If you thought the noughts was the decade of the network, think again. At this point, every sourcing vendor and its mascot either has a supply network or is in the process of creating one. We’re long past the point where the only network you could get aribaed on is the ASN. We have the Ketera Network. We have the Coupa Supplier Network. We have the SciQuest Supplier Network. We have the OB10 Global e-Invoicing Network. And two more Bay Area companies are in the process of releasing (or, depending on the timing of this post, have just released) their own supplier networks. It’s the age of the supplier network. But what’s the net? Is it worth it?
Should we, and by we I mean the little guy who’s going to ultimately end up paying the price (as networks, like most other systems of taxes, are the ultimate means of quickly and efficiently pushing the cost down upon us little guys), embrace the new networks with open arms? Should we do whatever we can to resist their adoption? Or should we take a neutral wait-and-see stance.
To answer this question, let’s examine each of the “selling points” of today’s supplier networks from both the buyer and supplier perspectives. (Although we ultimately care how the networks impact us, we also have to understand how they affect the buyers in order to make an informed decision. We have to consider the net/net, because even if the networks are detrimental to us, if the benefits to the buyer far outweigh the detriments to us, we can’t outright reject them if the buyer could pass some of those benefits to us. I know it’s a big if, but we have to be fair!)
- Find a supplier. / Find a customer.
Like any buyer worth her salt doesn’t already know who her suppliers, and their competitors, are? (Heck, all you have to do to find out your supplier’s top three competitors are is to ask them why they’re better than one and the salesman will start to ramble about how they’re better than competitors A, B, C, etc. until you cut him off!) And as a supplier, you definitely know who your top customers are, and it’s pretty easy to find out who their big competitors are with Google. No real value here.
- Electronically receive purchase orders and send invoices.
How long have we had secure FTP? And what modern e-Procurement platform doesn’t do this? And how many freeware programs / (HTTPS/SSL) websites exist that let you do this? (More than I can count!) No new vaue here either.
- Automate and Streamline Processes.
And how is this different from every other supply chain tool? Marketing gibberish. For value, we have to keep looking.
- Grow your business.
Sorry, but I just don’t believe this. Exposure != Award for a supplier and using a back-end tool does not guarantee a front-end sale for a buyer. Besides, what B2B / B2C technology provider doesn’t make this claim?
- Get paid (or make payment) faster.
Maybe, maybe not. That depends on whether or not the buyer has the appropriate systems in AP and on their internal policies. If the buyer believes in waiting until the last possible day to pay an invoice (or has an internal policy that they won’t pay an invoice any sooner than the “net” date), the supplier won’t get paid any faster. Besides, how much faster is this than the e-cheque, ACH, e-mail, or wire transfers we all have access to through our online banking? It all goes over the wire, and all packets transmit at the same speed. So, technologically speaking, there’s no gain here either.
- Participate in / run events.
Every sourcing tool allows you to do this through your browser. In fact, there are a number of free tools (including WhyAbe) that buyers and suppliers alike can use to solicit, and conduct, business on-line. Another claim filled with empty calories.
- Automated “lead” alerts of new RFX opportunities.
Okay, so you can’t get this if you’re not on a network, but I’d argue that at least 99% of these alerts aren’t real “leads” anyway. If a supplier hasn’t contacted you directly, how likely is it that they are going to award you the business? More importantly, how likely is it that you can even meet the demand? Just because a dumb keyword matching algorithm (and let’s face it, since software is not intelligent, most searching algorithms are pretty dumb) detected that the buyer wanted processors and you manufacture processors doesn’t mean you have the right equipment to make the custom processors the buyer wants. Sorry, but the web isn’t semantic yet, and even if it was, you’d still get more false positives than real “leads”! So we have negligable value here.
- Market Intelligence.
Okay, so you can see who’s out there, who’s bidding, what they’re bidding on, and, to some extent, what they are being awarded, but you can get most of this intel from most reverse auction platforms if you regularly participate in on-line events. Of course, as a network member on an appropriate network, you can have access to all data from all events, which can be quite useful as you can make an informed decision as to whether or not its worth your time to participate in an event before you do so. This, in turn, allows you to focus on events where you have a reasonable chance of winning the bid. So, there is some new value in terms of market intelligence. As to how much that value is worth, that’s highly dependent upon how many users the network has, how much business is flowing through the network, and how much of that business is relevant to you. If the network is small, if it’s mostly used for “listings”, or if most business ultimately happens offline, the value could be quite minimal.
This is about the only argument I’ve seen that actually has real, undeniable, merit. While many on-demand / SaaS / Cloud providers collect data and aggregate benchmarks, most are restricted to their customers and, furthermore, most don’t have enough customers to reach the transaction and spend level required to truly allow the derivation of meaningful metrics that can be defined relative to a specific category in a specific vertical. After all, most benchmarks defined at the global level are not that meaningful when each industry and category has its own individual nuances. But when all of the data across a large network is available for aggregation and analysis, the market intelligence becomes meaningful and usable by each and every member.
So what’s the net/net? There is undeniably some value in a supplier network, especially if it has a large number of members and an annual transaction volume in the Billion plus range, but the value provided is, at least for the time being, no where near as great as most of the providers claim it is. As a result, if you’re paying a lot for the pleasure of being a member, at least for now, you’re more likely to get aribaed then you are to see a profit. That may change in the near future, but make sure you go in with both eyes open and do the cost, and value, calculations before you make any long-term, big-dollar, commitment. And if the fee structure of the network model is designed to push all of the inflated costs and fees down upon you, the little guy, you should put up all the fight you can muster, because you’ll only end up getting aribaed if you don’t!