Supplier Enablement
The success of business-to-business e-commerce depends on both the buyer and supplier having the ability and willingness to conduct business electronically and an understanding of the benefits. From a buyers perspective it is clear that the degree of success of an electronic purchasing implementation is directly dependent on the level of supplier participation.
Supplier enablement refers generally to trading partners (buyers), or third party specialists, working collaboratively with suppliers to ensure that they have an appropriate e-commerce capability and as a result both suppliers and buyers can trade together electronically both efficiently and effectively.
It is a way to differentiate products and services and sell more effectively through multiple electronic channels whether it ¡s your own web site catalogue, e-marketplaces, or directly through Web sites of partner companies. This approach can increase the agility and response time of a business and lower the cost of working with partners.
Making the supply of goods and services simply a matter of point and click opens up enormous opportunities for improved customer relationships, cost savings, tracking spending, restocking inventory and understanding market trends.
By linking seamlessly to the e-procurement systems of trading partners there is less reliance on manual systems, typically fewer errors in order processing through multiple handling or re-keying data and the chance to open your business up to a wider group of potential suppliers which can drive more competitive pricing.
Why are buyers interested in electronic trading with suppliers?
More effective use of resources
- A more efficient way of dealing with non-strategic spending. Non-strategic spend is typically low, but consumes an inordinate amount of purchasing resources. By automating the non-strategic spend a purchasing manager can focus on more strategic supply relationships.
- Reporting tools provide information for more effective analysis of purchasing trends and patterns
- Can be used to cement in an organisation's set of preferred suppliers
- Reporting tools provide information for more effective analysis of purchasing trends and patterns
Reduces purchasing costs
- Locks in preferred supplier contracts (business rule enforcement) ie. Electronic catalogues, accompanied by a set of defined procurement policies and practices, reduces off-contract (maverick) purchasing
- Reduces costs associated with manual processes (e.g. cost of fax and telephone)
- Reduces errors associated with traditional purchasing methods ie. Telephone orders can be misheard
- Reduces costs associated with manual processes (e.g. cost of fax and telephone)
Increased efficiency
- Instant access to key suppliers with single sign-on, rather than having to sign on to each supplier's website
- Faster ordering process (cycle time), particularly if the system eliminates re-keying.
- Improved communication with supplier surrounding order acceptance and estimated time of delivery
- Faster ordering process (cycle time), particularly if the system eliminates re-keying.
Why should suppliers participate in electronic trading with buyers?
Revenue growth or maintenance
- Revenue from new channels by selling to channels beyond their own website
- Increased revenue from existing channels ¨C an electronic system can lock in a supplier's preferred status thus increasing buyer compliance to preferred contracts... and this is done cost-effectively.
- Prevents loss of sales channels - if a competitor is electronically enabled in may provide it with a competitive advantage in a tender situation.
- Increased revenue from existing channels ¨C an electronic system can lock in a supplier's preferred status thus increasing buyer compliance to preferred contracts... and this is done cost-effectively.
Reduces cost of doing business
- Potentially allows the reduction or maintenance (with growth) of the customer service team (aim of on-line service is to reduce, but not eliminate, human contact points)
- Reduced costs due to process automation
- Reduces errors resulting from miscommunication e.g. instantaneous price updates
- Fewer back-orders, returns, urgent couriers etc
- Reduced costs due to process automation
Increases competitive advantage
- Potentially locks in buyers business by increasing the switching cost of buyers to change to suppliers who are not electronically enabled.
- E-Commerce learning exercise - suppliers should be getting into e-commerce quickly to use it as a learning exercise
- Increased customer satisfaction and customer relationships if the electronic system delivers what it was supposed to deliver
- Better sales intelligence via reporting tools association with e-commerce software.
- E-Commerce learning exercise - suppliers should be getting into e-commerce quickly to use it as a learning exercise
Supplier Enablement issues and options.
Issue 1: Making products / services available to multiple electronic sales channels.
Some suppliers are selling to a large number of different e-procurement portals, each which requires the supplier to produce a different type of electronic catalogue (often with differing standards).
Options:
- Deal with each one separately, however this is complex and very costly.
- Connect to an e-commerce hub (or e-marketplace) such as SupplyNet's e-commerce platform. In contrast to the first option, all the supplier has to do is construct the electronic catalogue once (Build a catalogue once; use it many times), and the e-marketplace makes it accessible to any buyer seeking to trade. All that is required to trade with a new buyer is a new price file, which is laid over the top.
- Adopt a supplier e-commerce solution with the appropriate middleware to communicate with buyers using different protocols.
- Connect to an e-commerce hub (or e-marketplace) such as SupplyNet's e-commerce platform. In contrast to the first option, all the supplier has to do is construct the electronic catalogue once (Build a catalogue once; use it many times), and the e-marketplace makes it accessible to any buyer seeking to trade. All that is required to trade with a new buyer is a new price file, which is laid over the top.
Issue 2: Leverage a suppliers existing investment in e-commerce
Some suppliers have invested significant resources into their own sell-side electronic commerce solution, however this may not meet all of the needs of their buyers.
Options:
- Middleware a supplier can adopt software such as Microsoft BizTalk and WebMethods, which can communicate with multiple buyer technical solutions.
- Access an e-Marketplace with a RoundTrip service i.e. which allows a buyer to go to the supplier's own website, source the product and bring it back into the e-procurement shopping basket.
Issue 3: Electronic catalogue content management.
AMR Research says supplier-enablement software market is worth $US2.8 billion and growing but some observers suggest many offerings have serious drawbacks, making it hard for suppliers to change their catalogs once they are posted on marketplaces. However the emphasis of many of the major players is now on offerings that automatically upload catalogues to marketplaces and allow suppliers to have much greater control over content changes. The cost is also coming down as standards are adopted and a more modular approach adopted.
Suppliers have to convert their catalogues to an electronic form and then maintain it on an ongoing basis e.g. price updates. (For more details on content management click here.)
Options:
- Utilise a third party content management specialist, who specialises in processing electronic catalogues, for instance SupplyNet.
- Self-service - some e-marketplaces have hosted automatic catalogue publishing tools whereby Suppliers can upload changes made to their catalogues themselves.
- Invest in own content management tools
- Self-service - some e-marketplaces have hosted automatic catalogue publishing tools whereby Suppliers can upload changes made to their catalogues themselves.
Issue 4: Cost of entry.
If suppliers cannot enter e-commerce relatively cheaply the payback on participating on e-commerce will take much longer to achieve.
Options:
- Work with buyers to mitigate expensive duplication, which may mean joining an e-marketplace the supplier's major buyers are trading electronically with.
- Use hosted services - a supplier does not necessarily have to purchase any e-commerce infrastructure. Suppliers can have their electronic catalogues hosted by third party e-marketplaces.
- Outsource non-critical services e.g. content management who can do this job far cheaper than can be done in-house.
- Weigh up the current and future benefits and opportunity cost of not participating in e-commerce and then compare this with the costs.
- Use hosted services - a supplier does not necessarily have to purchase any e-commerce infrastructure. Suppliers can have their electronic catalogues hosted by third party e-marketplaces.
Issue 5: Other technical issues e.g. integration into back-end systems.
Suppliers realise that integration into their back-end systems will allow them to harness the true benefits of e-commerce. However this is complex and costly, particularly if a supplier has to integrate with a number of different buyers utilising a number of different technologies.
Options:
- Middleware at the supplier's end - a supplier can adopt software such as Microsoft BizTalk and WebMethods, which can communicate with multiple buyer technical solutions allowing integration into a supplier's back-end system.
- Middleware at the e-Marketplace provider's end e-marketplace providers such as SupplyNet also have middleware which allows a supplier to integrate their purchase orders into their back-end system.
- Many ERPs vendors have modular plugins that allow integration with specific formats. However, there may be an added license cost for additional ERP modules.
- Middleware at the e-Marketplace provider's end e-marketplace providers such as SupplyNet also have middleware which allows a supplier to integrate their purchase orders into their back-end system.
Issue 6: Marketing differentiation.
Some suppliers argue that by offering their electronic catalogue along with other suppliers their product or service becomes commoditised.
Options:
- In most instances the supplier will have a specific contract with a buyer anyway, so that the buyer will most likely only see their catalogue as opposed to a raft of other supplier catalogues. Otherwise:
- Work with the buyer to understand how the catalogue will be used by users
- Work with content specialists who understand how to make catalogues highly searchable
- Use internal resources to maximise the potential of the electronic catalogue by using long descriptions; pictures; specification sheets; and web links.
- Continued offline promotion using traditional marketing mix.
- Work with content specialists who understand how to make catalogues highly searchable
- Work with the buyer to understand how the catalogue will be used by users
Finally, replacing paper-based catalogues with automated purchasing and processing systems requires commitment and a clear understanding of savings and other benefits. Ideally the use of electronic processes should be instilled in company policy otherwise there's a tendency to a piecemeal approach and no-one gets the full benefits of supplier enablement technology.
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