There is a shift underway in both B2B and B2C practices which is starting to blur the lines between consumer based shopping and business based purchasing. This is resulting in traditional B2B eProcurement providers functioning more like B2C providers and conversely B2C marketplaces entering the B2B world. Let’s take a look at the elements which are underpinning this movement.
- First, there is the huge boom in B2C commerce through sites such as eBay and Amazon and these have defined the way we all now expect to interact with technology and content. In our personal lives, we swap providers if there is not a simple intuitive interface (B2C shopping), are guided through complex processes (satellite navigation) and receive instant feedback when something has happened in a process we are involved with (text and Twitter alerts).
- Second, the rise of the generation known as Millennials who are under 30 and currently at 50% of the workforce are rising to 75% in 2025. These are the group who have grown up within the communication and technological revolutions of the past 20 years; who know no other age than that of “always-on” internet accessed by mobile devices. This results in an expectation of real-time feedback, instant communication and intuitive processes from a generation which are now starting to become decision makers in our organisations.
- Third, B2C providers are looking for additional revenue streams in what is seen as an extension to their omni-channel strategy by also looking towards the B2B market segments.
- Finally, and more mundane, eProcurement providers have been around for close to 20 years and their solutions have evolved to cover an ever increasing number of processes and spend categories. We take stock of what we can automate, what we can do better and where the next layer of savings are; this leads to new solutions and capabilities.
One such enhancement which we are bringing to Europe and announcing at SAP Ariba Live is Spot Buy functionality.
Spot Buys have traditionally been simple or one-time items - which Procurement determine are not strategic enough to source; the 20% of the 80/20 rule. The effects of this can be seen in the vendor master commonly known as the long tail.
Companies classically address Spot Buys in one or more of the following ways:
- Through the use of a non-catalogue or free text request to Procurement who find the correct supplier, generate a PO (which usually requires creation of a vendor) and order the goods on behalf of the requestor. A highly manual process causing increased work for both Procurement and Finance; with the benefit of complete control and visibility into what companies are buying.
- Through the use of Procurement cards issued to employees who are trusted to buy what they need with restrictions on commodities and price. This comes with the benefit of a simple, fast and streamlined process at the expense of control and visibility (where cards typically done report line item information).
- Lastly, through Rogue Buying. The employee simply orders the goods and pays through a personal card (expensing the item back) or by asking the seller to send a non-po invoice to the company. This provides no control, minimal visibility and with a high process cost.
Putting all of these practices together; ultimately the long tail problem is created because neither one of the above steps provide Procurement and Finance with process efficiency, visibility and control; there is always a trade-off. From a content perspective, companies are becoming more dynamic, resulting in less predictable spend; meaning Procurement can’t load the right content and employees not being able to find what they want. Add into this an easy-to-use and content rich B2C shopping environment which more and more of the workforce want to purchase from and it’s an area ripe for innovation.
Enter Ariba Spot Buy.
- Consumer Simple: Solving the content problem by bringing B2C content into the eProcurement system. This means when an employee searches they always get a match and have no need to go outside of the system.
- Business Strong: Layering over this are B2B procurement level of controls which manage what commodities, suppliers, and value of items are displayed. On the accounts payable side, we use pioneering innovations and detailed reporting to control the amount of vendor maintenance.
We see Ariba Spot Buy as one of the first pure B2B applications to start to understand how the B2B and B2C worlds should meld together. Businesses want more control and reliable trusted sources with an advanced level of evaluation criteria while at the same time enjoying the limitless selection a marketplace can bring.
This is also changing the way the Procurement function views their companies' spend categories. The definition of a Spot Buy is now being extended to also cover categories of spend which are no longer effective to manage when Ariba Spot Buy is in place. This frees up commodity managers to focus on far more strategic spend where they can add the most value.
I look forward to presenting our plans for Ariba Spot Buy Europe at Ariba Live on the 13th June in Madrid and hope you can join me there. We have a Plenary Session with Sudhir Bhojwani, SVP Products & Innovation and also a number of Breakout Sessions covering Ariba Spot Buy.