From new lockdowns in China to soaring inflation, 2022 has opened a new chapter in the era of uncertainty.
In a time of much change, procurement teams that rely on 20th century models and technologies often struggle to remain agile. Digitization is enabling procurement to reinvent itself, accelerate processes and incorporate flexibility without losing control of costs and risks.
This may seem like uncharted territory, but the next generation of procurement will be built on a model as old as time itself. To get a glimpse of the future, companies need to move away from spreadsheets and look in a new direction.
An interconnected ecosystem
A forest is more than a group of individual trees, all competing for light, water and nutrients. They are all connected by a vast, microscopic network of mycelium – a thread-like fungus – that is woven into the roots of each plant. This “Wood Wide Web” pulls the resources it needs from the web and makes sure they get to where they’re needed. It even transmits information: For example, when a tree is attacked by insects, it sends alerts to others over the web so they can prepare their defenses.
In terms of connectivity, flexibility and even data, supply chain relationships are light years behind these natural networks. But that’s exactly how procurement will evolve over the next few years: away from fragile, individual business relationships to more organic, dynamic and resilient networks. The best example of these new networks are B2B marketplaces that weave global buyers and suppliers into a single, symbiotic ecosystem.
The perfect storm
Supply chain operators long ago realized that B2B sourcing was inefficient and time-consuming, especially compared to the choice and efficiency that characterize consumer marketplaces. While processes gradually went digital, relationships remained analog. Covid was the catalyst for a digital and supplier-centric revolution.
Supply disruptions demonstrated the risk associated with “just in time” procurement. When suppliers fail, companies need to be able to seamlessly switch to another supplier they trust for quality and delivery.
As with B2C marketplaces, B2B marketplaces are about leveraging the vast selection of suppliers from around the world. But they are more than that: the marketplace model addresses the twin trends of digitization and supply chain resilience.
True B2B marketplaces add value in a number of key areas:
- Content: They accelerate procurement by providing access to a wide range of products, suppliers and prices that are digitally connected to the buyer.
- Performance: They improve process efficiency thanks to a shared, standardized infrastructure that enables fast, accurate and increasingly automated transactions at scale on cloud-native platforms.
- Control: They reduce risk by pre-screening each participant to ensure they meet required product standards and digital processes.
- Connectivity: they provide resilience by offering quick access to alternative providers in the event of a supply disruption. Marketplace operators with expertise are able to provide guidance on equivalent sourcing options.
- Convenient to use: They are intuitive and easy to use, enabling employees to save time, simplify workflows, improve processes, and build stronger, more meaningful relationships with partners and suppliers.
The transition to this model is not a major technical challenge. However, it does require a change in mindset. The digital network character enables all participants to buy directly from a selected supplier base. Small and medium-sized companies can begin their digitization journey and compete with global suppliers.
The B2B marketplace market
McKinsey reports that more than three-quarters of buyers and sellers prefer digital self-service and contact with people remotely to face-to-face. Forrester estimates that cross-border B2B e-commerce transactions will reach $1.8 trillion by 2023, representing 17% of all B2B sales in the United States.
There is a wide range of marketplaces on the market and it can be difficult not to see the forest for the trees. Many of them masquerade as B2B marketplaces, when in fact they are just poorly disguised B2C networks that don’t support the types of transactions or the specific criteria for B2B commerce. What should companies look for in a marketplace?
Most marketplaces, whether B2B or B2C, are easy and intuitive to use. To determine their true value and resilience, companies need to look beneath the surface. There are many more moving parts in B2B buying than in B2C buying, from sourcing and selecting suppliers and products to handling requests, contracts, payments and logistics.
A global network for 21st century commerce.
Enterprise customers may want the same kind of user experience they’re used to from Netflix or Amazon. But they also need robust processes for management, compliance and integration on the back end. While demand for B2B marketplaces is evolving, there are still a high number of solutions that masquerade as enterprise-ready products but don’t stand up to scrutiny.
A good B2B marketplace platform should provide buyers with true transparency and competitive bids, while providing suppliers with a broad prospect base at low customer acquisition costs. A more efficient, resilient and flexible supply chain will only be possible if all stakeholders – from suppliers to freight forwarders, from banks to buyers – are connected in the same digital network. In this network, companies can set up their own marketplace, invite trusted business partners and take advantage of industry-specific group purchasing, or create an entirely new, vertically integrated supply chain.
Given the economic storm and further upheaval, it could be a while before the global economy is out of the woods. By leveraging B2B marketplaces, companies are laying the groundwork for a new commerce characterized by choice, transparency and, most importantly, resilience.
Author: Christian Lanng, CEO of Tradeshift