Global Logistics & Supply Chain Strategies recently ran an article that asked if supplier portals were so great, then what went wrong? that had a really good history of supplier “portals” and some insights into the reasons why they may have failed. However, I have to question whether or not their statement that the survivors have evolved into networks with real value is accurate. But first, let’s review.
As the article notes, supplier “portals” were cheap and easy to set up in the early days, and this was because these “portals” were often narrowly focussed on automating the transaction, getting the buyer the best deal, or allowing a buyer to find a new supplier. As the article also notes, they didn’t take a holistic view of supplier performance management (SPM) and collaboration, and, more importantly, of the sourcing AND procurement process. Furthermore, most of these companies had ill-formed business models or a “me-too” business plan (which was a sure sign of failure – how many outlets do you need for “best-priced” office supplies?).
This meant that many suppliers, including those who originally embraced the “portals”, pushed back, as they quickly concluded that there was little value there for them and that the “portals” were just another means for a buyer to boost his or her discount. Thus, many of the original portals failed.
Today, according to AMR, you have “networks” which offer a single transaction backbone, feature common instances of software for multiple users, provide scalable communications platforms that utilize standard message formats, allow for common applications, and allow members to share customers, suppliers, and service providers. Furthermore, they create a business network that includes retailers, manufacturers, logistics providers, suppliers, contract manufacturers, and other channel partners.
Today’s “networks” are arguably better than the “portals” of yesteryear, but do they, in and of themselves, offer the “real value” purported by the article headline?
Many networks offer instant access to, and identification of, thousands of suppliers. Mostly Worthless – most companies know who their suppliers are and who the main competitors of their suppliers are. They don’t need to identify suppliers. They offer automated document exchange – for a transaction fee. Hmmm … so do most sourcing and procurement platforms, and e-mail is essentially *FREE* if you’re hosting your own servers. They centralize information in one place. So what? So does your monolithic ERP. They offer e-Payment – which is usually calculated as a percentage of the payment amount. In comparison, many banks have ACH services that allow you to do e-Payments for a fixed transaction fee. Where’s the value???
Unless the platform offers real collaboration capabilities (and I’m sorry, but e-mail and FTP document exchange doesn’t qualify), and unless the platform “enables” the supplier, there’s no significant value to the network. What do I mean by this?
First of all, the platform, be it “portal”, “network”, or “marketplace” has to offer as much value to the supplier as it does to the buyer. Not only should it make it easier for the buyer to do business and get a good deal, but it should make it easier for the supplier to do business and negotiate a good deal as well. Capabilities should be bi-directional. If buyers can find new suppliers, then suppliers should be able to notify potential buyers about their capabilities as well and easily query “open” RFIs. If buyers can create questionnaires, then suppliers should be able to create questionnaires and ask questions to clarify a buyer’s need with just as much ease. Document sharing is one-thing – real time collaborative document creation is another.
Furthermore, in addition to allowing a buyer to pay electronically, it should allow a supplier to electronically submit its invoices and manage its payment terms. For example, if the supplier agreed to 90 days net, they should be able to offer *different* discounts for 30 days and 60 days. It should allow a supplier to manage all of their purchase orders, shipments, and goods receipts as well as allowing a buyer to manage the same. It’s all about enablement – and if the “portal”, “network”, or “marketplace” doesn’t enable the supplier to serve the buyer, and themselves, better – the value of such a solution is limited and it too will disappear as fast as some of the dot-com busts of the last decade.
What is enablement? Good question. However, you can start with this post on the core capabilities of supplier enablement.