Magazine article Training & Development

E - Shift

Magazine article Training & Development

E - Shift

Article excerpt

Well if you haven't heard, there is an important shift underway. Soon, there will be e-marketplaces on every HRD corner, and the question will be, Where is the real value?

In an economy in which speed and agility are the elements for success, b2b e-marketplaces are promising competitive advantages to whomever, and whatever, they touch.

E-marketplaces--also known as exchanges, trading hubs, or net-markets--are virtual forums in which a community of interested buyers and suppliers congregate to exchange information about their procurement requirements as well as the products and services they offer. These e-marketplaces also facilitate online commerce in which buyers and suppliers can conduct transactions efficiently once their requirements and capabilities are matched--via auctions, live trading exchanges, RFP generators, or catalogue aggregation.

The goal is to enable buyers to hook up with the optimum suppliers (and vice versa) and thus reduce inefficiencies caused by lack of (or too much) information. In that way, e-marketplaces are the ultimate mediator.

Let's parse it out.

Buyers

Controlled buying. Most companies have, poor control over spending. Typically, they allocate total budget amounts but have little control over who is spending what and when. The National Association of Purchasing Managers estimates that one-third of all corporate purchases are out of compliance with volume purchase agreements, called VPAs. Rebel buyers go outside of those contracts for reasons of "convenience." To add insult to injury, on average, the rebel buyers pay 18 to 27 percent above the VPA price.

Lower admin cost. The cost of processing a purchase order manually ranges from $125 to $175 per event. E-procurement can lower that cost to $10 to $15 per order because of speedy approvals and easier, asynchronous communication with suppliers that eliminate faxes and phone calls. For example, British Telecom estimates it reduced procurement costs $113 to $8 per transaction via Commerce One's BuySite technology.

Price-Process transparency. Finding the right product at the right time for the right price is of great value to busy executives. The first step is lowering the cost of discovery (who does what) as well as the overall unit price.

The Holy Grail:

* Track frequent purchases.

* Uncover duplicate and triplicate orders.

* Surface troubled business units and poorly performing suppliers.

Simply put, buyers always want to make the best decision possible. If they can do that without sacrificing security, speed, anonymity, reliability, and product quality--it's a no-brainer.

Suppliers

Lower customer acquisition cost. Compared to traditional marketing avenues, suppliers can discover new buyers at much lower costs. If customers are already in a centralized e-market, half of the journey is complete.

Lower selling cost. Some estimates suggest that up to 40 percent of all orders have to be reworked because of errors, incompleteness, miscommunication, or mishandling. Clickstream tracking makes for fewer errors in online purchases, especially large orders.

E-collaboration. This is the true win. Remember: Buyers are looking to make the best decision possible. Suppliers have an opportunity to help buyers proactively--to plan, schedule, and manage their products and services. Therefore, all events before, during, and after a purchase can also move online. Suppliers will be embedded firmly into the buying lifecycle. Savvy suppliers will use this opportunity to better understand market conditions and meet unfulfilled needs. The ability to conduct promotions, measure the result, and continuously adjust to new buyer information will increasingly be a core competency for suppliers. In the end, suppliers want to be valued partners, not just line-item costs.

All in all, e-marketplaces seem to be a win for everyone. …

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