Supplier Enablement

Supplier Enablement - No Free Ride

There is no shortage of interest in B2B eCommerce but who is going to pay?

Will it be the buyer or the supplier?

The vendors of products and services that deliver the solutions for B2B look upon buyers and suppliers as their customers. What are they saying?

What exactly needs to be paid for?

A buyer implementing eProcurement, eInvoicing or P2P automation, e- , will need to engage suppliers. That typically results in requirements put to a supplier to create and publish electronic content and generate an electronic invoice and that comes at a cost to the supplier.

Who pays?

The general picture is:

In the private sector the buyer usually expects the supplier to meet any cost as a ‘cost of doing business’. There are exceptions.

In the public sector, at least in the UK, the buyer usually meets the cost and that is to ensure that no supplier is disadvantaged from competing for contracts. The Zanzibar Marketplace exemplifies this approach.

Among vendors there is no consensus with pricing options where the buyer pays, supplier pays and both pay.

Suppliers are wary

There are examples of buyers achieving e- compliance with all their suppliers but in the mainstream it is typical that a buyer will target their top suppliers with the 80/20 rule applying. Many of those top suppliers will be sitting on multiple requests to get involved in the e- of their customers each having their own unique requirements. The supplier is now burdened with the complexity of the business case and IT implications for each customer. This is not going to change soon and the number of requests is increasing.

Buyers wait in vain

The supplier’s dilemma is often not evident to the buyer who blissfully assumes they have a supplier’s attention and compliance which is why those that have implemented e- describe supplier enablement as challenging.

Suppliers bogged down with cost justification and IT complexity

Many suppliers have customers in the public sector and the private sector and both are negotiating down the cost of purchased goods and services and so in the eyes of a supplier they already get a good deal. If the deal included e- as a condition of business then the supplier went in eyes open. However suppliers are receiving requests for e- from pre-existing business and worry about what to do; not knowing how that might affect their business. The cost to the supplier is important as it erodes margins but it is meeting the differing requirements of various customers that injects complexity in terms of process and IT requirements that suppliers want to avoid.

Buyers get it

If you look on the buyer side they typically implement a single interface between the business and the supplier base; one to many to keep down the cost and complexity. In the supplier base a piecemeal approach is more common as result of reacting to customers’ e- and that results in cost and complexity for the supplier.

Suppliers catching on

As suppliers get wiser they recognise the need for a solution that will accommodate all of their customers’ e- requirements. They are also looking at the opportunities from having XML orders available to them rather than paper documents to reduce the clerical costs of processing orders. As a result they are now implementing a single interface between the business and the customer base; a one to many solution, and the first vendor through the door is in a strong position. However, the reality is that the majority of UK businesses are untouched by e- but that is because wherever possible they have avoided engaging with e- customers in a wait and see approach and to forestall incurring additional costs.

e- is unstoppable

Things are changing, for example, the UK public sector has an agenda for e- efficiencies and is meeting the cost for equipping suppliers for e-. This has a big impact: i) it improves the competitiveness of suppliers particularly SMEs and, ii) it will also benefit the private sector as suppliers are given a ramp to e-.

Buyers have visibility to their own costs for processing requisition to order or an invoice and know what savings they achieve in a post e- world. Now they are becoming curious about a supplier’s costs; to process an order and raise an invoice. Why the interest? Because where a buyer meets the cost of e- for a supplier then they expect the supplier will achieve savings and that provides scope for the supplier to offer concessions that help the buyer meet their objective to drive down the cost of purchased goods and services.

e- is here and the who pays options are: the supplier pays and figures out how to cut costs or recover their additional costs perhaps through tweaking prices, or, the buyer pays and agrees that a supplier’s cost savings will be taken account of when negotiating prices.

At the end of the day e- is about reducing costs and if your supplier is at the bottom of their barrel when it comes to price then buyers may have to give to get.

On a final note

In a recent blog I challenged the view that the success of e- hinged on solving a customer’s pain and vendors co-operating. No it is not. e- depends upon the collaboration of parties that have opposing agendas; buyer to pay the smallest price negotiable, supplier to achieve the highest profit negotiable. It is about: who pays and how much.

This blog was also published by Line56.com on 18th December 2006.

posted by FrankB @ Friday, December 15, 2006