronic ordering, delivery notes and e-invoicing. Suppliers to NHS trusts will make PEPPOL-compliant catalogues available, from which products can be automatically ordered. EDI enables full automation of the purchase process, and simplifies the task for suppliers to create delivery notes and invoices.
Aside from day-to-day efficiency, the requirement for PEPPOL as a standard across all NHS trusts and suppliers creates a more open and competitive market. Consequently, NHS trusts will experience greater cost efficiency in procurement – selecting goods from the best value supplier at the time. Additionally, greater visibility of stock-levels and speed of procurement brings benefits such as Just-in-Time ordering that have significantly reduced warehousing and wastage costs in retail and automotive industries.
Suppliers are set to benefit too, with easy access to a broader network of buyers. Competitive conditions will improve cost-efficiency for NHS trusts, but also empower suppliers to scale up and achieve sales volumes that were previously limited.
Furthermore, the implementation of PEPPOL vastly simplifies the task of tracking products from purchase to deployment. The standardisation of labelling, through GS1 compliance, and PEPPOL EDI means that a particular range of products can easily be traced and recalled from market if required. In the context of medical supplies, recall and management of previously unknown side-effects in existing patients is a crucial standard to uphold.
What does PEPPOL consist of?
PEPPOL isn’t an e-procurement, or e-invoicing system. PEPPOL is a set of open technical specifications that facilitate interoperability and trading between connected parties. Connection to the PEPPOL network is via a PEPPOL access point, typically a service provided by an e-invoicing or e-procurement solution provider.
PEPPOL compliance centres around the exchange of PEPPOL-compliant documents, between buyer and supplier, such as e-catalogues, e-orders, e-despatch notes and e-invoices. This exchange is done across the PEPPOL network, via respective Access Points (gateways).
For documents to be PEPPOL-compliant, they need to adhere to specifications outlined in PEPPOL Business Interoperability Specifications (BIS) v2.
You can find more information about PEPPOL in our PEPPOL FAQ Document here.
What do NHS trusts need to know about PEPPOL?
As a public authority, NHS trusts must adopt e-invoicing in public procurement using a common European standard by November 2018. It is broadly accepted that PEPPOL is the most relevant standard to adopt, and in doing so, NHS trusts will become aligned with the requirements set out in the EU Directive.
PEPPOL-compliant e-invoicing is one aspect of the larger drive to improve efficiency across the NHS. Part of this drive includes a mandate that NHS trusts should be using the PEPPOL EDI protocol, with GS1 labelling and location coding standards, for the majority of transactions with suppliers by 2020.
So, there are two deadlines:
- PEPPOL-compliant e-invoicing – by November 2018
- PEPPOL-compliant, and GS1-compliant, e-procurement processes (for the majority of transactions) by 2020
There are many challenges ahead for NHS trusts in the deployment of PEPPOL. Currently (early 2017), NHS trusts are looking to the handful of demonstrator sites within the NHS for learnings and guidance on the best way to implement GS1 and PEPPOL compliance. As these sites release early-stage learnings, the path to PEPPOL compliance will become clearer.
In addition to the technical challenges of PEPPOL compliance, NHS trusts also need to find budget to invest in PEPPOL. Whilst the long-term savings through efficiency gains are substantial, this reduction in operational expenditure does little to support the immediate need for capital expenditure.
What do NHS suppliers need to know about PEPPOL?
Suppliers are set to benefit from vastly improved efficiency, as GS1-compliant electronic purchase orders are raised and transmitted by PEPPOL-compliant EDI. These electronic purchase orders can trigger automated delivery and the generation of an electronic invoice.
Savings will arise from greater automation. Presenting invoices electronically, in a format that can be automatically processed by NHS trusts, will also result in reduced delinquency and DSO (days sales outstanding). Collecting money fast is always a major competitive edge, so embracing the e-invoicing side of PEPPOL, ahead of competitors, is a strategic advantage. The improved cashflow, resulting from this, will enable growth and improve profitability.
The onus will be on suppliers to deliver PEPPOL-compliant documents such as e-catalogues, despatch notes and e-invoices for NHS trusts to consume and integrate with their e-procurement processes. For documents to be PEPPOL-compliant, they need to adhere to specifications outlined in the PEPPOL Business Interoperability Specifications (BIS) v2.
What is the easiest way to become PEPPOL compliant?
As with any business decision, the cost-case for investing in PEPPOL needs to present a return on investment as swiftly as possible. The breadth of requirements for full PEPPOL-compliant eProcurement presents an investment conundrum for NHS trusts and suppliers alike – how to make this investment before budget is available from the savings achieved.
One of the best approaches to this challenge is to deploy PEPPOL-compliant e-invoicing as a first stage. Both suppliers and NHS trusts stand to make substantial savings through electronic invoicing. These savings can then be reinvested in the broader requirements of full PEPPOL-compliant eProcurement.
In the context of invoice generation, as opposed to invoice processing, solutions such as Netsend, present an attractive business case. With a minimal upfront investment, setup costs are offset and become part of operational expenditure. This equates to a lower barrier to adoption, enabling suppliers to extract competitive advantage and business gain rapidly.