New developments in online marketplaces will empower buyers 18 November 2015 Colin Farrow

Contents

1. Marketplace – a definition 2. Historical context 3. Recent history – Marketplaces go online 4. Ages of business marketplace development 5. The challenge of indirect tail spend 6. How can the new online buying platforms help? 7. Request for Quotation 8. Pre-validation and standards 9. Risk mitigation 10. ApplegatePro – a demo

Marketplace – a definition

A place, physical or virtual, where

suppliers and buyers meet and interact

Historical context

In Ancient Egypt goods were traded in public marketplaces Contracts of Hepd’efae, recovered from Asyut, dating to the Middle Kingdom [2040-1783 BCE], show complicated commercial transactions In Ancient Greece, the Agora in Athens became an important marketplace in the period 1550-1100 BCE Samuel Lee compiled the first London business directory, collecting the names and addresses of nearly 2,000 merchants and goldsmiths.

Pre-2000 BCE 2040-1783 BCE 1550-1100 BCE 1677 AD

Recent history – Marketplaces go online

The ARPANET is used to arrange a cannabis sale between students at the Stanford Artificial Intelligence Laboratory and MIT Tim Berners-Lee writes the first web browser, WorldWideWeb Jeff Bezos launches Amazon.com eBay is founded by computer programmer Pierre Omidyar as AuctionWeb Andrew Tweedie launches Applegate, as the definitive online directory for B2B in the UK Ariba launches the ariba.com Network Alibaba Group is established in China

1971 1990 1995 1997 1999

Ages of business marketplace development

Prehistory to 1677 1677 to 1999 1999 to present day

Marketplaces are physical, relying on buyers and sellers being in the same geographical location The age of the ‘infomediary’ The age of online platform services Software as a Service (SaaS) comes of age

The challenge of indirect tail spend

Earlier this year, in a survey of 360 CIPS members conducted by Supply Management and Expense Reduction Analysts, 71 per cent of respondents regarded maverick spend by non-procurement professionals with purchasing power as the biggest challenge relating to indirect procurement. Contributory factors: • Lack of training for non-procurement professionals • Insufficient influence by procurement

departments over specialist and tail spend • Lack of access to sophisticated buying tools

Can new developments in marketplace technologies help bring indirect tail spend under control?

How can the new online buying platforms help?

• The current phase of evolution in online marketplaces involves the development of tools to make it easier for buyers to find and engage with suppliers

• For procurement professionals the tools may offer advantages over expensive and cumbersome enterprise purchasing solutions in buying long-tail items.

• For non-procurement professionals that have spending authority, these tools will offer a framework that encourages good practice

• So what are these elements of good practice?

Good practice – Request for Quotation

• The simple act of inviting more than one supplier to quote is the key to achieving value and developing the supply chain

But … • Researching and identifying multiple suppliers is a time-consuming business • Producing an RFQ document may be a daunting task for the non-

procurement professional – they may not know where to start • The act of sending out invitations and receiving in responses adds further

time and administrative burden

What if … • The 10 minute RFQ became a reality?

Pre-validation and standards

• In a procurement environment crowded with standards and compliance concepts, which route do we take?

• How do we judge materiality?

• Quality of process and control – e.g. ISO 9001 • Quality of product engineering – e.g. BS EN 62467-1 • Environment Policy • Health & Safety Policy • Sustainability

• CIPS Sustainability Index • Global Reporting Initiative

Risk mitigation

• Which supplier indicators contribute most to reducing risk of failure, especially when buying a new product or service:

• Years trading? • Turnover? • Relevant client references?

• Does PAS 7000 offer a feasible solution?

ApplegatePro – a demo

- Applegate search - Favourites

- RFQ Engine - Message Centre

- PO Generator

- Communications Centre

Existing functionality

New functionality