PROCSERVE

What would Amazon do?

The art of the possible…

CPO Masterclass – MARCH 2014

© Procserve Holdings Limited. All rights reserved.

Paul Clayton Head of New Service

Development

@Procserve @CPOEVENT #CPO

SynopsisIn this master-class we will take a look at how changes in the retail world will impact on procurement and supply chain in the B2B space, what the opportunities are, and how to take advantage of them. The size of the online retail market has trebled since 2007 and accounted for just over 10% of sales in 2013 and is set to continue to grow. Many traditional retailers are now re-designing their business models to drive more sales through their online channels in the face of competition from the likes of Amazon, high quality fulfilment logistics and associated customer service are becoming key battlegrounds. As these organisations transform their retail operations, how they service their retail customers is beginning to align with the needs of the business sector and this is where the opportunities lie.

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Introduction

The drive towards online retailing is creating opportunities for procurement professionals to look again at their procurement and supply chain processes.But can traditional B2C companies cut it in the B2B world? We believe that the capabilities of the online retailing world when combined with simplified B2B eCommerce solutions means that it is now time for procurement professionals to take a serious look at how this can be exploited to deliver benefits to their organisations.

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How long is your tail?

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How long is your tail?

Typical tail:

• <10% of invoice value

• 75% of suppliers

• 5% of invoices

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How long is your tail?

Extended tail could comprise:

• 25% of invoice value

• 90% of suppliers

• 50% of invoices

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How long is your tail?

We only focus on what’s seen as strategic:

• 75% of invoice value

• 10% of suppliers

• <50% of invoices

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B2B suppliers are used to charging

different prices to organisations for exactly the same

products

No matter how good we think we

are, extreme prices are being paid for exactly

the same products

Are we really achieving savings and control?

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The price is right

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Right place, right time• Certainty / quality of supply are key to B2B• In online retail, high quality logistics is also

key as focus extends from price to customer experience

• Those with the best logistics will win out

• The best online retailers are experts at matching their fulfilment chains with very unpredictable customers.

• With a much more predictable customer (businesses) they can and will improve this even further.

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Question 1 (using the red/green card)

Do you believe that B2C logistics is good enough for the tail?

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Keep It Simple Stupid• One of the top 5 reasons for not using the corporate

eProcurement system is “it’s just too complicated”

• Even the best P2P systems compare poorly against ‘One Click’ Ordering !

• A recent article asked“Can Procurement Compete with Amazon?”

• A better question might be “Should Procurement compete with Amazon?”

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Question 2 (using the red/green cards)

Are traditional P2P systems just too

complicated to use for the long tail – and

thereby preventing use?

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Show me the money• We analysed spend patterns of an organisation spending

£750M p.a. on 3rd party goods & services. • 75% of their suppliers received 10 orders p.a. or less • By using online retail to supply their long tail needs,

they could save c. £500K p.a. in P2P, supplier adoption and AP process costs alone

• As online retailing embraces B2B, just how much tail can it satisfy?

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Service please

• Online retailers are not (yet) going to act as a front end for services - unless they are easily commoditised:– Tesco Insurance– Expedia

• Fill this gap with greatly simplified RFX that are:– Very easy to use– Can handle basic sourcing activities – Can provide corporate spend data

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Question 3 (using the cream card)

What proportion of your long tail is services?

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Making it happen…

Nice in theory BUT what’s needed to use B2C in B2B:• ePayments (eg virtual card platforms) - pay online

retailers using their preferred mechanism, without losing line item VAT and spend data

• Integrate your B2B procurement system with their online ‘marketplace’ to ensure – MI– Approvals– Control– Compliance– Familiar buying process

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Questions?