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Marketplaces: still a new revolution

Guest article by Bertrand Mabille, EPSA Group Partner and Martial Gerardin, Managing Director Europe at Proactis.

With technology, it is usually necessary to try something a number of times before the desired and predicted changes actually take place. Second-generation players generally benefit from the fruits of the first innovators, mainly because their focus is more centred on the use, rather than the technicalities.

For example, Xerox invented the first micro-computer, but Apple turned it into the universal product it has become. Similarly, iPhones are credited with the mobile internet revolution, permanently laying to rest the investments of Blackberry and other mobile operators. There are many examples of this, and shopping platforms are no exception.

Already announced 20 years ago, “Marketplaces" were to revolutionise the relationship between buyers and their suppliers. We were promised a profound change in B2B business relations thanks to the internet, and automation of all stages of the purchasing process, both in terms of supply and expenditure management control. There is a French proverb – the mountain brought forth a mouse – and in this context, there has been a marginal improvement in efficiency, but often at the cost of increased complexity for users.

Software providers have, in turn, often returned to more traditional methods but these are often limited to automating existing processes. Over the last 20 years, all the major organisations have persevered with their projects to digitally transform indirect spending: search engines, eProcurement, automation of relations with suppliers, etc. Some of these initiatives have helped to increase productivity, but no model has been convincing enough to establish a foothold.

There are a lot of possible reasons for the partial success, such as the undoubted immaturity of the technology, combined with how unprepared purchasing departments were. As with the examples provided, it is undeniable that one of the main factors was the complexity of the early systems and the lack of an overall view of indirect purchasing.

Introducing a marketplace must be preceded by an overall assessment of the associated processes and costs, both direct and indirect. For example, for indirect expenses, simply looking at the selling price leads to “missing the bigger picture”: the real focal point should be the administrative cost. This observation is not new, but often limited solely to analysis by purchasing departments.

A change of perspective
Approaching this with a holistic view of the whole company is often overlooked, yet can vastly change the perspective. This approach can make it possible to add the costs associated with payment delays, due diligence and all the constraints imposed on a large account to the costs related to the management of suppliers and associated processes. A good purchasing system should ensure market prices while at the same time offering simplicity, transparency and good risk management.

Simplicity and transparency have been characteristics of marketplaces for years. The “village square,” where suppliers “meet,” presents the ideal opportunities and conditions to agree, settle and regulate pricing, while simplifying the lives of buyers. It can also present the same opportunities for expenses: a simple and rapid user experience using tools that bring together all the available offers.

The latest technologies help to deliver this. We are increasingly seeing self-regulated markets, which challenge more traditional approaches to expenditure control in which purchase conditions must be defined in advance. With these new platforms, the seller can put conditions online freely and simply, but can adapt to market conditions to continue to receive orders.

A successful digital transformation must not be dictated by technology, but by rethinking how the organisation operates and offers goods and services, with the users, and the functionality to support them, at the centre of things. The technology is there to make this transformation possible. For indirect purchasing, new platforms will be easy to use for suppliers and users, to allow price self-regulation while controlling administrative costs and limiting risks.

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