Key Benefits Driving Procuring Organizations to Marketplaces

by Scott Walls

As procuring organizations drive ever-larger amounts of “spend” onto contract, the support costs associated that spend increase in direct proportion.  These support costs, as well as the lack of shared or “managed” service offerings from the major ERP houses (PeopleSoft/Oracle or SAP), are driving procuring organizations to SaaS “marketplaces”.

This BLOG highlights 5 major drivers and their benefits.

As always, please provide comments based on what you see in your firm.

Driver 1 – Single Search

Single search refers to the ability to search for ALL content (requisitionable/non-requisitionable, contract/non-contract, capital/non-capital, internal catalogs, external catalogs, supplier catalogs, whatever/wherever) in one place and at one time.  It allows every user, regardless of procurement knowledge, to acquire the right product/contract at the right time with NO support from procurement.  It leverages the one piece of information all requesters have when searching…a description.

Within eProcurement, search is the “Tip of the spear”.  From this process, many other processes/best practices follow.  When done correctly, it allows procurement to truly deliver an “Amazonian Simple” self-service experience.  To illustrate how important the acquisition algorithm is to success, ask yourself how successful Expedia would have been if my 55 year-old-mother needed to watch a video or read an instruction manual in order to book her flight?  While corporate procuring isn’t as simple as B2C, the parallel has relevance.  In fact, change management videos, training, and documentation are indications the acquisition algorithm  (where do I go to buy any given item?) is too complex.  Complexity leads to “leaks” in the strategy; increased off-contract spend, secondary sourcing, requisition denials, and compliance efforts, as well as general requester dissatisfaction.

Business Benefit – “Single Search” reduces change management and increases requester adoption allowing prouing organizations to more easily increase spend under on contract.  Requesters use a universal known, description, to locate and understand how to acquire items; allowing the marketplace to effectively manage change.

NOTE: because marketplaces are SaaS, they can provide a “window shopper” environment for smaller organizations who may not have a dedicated ERP window.

Driver 2 – Superior Content Tools

Content tools refer to the data structures any application provides to store and present securely its content.  In order to facilitate best practices such as “single-search”, the underlying application must have some level of “base” functionality.   In particular, it must allow the procuring organization to create instructional items, make live price calls, link to contracts, and show only certain content to certain requesters.

Instructional items are pseudo-items used as pointers.  For example, a rental car can be on contract, but is rarely purchased via a requisition.  However, if it is on contract, the requester must find it in the single search.  Instructional items are displayed as part of the search with links to purchase instructions, contract limitations, and external content.  The instructional item could link to the contract or even several reservation hyperlinks based on the requester role within the marketplace.

Live price calls allow procuring organizations to bring punch-out content into marketplace catalogs (the right course of action for all but configurables).  Having content in the marketplace gives the procuring organization control over price changes.  Live price call makes a call to the supplier’s site when the pseudo-item is returned as part of the search results.

Lastly, contract linkage and catalog security should be easily manageable and quickly configurable.  Best of breed procuring applications make these tasks easy and fast.  Old world structures not allowing single and mass assignment and change are labor sink-holes and should be avoided.

Business Benefit – superior content tools allow procuring organizations to enable mass content, keep price updated, support single-search, maintain contract linkage, and easily attach to the right requester(s) search results.  Increasing adoption, while managing content support costs.

Driver 3 – Content Enablement Managed Services

“Content” refers to 4 key elements used to create transactions (think requisitions) within most procuring applications; suppliers, contracts, catalogs (AKA items), and requesters.  Managed services refer to shared resources that enable and manage this content.

As organizations drive ever-increasing amounts of spend on contract, procuring organizations struggle with the enablement of “content” as well as being able to effectively broadcast that content to the right requesters, at the right moment in time.

Without even discussing the management of price changes related to internal content and managing compliance related to punch-out content, the enablement of content must be supported solely by the procuring organization and/or its technology department.  While elapsed time far exceeds the actual dedicated or “working” time, these processes are a labor sub-optimizer.

Content enablement managed services are services provided by the SaaS providers allowing procuring organizations to source content (given contract stipulations) and completely outsource the enablement of said content.

Business Benefit – Content Enablement Managed Services decrease procuring organization labor requirements by allowing procuring organizations to outsource large portions of the enablement and management efforts; deploying the “we source, you enable” model.  This can results in thousands of hours of saving as well as having spot transaction failure skills available without having to staff for the need internally.

NOTE: marketplaces also manage the on-boarding of requesters, deploying within the security framework you create/instruct.

Driver 4 – Catalog Management Tools

Content management tools allow procuring organizations to manage item attributes (color, size, price, description, UOM, etc.).  For procuring organizations of size, managing annual changes on the hundreds of thousands, or millions, of items is a major effort.  For this reason, superior content management tools are essential.

It is not uncommon for a supplier to have a catalog with over 50K items and have only a small portion of those items change in price (i.e. Dell sees a RAM price spike within SE Asia).  Some send only the changes, others the whole file.  Procuring organizations need a way to quickly see only the changes relevant to them.  Pricing changes, changes only greater than 5%, description changes, UOM changes…the content management tools need to be flexible in this area in  order to avoid labor charges escalating.

Business Benefit – best in class content management tools increase pricing accuracy while decreasing the labor costs associated with managing content.

Driver 5 – Procurement Connectivity Experience

Marketplaces are “trading rings” where buyers and suppliers connect to exchange items, orders and potentially more.  Because these firms have architected and managed their trading rings, they have years of experience in creating, managing, and supporting buyer/supplier connections.  Because this gateway is appealing to suppliers, the trading ring has the ability to standardize the connections making it easier for the procuring organization to communicate en mass and quickly on-board suppliers.

Business Benefit – years of connectivity experience primarily accelerates the connectivity and error resolution process, decreasing the dollars spent on labor.  Secondarily, Marketplaces bring years of cataloging experience and are great resources for internal/external education.

Driver 5 – Consolidation

Consolidation refers to application consolidation, point of contact consolidation, reporting consolidation and more.  Marketplaces can act as points of consolidation for buyers, suppliers, and data mining parties.  Procuring organizations “expose” services via a marketplace form multiple applications to multiple parties and report on all the activity. With SOA, applications can be interconnected and services could be exposed across many platforms in any number of configurations.

Business Benefit – marketplaces can be a logical and less expensive way to consolidate transaction reporting by funneling all applications’ procuring transactions through the same external marketplace.  A major government entity uses their marketplace to serve content to 120+ sub-agencies, often running separate instances/procuring applications.  Their marketplace serves content  (suppliers, contracts, catalogs, and items) across all applications form one location.  As the content transactions run through the marketplace, consolidated reports are run within it.

Point of contact consolidation (exposing ERP services like a supplier portal via a marketplace) is also growing in popularity.  Point of contact consolidation allows the procuring organization to present one, simple front-end for all of its suppliers to manage their content in.

Advertisement