Automation Does Solve the Supplier Enablement Problem …

… but it has to be done right! Regular readers of the Supply Chain Management Review will remember an article from about four months ago that attempted to address How Automation Solves the Supplier Enablement Problem. Noting a study from Aberdeen that found that enterprises with properly deployed supplier enablement strategies are able to drive down their costs by 71 percent, while also realizing an average cost more than 45 percent lower than their peers, the article noted that the utilization of automated processes instead of manual systems improves supplier enablement.

The article is right in that automation improves supplier enablement, right in that it is an ongoing effort that requires the utilization of software and the deployment of services, and right in that you have to engage the proper buyer-automation strategy. But it’s wrong when it states that only key and high-volume/high-dollar mid-tier suppliers should be integrated directly into the on-line marketplace. I understand why the recommendation is being made — it’s authored by an employee of a vendor of a marketplace solution that still uses punch-out and hosted catalogs — B2B 2.0 solutions.

(Simply put, the B2B 2.0 vendor logic is as follows:
(1) High dollar, high volume, low-maintenance members of the supplier community are usually already punch-out enabled, and, thus, easy to hook up directly,
(2) About half of the high dollar, high-volume, high-maintenance members of the supplier community will be punch-out enabled, and easy to hook up directly. The rest will likely have staff dedicated to maintaining catalogs in a common format, so it won’t be too much work to get these catalogs on a regular basis in a form that allows most of the products and services to be automatically imported into the vendor’s hosted catalog. Furthermore, the transaction revenues should come close to covering our hosting costs, but
(3) Low-dollar, low-volume members of the supplier community are not only not likely to be punch-out enabled, but also not likely to have an up-to-date catalog in a modern, standard, data-format. Hosting these catalogs will require a lot of work on our part at a cost much greater than the transaction revenues we are likely to see from them.
Thus, since
(1) a buyer’s key suppliers are high-dollar, high-volume, low-maintenance suppliers who are already punch-out enabled, and since
(2) a buyer’s mid-tier suppliers are high-dollar, high-volume, high-maintenance suppliers with good catalogs in a clean XML format,
we’re safe in recommending that the buyer integrate these suppliers directly into the on-line marketplace as it will be relatively easy and cost effective for us. But since low-dollar/low-volume suppliers who are not punch-out enabled and without good catalogs drive up our costs, drive down our margins, and risk pricing us out of the deal, we have to recommend that buyers deal with this group on a company-specific basis and host some of their enablement and offer encrypted email channels for other low-volume suppliers … because, not being B2B 3.0, we just can’t do it at an affordable price-point.)

If you are still using a vendor who is still on B2B 2.0, then the approach outlined in the article is the right one for you, since there is a cost associated with every supplier you integrate and you should only integrate suppliers where you’ll achieve an ROI. However, if you’ve progressed up the value-chain to B2B 3.0, then it doesn’t matter what format the supplier has their data in — punch out, hosted catalog, flat-file, on-line database, or proprietary XML. This is because a B2B 3.0 solution uses meta-search, web services, agents and mash-up technology that can automatically convert and search the suppliers’ catalogs, in any format it happens to be in, in real time, to the format used by your procurement or marketplace solution, and the cost for each supplier, once you’ve purchased and deployed the solution (which is usually implemented as a web-service) is minimal, and, more importantly, always fixed because it is SKU and format agnostic.

Furthermore, B2B 3.0 gives the supplier the choice on how he wants to be enabled … he can come direct from his existing XML punch-out, he can send you his catalog, he can send you his web-based database connection information, or he can just send you the URL of his web-site with on-line, real-time, pricing information. He can even direct you to a third-party marketplace that is already hosting his catalog if he wants to. And regardless of where your suppliers’ data comes from, the enabling technologies of B2B 3.0 will give you a single, simple, unified, and meta-search enabled view of your suppliers and their product and service offerings. This is because B2B 3.0 technologies aggregate the catalogs, punch-outs, and marketplace listings into a single, virtual marketplace customized for you.

That’s why B2B 3.0, a revolution that is about to take the enterprise software world by storm, is so critical to your future success. As the first generation of enterprise technology to enable true B2B e-Commerce that consists of simple, fast, low-cost transactions at true market prices, it’s also the first generation of technology with no limitations on content or community, as it’s able to take advantage of the full underlying connectivity offered by the Internet. For more information on B2B 3.0, check out the inaugural Sourcing Innovation Illumination Introducing B2B 3.0 and Simplicity for All, and for more information on how the right automation truly solves the supplier enablement problem, watch for the upcoming Sourcing Innovation Illuminations that will describe how Simplifying B2B for Suppliers Enables Buyers and how Content Enablement Technologies Enable e-Procurement 3.0.