Monthly Archives: February 2016

Have We Reached B2B 3.0 Yet? Part 5: B2B 3.0 in Procurement

In our third post we exemplified our definition of B2B 3.0, simply defined as the first generation of technology that actually puts business users on the same footing as consumers, as the first generation of B2B technology that adds real content, community, and open-connectivity to B2B platforms through cutting edge technology like:

  • web services
  • intelligent agents
  • meta-search
  • real-time collaboration
  • semantic technology
  • mashups
  • analytics and
  • workflow

But we didn’t explicitly map these technologies to the different Supply Management technologies or workflows that you as a Supply Management professional have to use on a daily basis. That’s why our last post covered some of the necessary, but not necessarily sufficient, requirements of a modern Sourcing platform (defined as the platform that is typically used from the time a need is identified until the contract is signed, covering the “planning” and “sourcing” phases of the strategic sourcing execution lifecycle if you will), and today’s post is going to outline some key requirements that Procurement suites should possess if we are going to consider them as B2B 3.0 platforms.

As with our last post, this list is not all inclusive, and simply possessing all of this capabilities will not make a suite B2B 3.0 (because it’s not a suite, it’s just Procurement), but if these requirements are not missing, then the suite will not make the cut. In mathematical terms, these are necessary, but not sufficient, conditions.

In order to avoid confusion, we are using Sourcing Innovation’s standard definition of a Procurement platform from a technology perspective, which is defined as the the platform that is used from the time the first order needs to be placed (after a contract is signed, or the need for a spot-buy that does not have to be strategically sourced identified) until the last order is placed, received, paid for, and gone out of warranty. Such a platform will often be used alongside an SRM platform, but will not necessarily contain SRM as that is not a key capability in the procure-to-pay cycle, which is the latter half of the larger source-to-pay cycle.

From a historical perspective, the primary “capabilities”, organized into one or more modules, that such a platform would possess would include requisition, approval, and PO management; invoice and receipt management; m-way match; payment platform integration; tax tracking and reclamation support; discount management and cash flow tracking; and budget management. Such a platform may or may not includes special capabilities for T&E or contingent labour, which may be managed through separate, parallel workflows in parallel platforms.

From this viewpoint, some key capabilities that such a suite must possess include:

  • intelligent requisitions
    semantic technology and predictive algorithms must be brought together to help a user properly define what they want, preferably against standard goods, services, and work order “catalogs” so that the proper goods and services can be selected or, if a sourcing project is required, sourced; the platform should guide the buyer to the right type of good (FGPA and not off-the-shelf motherboard), service (database programmer and not administrator), or ATM installation (and not acquisition) based upon what the user free-form enters in the description field (when he bypasses the wizard-based workflow that was custom-designed to get him there)
  • auto-generated purchase orders
    that are generated against a contract, approved requisition, or recurring order to make sure all data is complete, and all part numbers match both supplier and buyer databases
  • automatic m-way match and invoice correction
    not only should the system automatically m-way match every invoice that comes in, but it should automatically kick-back any errors to the suppliers with a complete description (missing data, invalid prices, etc.) and a suggestion for an auto-corrected re-submission – the goal is that only when there is a dispute that needs to be manually resolved should a human be involved; this also goes for payment, if the invoice is against a contract, against a pre-approved requisition, or within a payment threshold, it should be automatically queued for payment – manual approval should only be required in exceptional circumstances
  • working capital optimization
    not only should the platform support early payment discounts and invoice factoring, but it should be capable of using this information to present cash-flow optimized payment schedules, subject to no late payment or max late payment rules by supplier, that schedule all approved payments to optimize the organization’s working capital without unduly burdening suppliers (and hiking their costs, which will just result in price hikes to the organization in the following year)
  • tax database integration
    the system should pull in tax rates in real time, verify all taxes paid are correct, track each tax paid by appropriate municipal, state, federal, or union body, determine which taxes the organization is eligible to get back in rebates, link to appropriate filing documents, and automatically fill out the necessary documents for rebates as appropriate
  • intelligent catalogs
    that seamlessly integrate supplier catalogs, be they EDI, XML, or custom format, open web-store catalogs (from un-contracted merchants or contract merchants for un-contracted products), and buyer developed catalogs that custom define products and services unique to the organization (and automatically suggested by the intelligent requisitions above) that not only allow any product or service that could be requisitioned to be easily found, but that guide the user to any contracted, preferred, or low-cost alternative
  • returns and defects and warranty tracking
    the system should also track all products rejected at the warehouse due to defects, all returns within the warranty window, and all related warranty service costs that can be billed back to the supplier and insure that defective items received are taken off of the invoice before it is paid and returned and warranty items are credited and taken off future payments

In other words, the requirements for a modern B2B 3.0 Procurement platform, even from this short list, are well beyond what has traditionally passed for an e-Procurement platform that, in the early days, was anything that could manage requisitions, approvals, purchase orders, and manually entered invoices. Do any of the platforms out there make the cut? We’ll get to that. But first we had to provide some food for thought.

Have We Reached B2B 3.0 Yet? Part 4: B2B 3.0 in Sourcing

In our last post we exemplified our definition of B2B 3.0, simply defined as the first generation of technology that actually puts business users on the same footing as consumers, as the first generation of B2B technology that adds real content, community, and open-connectivity to B2B platforms through cutting edge technology like:

  • web services
  • intelligent agents
  • meta-search
  • real-time collaboration
  • semantic technology
  • mashups
  • analytics and
  • workflow

But we didn’t explicitly map these technologies to the different Supply Management technologies or workflows that you as a Supply Management professional have to use on a daily basis. Today we are going to outline some key requirements that Sourcing Suites should possess if we are going to consider them B2B 3.0 platforms. This list is not all inclusive, and simply possessing all of these capabilities will not make a suite B2B 3.0, but if these requirements are missing, then the suite will not make the cut. In mathematical terms, these are necessary, but not sufficient, conditions.

In order to avoid confusion, for the purposes of this post, and this series, we are using Sourcing Innovation’s typical definition of a Sourcing platform from a technology perspective, which is defined as the platform that is used from the time a need is identified until a contract is signed. It is the platform that underlies the “planning” and “sourcing” phases of the strategic sourcing execution lifecycle (with Procurement, SRM, and similar technologies taking over during the “execution” phase).

From a historical perspective, the primary “modules” that such a platform would include RFX, e-Auction, optimization, analysis, and contract creation and management, but these would be integrated in one seamless process because, as SI has repeatedly said, it’s not a suite, it’s just sourcing.

From this viewpoint, some key capabilities that such a suite must possess include:

  • near real-time market intelligence
    integration with market (price) indexes, including commodity exchanges, public sector price databases (from public contracts), best price databases (that compare listed prices across multiple sets), energy rates, and labour rate databases (from government and published data)
  • automatic cost-model recalculation
    and alerts whenever there is a potential for costs to increase or decrease beyond a certain threshold
  • single-sign-on supplier portals
    where the supplier can manage all interaction with you as the buyer and submit invoices, query payment status, resolve conflicts, collaborate on NPD, discover upcoming opportunities,and provide new product and service information
  • automatic profile completion
    for current and new suppliers that uses IRS, credit and risk services, business directory, and other public sources to auto-fill missing data in a supplier’s profile, so all they have to do is confirm and correct data; also, automatic discovery of products and services they offer from online exchanges that they list on
  • visual supply chains for each supplier
    that allows a buyer to visualize the supply chain for each and all products sourced from the supplier based on all available data as well as the global supply chains the supplier interacts in based upon public trading data from government import/export databases and public sector contracts
  • auto-quote
    based upon current pricing, standard increases or decreases based upon market rates, and publicly available price data to simply initial supplier bids in an RFX or e-Auction
  • (near-)real-time decision optimization
    that is able to compute the lowest cost award taking all cost (model)s, (business) constraints, and goals into account
  • advanced spend analytics
    that can not only allow a power-user to slice, dice, enrich, re-categorize, and slice again the data any way they want to see it, but detect anomalies, project trends, and dig up insights that will allow new opportunities to be sourced in clever and valuable ways
  • contract obligation tracking and auto-verification
    most contracts require submission of insurance certificate, government (tax) forms, certifications, audits, and similar data upon award that needs to be tracked and validated by the buyer – this is a very time-consuming task; the platform should allow buyers to upload and use semantic technology, government, insurance agency, and other APIs to automatically validate uploaded documents upon receipt so that all a buyer has to worry about is chasing down delinquent suppliers or suppliers who don’t upload documents in the require formats (to allow for automatic verification and validity tracking)

In other words, the requirements for a modern B2B 3.0 Sourcing platform, even from these short lists, are well beyond what has traditionally passed for an e-Sourcing platform that, in the early days, was anything that could manage a few RFX forms, power a simple e-Auction on a few lots, and index a scanned version of a contract on a few meta-data fields. Do any platforms out there make the cut? We’ll get to that, but first, in our next post, we’ll define some of the key capabilities of a B2B 3.0 Procurement platform.

Have We Reached B2B 3.0 Yet? Part 3: B2B 3.0, A Definition

As per Part I, over seven years ago, Sourcing Innovation published Introducing B2B 3.0 and Simplicity for All, which is available as a free download, to help educate you on the next generation of B2B and prepare you for what comes next. The expectation was that, by now, we would be awash in B2B 3.0 (Business to Business 3.0), which was simply defined as the first generation of technology that actually puts business users on the same footing as consumers, but are we?

In Parts I and II we discussed the history of B2B 1.0 and B2B 2.0 in order to conclude that, neither B2B 1.0 and 2.0 was not enough. B2B 1.0 launched the internet era, but proved that connectivity, and even basic functionality, is useless without content (that helped buyers find what they needed and sellers provided what buyers needed) and community (as the right parties need to come together). B2B 2.0 brought the internet era to the mid-sized business, but ultimately proved that creating private networks and marketplaces didn’t add anything because while redundancy in data centres is good, network redundancy is bad and only increases costs, not value.

That’s why we need B2B 3.0 but is it? First we need to discuss B2C 3.0.

B2C 3.0, which was kicked-off by sites like Froogle (Google Product Search), PriceGrabber, and PriceWatch, allowed consumers to search and browse product listings from multiple sites. TechRepublic, CraigsList, and ComputerShopper provided the community for these consumers to discuss providers and products and find what they wanted at the price they wanted. And C2C 3.0 sites like MySpace, FaceBook, and Twitter connect more users than ever before.

B2B 3.0 is the business equivalent. It’s the next generation of B2B that adds content, community, and open-connectivity to B2B platforms. More specifically, open connectivity that is free to all to access, open community that allows all buyers and sellers to come together though dynamically created virtual networks on an open, shared, secure, and decryption-supporting API to conduct business as needed, and the depth of content required to support complex direct purchases. It’s what B2B 2.0 should have been, but without the unnecessary redundancy and the necessary cost.

B2B 3.0 is an open platform enabled by:

  • web services
    like Google Maps that allows supply chains to be plotted
  • intelligent agents
    that can automatically place re-orders and identify market data of interest to the buyer or supplier
  • meta-search
    that works over multiple catalogs, on multiple sites, accessed using multiple EDI, (c)XML, or other standard protocols
  • real-time collaboration
    instant messaging, (visual) VOIP, screen sharing, and collaborative document authoring
  • semantic technology
    that can identify news stories and reports of interest
  • mashups
    to normalize data from hundreds (or thousands) of file and data formats into a common taxonomy
  • analytics
    that can process, and make sense, of all of the information streams and present meaningful information and actionable insight
  • workflow
    as a good process is an effective and efficient process

But are we there yet? To be continued …

Have We Reached B2B 3.0 Yet? Part 2: B2B 2.0, A History Lesson, Continued

As per Part I, over seven years ago, Sourcing Innovation published Introducing B2B 3.0 and Simplicity for All, which is available as a free download, to help educate you on the next generation of B2B and prepare you for what comes next. The expectation was that, by now, we would be awash in B2B 3.0 (Business to Business 3.0), which was simply defined as the first generation of technology that actually puts business users on the same footing as consumers, but are we?

SI would like to jump right in and answer that question, but first we have to discuss B2B 2.0 and get our terminology straight before we can discuss B2B 3.0.

B2B 2.0: The “Marketplace” era

In the early naughts, thanks in part to efforts by large B2C and C2C (Consumer-to-Consumer) players like Amazon and e-Bay who made great strides in bringing security, trust, and quality to on-line platforms, e-Commerce became a major part of the consumer world. The growth of online business in some industries was so expensive that, almost overnight, small stores and chains started suffering and going out of business. Why pay $20 for a CD that an online store would sell for $14 and ship free if you bought 4 of them?

The end result was that businesses saw the potential of the web to host large, on-line marketplaces, and address the content and community requirements, and a large number of B2B marketplaces and private networks sprang into existence. This included dozens of general purpose marketplaces, including the likes of Ariba, Enporion (now GEP), Quadrem (now Ariba), and TPN Register (acquired by GXS, now OpenText GXS which sprang onto the scene alongside dozens of vertical-specific marketplaces like Aeroxchange, ChemConnect (gone), eSourceApparel (gone), and GNX (merged with WWRE, now Global Sources). The technology was more advanced than 1.0, but it only offered basic e-Procurement features — such as catalog management, request-for-bid, simple reverse auction, and supplier directories. B2B 2.0 expanded the marketplace for e-Procurement as these marketplaces spurred a flurry of new market entrants (such as Emptoris, Ketera [now Deem], and SciQuest) and allowed mid-tier buyers and suppliers to get in the game. And even though dynamic content was limited, and search was primitive, B2B 2.0 was made out to be a good thing.

But in the end, the gains didn’t negate the losses. Even though the marketplaces and private networks initially thrived, the high access fees became even more prohibitive as suppliers had to be on multiple networks to service their buyers and buyers had to be on multiple networks if they wanted to discover new suppliers. Again, only the e-Procurement vendors won.

Lesson learned? Private Networks are redundant with the BIG Network, the ONE Network, the Internet and network redundancy (not machine redundancy in data centres) is bad, especially when everyone is on the same internet that supports the same internet protocol stack and can connect with the same open protocol.

Have We Reached B2B 3.0 Yet? Part 1: B2B 1.0, A History Lesson

Over seven years ago, Sourcing Innovation published Introducing B2B 3.0 and Simplicity for All, which is available as a free download, to help educate you on the next generation of B2B and prepare you for what comes next. The expectation was that, by now, we would be awash in B2B 3.0 (Business to Business 3.0), which was simply defined as the first generation of technology that actually puts business users on the same footing as consumers, but are we?

SI would like to jump right in and answer that question, but first we have to discuss B2B 1.0 and B2B 2.0 to get our terminology straight.

B2B 1.0: The “Free Network” era

In the early nineties, a time when our current Hindsight would have been useful, the Internet burst onto the scene. Almost immediately, entrepreneurs saw the potential of the Internet to grow consumer-based business of all types, and B2C 1.0 was born. And although it was primitive by today’s standards, it took mail order to a whole new level. It wasn’t long before big business took note and decided that the internet would benefit them too, allowing new customers to find them and place orders, and suppliers to participate in reverse auctions to allow them to serve more customers at a lower price point. B2B 1.0 arrived.

B2B 1.0 was largely powered by the “free” connectivity of the internet as opposed to the costly EDI (Electronic Data Interchange) alternatives that ran over private networks that had to be maintained by the business. However, since bandwidth was still quite expensive (as it cost thousands of dollars a month for a dedicated 1.54 mbps T1 line as opposed to the 100 a month you can now pay for 100 mbps cable modem, and since network infrastructure technology was still quite expensive (as it could cost almost 10K for a multi-port enterprise router and switch), B2B 1.0 was still limited to large organizations, who nonetheless saw significant savings potential. (Considering that first generation reverse auctions often saved Millions, what’s a 100K for infrastructure?)

However, while “big buyers” won big, suppliers lost bigger as they ended up having to

  • maintain expensive internet connectivity and infrastructure, which was sometimes considerably more expensive in their rural factory locations versus dense urban business centres
  • support the different EDI and data standards required by different buyers, greatly increasing their IT support costs and
  • maintain different catalog versions for each buyer, with different pricing, buyer SKUS, etc., further increasing their IT support costs.

And these suppliers were the lucky ones. Some suppliers didn’t get to participate at all.

In short, suppliers lost. Lucky buyers broke even. And only the first-generation enterprise e-Procurement vendors, who laughed all the way to the bank, won.

Lesson learned? Functionality, and even connectivity, is useless without content and community.