Regional Market Outlook on B2B Marketplace Analysis 

Implementation of Amazon/B2C-ization model B2B marketplace will shift large number of procurement FTEs from low value transactional work to high value  strategic work improving overall procurement process efficiency.

Tail Spend Segmentation

There are high potential of savings in these segments, but due to lack of visibility most of the companies fail to understand the total volume of business they could do with known and approved vendors for bundling demand and achieving discounts. Amazon/B2C-ization model B2B marketplace can play a major role being an alternative procurement channel for Spot Buys in the Middle of the Tail and Tail of the Tail section of Tail Spend segment increasing low value procurement efficiency.

Hidden Tail

It is a part of strategically managed spend with big suppliers not covered by contracts 

Solutions:-

  • Dedicated team to negotiate new contracts or existing contracts
  • For spend occurred without reference to existing contracts dedicated team to find and implement the existing contract

Head of the Tail

  • Spend per supplier from $50,000-1 million p.a.
  • It is not part of strategically managed spend 

Solutions:-

  • Dedicated team should work for supplier consolidation shifting consolidated spend to strategically managed spend

Middle of the Tail

  • It includes large number of suppliers with spend per supplier from $2000-50,000 per supplier
  • It is not part of strategically managed spend   

Solutions:-

  • Spend in this  segment can be  moved to strategically managed spend or automated by alternative buying channel
  • With large number of companies with relatively low spend per supplier,  savings are expected by setting up spot buy desk
Tail of the Tail
  • This segment contains suppliers with per supplier spend less than $2000
  • It includes small purchases from large number of suppliers
Solutions:-
  • Alternative channels which allows low value buying without involvement of procurement

Procurement Internal Control for Low Value Purchase

Amazon/B2C-ization model B2B marketplace makes entire procurement process easier but it reduces the number of purchases through contracted vendors affecting Strategic Procurement Management, hence all the purchase requests from business users should be routed through Internal Procurement team for right procurement approach focused towards increasing the amount of contracted spend and reducing transactional spend.

Amazon/B2C-ization model of B2B marketplace

  • Amazon/B2C-ization model provides B2C buying experience to buyers saving time and improves overall efficiency of low value procurement process 
  • This model acts as a medium where Buyers  can search for millions of products from different suppliers
  • It also act as a  Hosted, or API based or punch-out catalog for leading procurement systems

Who prefers this type of Model?

  • This model  is useful for Tail of the Tail and some part of Middle of the Tail section of Tail Spend where priority is given to spot buy and alternate channel for procurement
  • Preferable for buyers looking to buy products of low spend per supplier in an effective manner and prefer using P-Cards for purchase
  • Preferred by buyers looking for B2C type interface for procurement which doesn't involves traditional procurement processes  and has lesser complications
  • Buyers who are least bothered about the direct suppliers prefers going for the model

Information and Product Flow

  • Buyers visits these  marketplace to search the list of products for particular categories
  • Buyers can sort products of a particular category based on product and supplier ratings by marketplace and suitable price
  • Here marketplace is the  sole supplier and invoice is generated in their name, improving Accounts Payable reconciliation efficiency
  • Logistics are arranged by these  marketplaces providing end to end delivery increasing supply chain efficiency
  • Detail analysis report of spend per business account is generated here

Alibaba/Supplier Discovery B2B Marketplace

  • Alibaba Model acts as a Handshake Medium for Buyers and Vendors  helping search efficiency
  • Started with main motive is to connect Chinese manufacturers with western companies for Low Cost Country Sourcing
  • Buyers can get details of large number of suppliers along with  their contact details  and location

Who prefers this type of Model?

  • This model  is useful for Head of the Tail and Middle of the Tail section of Tail Spend where priority is given to supplier consolidation and contracted purchase
  • Preferable for buyers looking to touch base with the direct suppliers
  • Buyers looking for purchase of goods following traditional procurement process prefer to use this model
  • Organizations who prefers using their own dedicated logistics or logistics arranged by direct suppliers uses this model of market place 

Information and Product Flow

  • Buyers visits Alibaba.com to search the list of suppliers subscribed to Alibaba for particular categories
  • Buyers can sort suppliers based on certification & ratings by Alibaba and geographical preferences
  • Further communication of contract negotiation and delivery terms will be directly between Buyers and Suppliers with least involvement of Alibaba
  • Logistics are arranged either by the suppliers or buyers with least involvement of Alibaba