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Add to cart: Digital Procurement for B2B is the New Normal

Digital procurement for B2B is on the cusp of a significant transformation. Supply chain disruptions through the pandemic are causing CPOs to look at B2B procurement in a new light. While the KRAs of quality, cost, and delivery continue to be relevant, there is an increasing demand for spend analysis, transparency, data, supplier reliability, and risk management. In the near future enterprises will get a more personalized customer experience similar to what individuals get from B2C e-commerce.

What is Digital Procurement for B2B?

Digital procurement for B2B migrates enterprises from ad-hoc and offline buying to a digitized source-to-pay platform. It replicates the customer experience of a B2C e-commerce marketplace.

Like a B2C e-commerce marketplace, a B2B online marketplace offers a catalog of line items spread across product categories. Users can browse through the catalog to compare suppliers, brands, and products. They can compare costs, volume discounts, expected time of arrival (ETA), and inventory availability to place orders.

However, B2B e-commerce offers several advantages, and therefore enterprises have been drawn to it for a long time now.

Reasons for Adopting Digital Procurement Before the Pandemic

The following reasons had been driving enterprises’ adoption of digital procurement before the pandemic:

Faster Delivery: Agility is a significant challenge in enterprise procurement. B2B online marketplaces offer quicker and cheaper delivery than their offline counterparts and are an enabler of value.
Cost Control and Compliance: Cost efficiency is a critical KPI for procurement teams. B2B e-commerce platforms enable inter-supplier comparisons and thus augment ease of spending control and compliance.
Scale: In manufacturing, order sizes surpass the scope of a piece-meal approach and is critical to procurement officers. B2B marketplaces can fulfill large scale industrial purchase orders.
Quality: The quality of industrial supplies determines the quality of industrial output. B2B marketplaces deploy internal quality control procedures that foster trust creation for enterprises.

Reasons for Upswing in Digital Procurement Through the Pandemic

While online shopping benefits in the B2B segment were visible long back, the pandemic has fastened the move towards digital procurement.

Risk Management: Supply chain disruptions have been a significant challenge for enterprises. B2B marketplaces have responded with better data analytics, cloud computing, and the internet of things capabilities to augment supplier visibility.
Reliability: B2B marketplaces with diverse and inclusive supplier ecosystems are less prone to supply chain disruptions than their offline counterparts.
Safety: The pandemic has pushed the need for ensuring people’s health and safety. The online workflow supports collaboration across the supply chain and is safer than offline models of procurement.

Integrated Solutions: B2B procurement platforms allow enterprises to track, control, negotiate with suppliers, and report from a single platform. It will enable industrial buyers to get a B2C-like customer experience.

How Will Digital Procurement Make Life Easier for CPOs in the Future?

B2B marketplaces have seen a large scale adoption for some time now. Before the pandemic, the procurement officer’s responsibilities were those of negotiation and compliance. Beyond the pandemic, these responsibilities are likely to give way to supplier relationship building and risk management.

B2B procurement automation will soon upgrade to include artificial intelligence and machine learning capabilities. This will lead to a more personalized customer experience, share product recommendations, and set reminders to prevent inventory stock-out situations.

Vendor Consolidation Vs. Diversification: What is the Best Supply Chain Strategy?

The pandemic brings the focus back on the classic debate: vendor consolidation or vendor diversification? Which of the two is the right supply chain management strategy. If your sourcing managers are searching for an answer to the question, we have got you covered. The truth is that your supply chain’s digital readiness can make all the difference to the answer.

What is Vendor Consolidation and What are its Benefits?

Vendor consolidation is a strategy to rightsize the existing supplier base and make it more cost-efficient, quality-centric, and stable. A vendor consolidation strategy will require you to map the value and category of procurement against each supplier and procure more industrial supplies from a chosen few suppliers. You can now reduce the number of vendors and reap the following benefits:

Reduced Purchase Costs: When you purchase higher volumes of industrial supplies from handpicked suppliers, you will have higher bargaining power and ask for discounted prices. You can also explore the option of annual rate contracts to seek effective insulation against price increases.
Reduced Process Costs: Once you reduce the number of suppliers, you will reduce the number of purchase orders and invoices. You will reduce the turnaround time for placing orders by integrating more line items in each order. You will reduce your process costs.
Reduced Mismatches in Supplies: One of the hurdles of a large supplier base is many supplier codes, material codes, and supplier catalogs. Vendor consolidation allows your sourcing managers to work with fewer supplier codes, material codes, and catalogs. You will reduce the scope of mismatches between items that you order and those that you receive.
Improved Supplier Relationships: When you increase your purchase orders’ value, suppliers will undoubtedly accord greater attention to your requirements. You can look forward to stable and reliable supplier relationships over the long term.

What is Vendor Diversification and What are its Benefits?

A vendor diversification strategy will require you to spread out your supplier base and work with many suppliers. Following are the benefits of vendor diversification:

Opens Multiple Channels of Sourcing: Vendor diversification opens up multiple sourcing channels for your enterprise. It spreads out the procurement risks across a large number of suppliers and reduces your dependence on each supplier.
Promotes Innovation and New Product Development: Vendor diversification augments innovation and new product development. You can engage with multiple suppliers, browse through their offerings, and select the one that fulfills your requirements.
Promotes Competition among Suppliers: One of the benefits of diversifying your vendor base is that you have greater flexibility to choose your suppliers for each purchase order. It allows you to create an environment for competitive bidding and opt for the lowest price to get a competitive advantage.

What is the Best Supply Chain Strategy?

The best strategy depends on product category, procurement processes, and technology maturity. In the long run, for large and growing businesses, vendor consolidation provides the scale with reduced costs. The pandemic experience has shown that effective supply chain risk management calls for visibility into procurement.

Digital procurement solutions allow you to leverage analytics, map supplier performance, and make purchasing decisions. You can lean on an integrated platform with an inclusive supplier ecosystem and a single catalog managed by a single point of contact. This way, you can consolidate your supplier base, re-engineer your procurement process, and de-risk your supply chain.