Supplier Enablement

Supplier Enablement - tipping point

There is growing evidence, some of it is available in previous posts in this supplier enablement blog, that we have reached a tipping point where we are all done talking about this and are now getting on with it!

I guess the dynamic now is; who is gonna pay as supplier enablement becomes a must do?

There are two camps:

1. Those that maintain the supplier must pay - because their business model dictates that. That business model usually being the dictate of a provider to a buyer that is offering to deliver supplier connectivity. This is a valid business model particularly for those buyers that have purchasing power and are prepared to mandate suppliers to comply with their trading initiatives.
2. Those that maintain the buyer will pay because it reduces the commitment the buyer would otherwise have to make to secure the participation of their suppliers. The approach being; without our suppliers' participation we don't get the full benefits and ROI on our investment. The incremental cost to us is not so high and we can always negotiate a cost recovery later when we have suppliers connected and they see the benefits in their business. We just get to where we need to be alot quicker than if we put the onus on our suppliers.

The economics for those that pay are:

The supplier pays a per transaction fee or a fixed fee per annum. In an ideal world the supplier would get to choose and that may be particularly important where there are a small number of low value transactions between a supplier and a customer.

The buyer accepts a cost to the business to support all their suppliers irrespective of the number of suppliers, the volume or value of transactions.

How is ROI computed?

Where a supplier pays they simply look at the impact on their gross margin for their costs and make an assessment as to whether that is affordable. That has to be tempered with a commercial assessment of the impact of not 'participating', as in; will I jeopardise my existing and future business with my customer?

For a buyer that is involved in a major investment and change program to roll-out electronic trading with suppliers there are a number of factors that need to be considered and perhaps the biggest of those is a risk assessement of the impact of suppliers choosing not to participate?

How many buyers do this?

The assumption is that suppliers will comply and if not we will bully them. That may work for some but not for all.

Does it matter any more as I have suggested we are at a tipping point?

It will be interesting to see which of the two 'pay' models becomes prevalant.

www.impaq.co.uk for more insight on how to deliver the participation of your suppliers.

posted by FrankB @ Monday, June 12, 2006