Procurement has been largely unchanged for years, but that’s changing. B2B marketplaces are making it easier for buyers to find the best products and services. Buyer expectations are changing, and procurement is changing with them.
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B2B marketplaces are rapidly expanding into procurement organizations these days. According to Forrester’s research, client value will vanish in the next few years if a trading platform is not included as a core component of a BPO offering.
Furthermore, it is expected that by 2022, half of all legacy spend analysis software will be retired and replaced by AI-powered tools. What does this mean for procurement executives? Continue reading to learn about what the B2B Marketplaces are, how it is the future of procurement and the advantages of using a marketplace approach.
People who remember when consumers first started using digital marketplaces may be surprised to learn that the oldest of those platforms is now nearly 25 years old. Even business-to-business platforms have been around for over two decades, becoming an almost imperceptible source of commerce for many small and medium-sized businesses.
Leaders are hesitant to change their long-standing reliance on dealing directly with suppliers due to concerns about scale, quality, and reliability. That is beginning to change. A new generation of procurement leaders, who have grown up purchasing online for increasingly complex personal needs, are beginning to wonder if purchasing online makes sense for business as well.
Powerful digital and analytic tools are also contributing to the new mindset, opening up new opportunities for procurement departments to generate value outside of their traditional transaction management focus.
What are B2B Marketplaces?
B2B Marketplaces are speeding up procurement activities in a variety of areas. Procurement teams can eliminate hidden procurement waste that has previously been too costly and resource-intensive to closely manage by embedding these online purchasing platforms.
Figure-1: How quickly can you close the gap?
B2B purchasing is not at the level of B2C purchasing yet, but it is improving every day.
To deliver value and meet the growth trends in the B2C environment, marketplace solutions must integrate companies’ internal processes “end to end.” Unfortunately, there is still a capability gap between B2B and B2C, which boils down to three critical functionalities.
The main abilities are listed below:
- control which suppliers are allowed to participate in a marketplace and which items can be sold to a company
- set up relationships, pricing, and terms with suppliers privately
- set purchase options for specific buyers and provide them with more or fewer options
- offer a competitive environment at the time of purchase
Why is the E-commerce approach better in comparison to traditional purchasing?
Figure-2: Money spent on e-commerce sites by year
E-commerce is the process of exchanging goods and services in a digital format in which payment for the goods and services is made electronically. E-Commerce is a type of online shopping market in which customers can easily buy goods and services from the comfort of their own homes, including a few discounts, and the goods will be delivered to their door.
Traditional commerce is the process of directly exchanging goods and services for money. Traditional Commerce involves face-to-face and in-person dealing with all the parties to perform the exchange of goods and services with predefined prices.
The key differences between E-commerce and traditional purchasing are:
- E-Commerce is entirely digital and online, with all communication conducted in electronic form, whereas traditional commerce is entirely offline and conducted in person or face to face.
- E-commerce is available worldwide and has greater connectivity, whereas traditional commerce is limited to a specific geographical area, particularly a smaller one.
- Information exchange in E-Commerce occurs in various forms, such as digital ads or emails, whereas information exchange in Traditional Commerce occurs in the form of hoardings or pamphlet distribution, or through any physical mode of exchange.
- E-commerce allows for one-to-one marketing, whereas traditional commerce only allows for one-way marketing.
- E-commerce can accept a variety of payment methods, including online transactions, digital wallets, and cash on delivery, whereas traditional commerce can only accept cash in person.
Digital Procurement for B2B: A New Normal
Digital procurement for B2B moves businesses away from ad-hoc and offline purchasing and toward a digitized source-to-pay platform. It is designed to mimic the customer experience of a B2C e-commerce marketplace.
A B2B online marketplace, like a B2C e-commerce marketplace, provides a catalog of line items spread across product categories. Users can compare suppliers, brands, and products by browsing the catalog. To place orders, they can compare costs, volume discounts, expected time of arrival (ETA), and inventory availability.
Here are some reasons are given below for Adopting Digital Procurement:
- Faster Delivery: Enterprise procurement faces a significant challenge in terms of agility. B2B online marketplaces enable value by providing faster and cheaper delivery than their offline counterparts.
- Cost Control and Compliance: For procurement teams, cost efficiency is a critical KPI. B2B e-commerce platforms allow for inter-supplier comparisons, which improves spending control and compliance.
- Scale: Order sizes in manufacturing exceed the scope of a piecemeal approach, which is critical to procurement officers. Large-scale industrial purchase orders can be fulfilled by B2B marketplaces.
- Risk Management: Risk management has been a significant challenge for businesses due to supply chain disruptions. To improve supplier visibility, B2B marketplaces have improved their data analytics, cloud computing, and internet of things capabilities.
- Reliability: B2B marketplaces with diverse and inclusive supplier ecosystems are less vulnerable to supply chain disruptions than their traditional counterparts.
- Safety: The pandemic has highlighted the importance of ensuring people’s health and safety. The online workflow promotes collaboration across the supply chain and is more secure than traditional procurement methods.
Digital B2B Marketplaces are the Future of Procurement
For some time now, B2B marketplaces have seen widespread adoption. Prior to the pandemic, the procurement officer’s duties were primarily those of negotiation and compliance. In the aftermath of the pandemic, these responsibilities are likely to be replaced by supplier relationship building and risk management.
Artificial intelligence and machine learning capabilities will be added to B2B procurement automation in the near future. This will result in a more personalized customer experience, the sharing of product recommendations, and the setting of reminders to avoid stock-out situations.
The marketplace approach is better than traditional purchasing
By incorporating big data, AI, and new technologies such as IoT (Internet of Things), marketplace solutions are disrupting traditional purchasing processes. “Three major steps will be added to the e-procurement process by marketplace solutions,” Thieulloy explains.
“First, adopting a marketplace approach will enable end-users to purchase directly from a curated supplier base. Second, they will allow procurement personnel to shift their focus to higher-value activities. Third, they will assist small and medium-sized suppliers in better digitizing their products and services in order to compete with large, global vendors.”
Taken individually, you can see why our customers are so excited about the potential of marketplaces. They can not only help them improve the way stakeholders consume procurement, but they can also help them create more value in their organization. Marketplace solutions have the potential to significantly improve the buying experience, increase efficiency, and revolutionize how suppliers and buyers interact with one another.
The views expressed in this article are those of the author alone and not the WorldRef.
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