Category Archives: Market Intelligence

Good e-Procurement Starts with e-Commerce Fundamentals

A recent article over on VentureBeat on how Maslow’s hierarchy can help you build a great mobile checkout process had some good advice for e-Commerce sites and some startling statistics that need to be heeded by e-Commerce providers AND e-Procurement providers alike. Consider these statistics:

  • 29% of mobile shoppers who abandoned the checkout process did so because they were requested to register before buying
  • 42% of consumers have stopped or abandoned a purchase on a web site because of a safety or security concern
  • 49% of mobile shoppers don’t shop more on their smartphone due to an awkward shopping experience
  • 63% of consumers prefer mobile commerce because they can do it while multi-tasking
  • 79% of decisive consumers would be more inclined to make online purchases if given easier and more secure payment options

This means that you need to keep the following in mind when designing your e-Procurement solutions:

  • make purchasing on third party sites a native experience – awkward punch-outs are not going to be adopted by average buyers,
  • organizations are not going to adopt your solutions if they see any security risks in using it,
  • if you’re going to build a mobile experience, make it intuitive and don’t try to do complex tasks on the mobile app as it will just frustrate your customers,
  • don’t ignore the mobile aspect because it’s harder to properly design and deliver – your customers want it, and
  • if its done right, your mobile solution will see widespread adoption by users, who will be inclined to quickly approve invoices and expense reports for payment when on the go.

As the author says, if you:

  1. Keep it Simple and meet the basic needs of your customers,
  2. Give Your Customers Peace of Mind and make the application secure,
  3. Create a Familiar Environment and make your customers feel like purchasing belongs in the e-Procurement system,
  4. Let Your Customers Run the Show and give them self esteem, and
  5. Keep Up with Your Customers and help them self-actualize

it stands to reason that your e-Procurement system will be a success.

Do Great Supply Chains Create Great Brands?

Consider the Gartner Top 25 Supply Chain companies and the 25 top Brandz Top 100 Global Brands. Notice anything?

Gartner Top 25

01. Apple
02. McDonald’s
03. Amazon.com
04. Unilever
05. Intel
06. Procter & Gamble (Gilette/Pampers)
07. Cisco Systems
08. Samsung Electronics
09. Coca Cola Company
10. Colgate-Palmolive
11. Dell
12. Inditex (Zara)
13. Wal-Mart Stores
14. Nike
15. Starbucks
16. PepsiCo
17. H&M
18. Caterpillar
19. 3M
20. Lenovo Group (Old IBM PC Unit)
21. Nestle
22. Ford Motor
23. Cummins
24. Qualcomm
25. Johnson & Johnson

    Brandz Top 25

01. Apple
02. Google
03. IBM
04. MacDonalds
05. Coca Cola
06. AT&T
07. Microsoft
08. Malboro
09. Visa
10. China Mobile
11. GE
12. Verizon
13. Wells Fargo
14. Amazon.com
15. UPS
16. ICBC
17. Vodofone
18. Walmart
19. SAP
20. MasterCard
21. Tencent
22. China Construction Bank
23. Toyota
24. BMW
25. HSBC

Looking at the Gartner top 25 supply chain, 5 of the top 25 are also 5 of the top 25 global brands! In other words, 20% of the leading supply chain companies are also leading brands. Digging deeper, we find that 17 of the top 25 supply chain companies are also top 100 global brands, as mentioned in the BrandZ report. In other words, 68% of great supply chain companies are also leading global brands! Of the 8 companies that are not leading global brands, 3 are consumer good companies that have a large variety of brands (Unilever, Nestle, Johnson & Johnson), 1 is a primarily North American computer hardware provider (Dell), 2 are construction equipment giants and not expected to be a household name (Caterpillar and Cummins), 1 is a multinational manufacturing conglomerate with dozens of consumer and industrial brands (3M), and the last 1 produces chipsets for big-name mobile phone makers (Qualcomm). In other words, the only top 25 supply chain companies that are not top 100 global brands are precisely those companies that are not big consumer market companies or those companies that are conglomerates of a large number of smaller, but sometimes still Billion-dollar plus, companies.

And while it’s true that, at this point, this is just correlation, it’s a very significant correlation. While one may not be able to say that a great supply chain creates a great brand, these results seem to suggest that a great supply chain is needed for a great brand.

India is Bigger and Bigger Business By the Day!

While it will likely be at least twenty-five (25) years before India overtakes the United States in GDP, companies are starting to bet big on India, including Anglo-Dutch multinational Unilever that “bet big on India” with a US $5.41 Billion open offer for a 22.52% stake in its Indian subsidiary Hindustan Unilever Ltd. That’s big, big bucks as far as India is concerned. If you look at the Global 500, and their revenues for 2012, only seven exceeded 30 Billion in Revenue (Oil & Natural Gas, Tata Motors, State Bank of India, Hindustan Petroleum, Bharat Petroleum, Reliance Industries, and Indian Oil). Five of these are in the petroleum industry, one is a bank, and one is an automobile company. None are CPG.

This is a big step for Unilever, who obviously sees India as the next China and wants to guarantee their stake. If the deal goes through, it could be the first of many. In addition to having to Mandarin-ize Your Supply Chain, you may have to add some Hindi to the mix. Are you ready?

Uh-oh! You’re in the S&OP Rabbit Hole!

 

Procurement Leaders recently released their CPO Guide for 2013. One of the key findings, related to the economic environment, was that most CPOs seem over-optimistic about their organization’s sales potential for 2013, but are less positive about the wider economy. To be blunt, if the economy is going to remain stagnant, then the majority of you are going to have stagnant sales. Mathematically speaking, the only way a majority of organizations could have an increase in sales in a stagnant economy is if one or more major market players in the majority of market segments went bankrupt, freeing up a considerable percentage of the market to be divided among everyone else. And even then, the market share gain most organizations would get would be miniscule. Let’s illustrate this with a table.
Company Current Market Share Economy Grows 2% Equally Economy Grows 2%; 3 Top Players Grow 4% Market Share after A goes bankrupt
A 25% 25.5% 26%
B 15% 15.3% 15.6% 26%
C 15% 15.3% 15.6% 24%
D 10% 10.2% 10% 15%
E 8% 8.16% 8% 12%
F 6% 6.12% 6% 5%
G 6% 6.12% 6% 5%
H 5% 5.1% 5% 5%
I 5% 5.1% 4.9% 4%
J 5% 5.1% 4.9% 4%

In other words, if the economy grew 2% and all things were equal, a company’s business would only grow 2%. No more. If some companies beat the market, and grew a combined total of 4%, as demonstrated in column 4, for three companies to beat the market, in a good scenario, we would expect four to five companies to hold steady while two to three companies drop in sales (and at least one company must have decreased sales). And the market leader going bankrupt will not help much either. What typically happens is the top two companies rush in to fill the void and get the lion’s share of the business, the next two companies, taking advantage of the marketing frenzy created by the new top two and their lower prices pick up the rest, and the companies at the lower end of the spectrum actually lose business to those making all the noise (with enough market share to get noticed by the big buyers). A likely scenario is given in column five. In other words, since the market is fixed, only a few companies are going to increase their sales more than average.

So don’t let sales and marketing lead you down the S&OP rabbit hole where you negotiate volume discounts that never materialize (as you never order the full volume) and get stuck with obsolete inventory (as you will front load to meet the massive increase in demand that sales and marketing are promising). You’re smarter than them and know that stagnant markets mean stagnant sales.

We Have Supply Management Problems. Where Will We Find Solutions?

Scandinavia.

That’s right, Scandinavia! Apparently.

According to the Global Creativity Index, put out by the Martin Prosperity Institute* and published in 2011, Sweden takes first place, Finland takes third place, Denmark takes fourth place, Norway takes eighth place, and the Netherlands takes tenth. The U.S., Canada, Australia, New Zealand, and Singapore round out the top 10, creating North American and Australasian pockets of creativity, but most of it is centered in Scandinavia. (And that’s likely why Spend Matters is expanding into The Netherlands [spendmatters.nl]. They’re hoping to tap into that creativity that huge pocket of creativity.)

The report, which takes the three main classes of economic inputs — Technology, Talent, and Tolerance — attempts to go beyond simply ranking the 82 nations considered in the study and shift the classical focus on competitiveness and growth (which resulted in the pursuit of short term profits to the point where some of the world’s most advanced and affluent economies reached the brink of collapse) to creativity, prosperity, and well-being. As a result, in addition to the classical measures of economic growth and competitiveness, the research also takes into account broader measures of economic equality, human development, and subjective well being.

Classical economists, who followed in the footsteps of Adam Smith, may have believed that economic development came down to land, labour, and capital, but physical factors alone no longer determine progress in today’s modern, advanced economies, where factors like technology, innovation, knowledge, and human capital play much greater roles. And creativity underlies all of these factors. Also, as the report points out, everyone is potentially creative. But not everyone produces creativity. A lot of this depends on the tolerance of the culture in which they live. New ideas are generated most efficiently in places where different cognitive styles are tolerated — and different cognitive styles are linked to demographic diversity. It’s important to remember that, in today’s world, technology and talent are mobile and tend to flow to areas with the most tolerance.

What’s interesting to note is that leadership in any two measure is not enough to guarantee leadership across the board. Finland is first in Technology and talent, but 19th in tolerance, and thus lag Sweden by 3% in the index, putting them in third place. Canada, which is first in tolerance, is in seventh place because it’s eleventh in technology and seventeenth in talent. The United States maintains it’s second place position because it manages to maintain a ranking in each category that is top ten, giving it a narrow margin over third place Finland. Sweden is number one because it maintains the best overall balance, second in talent, fifth in technology, and seventh in tolerance (and since it maintains the best balance, people and technology are unlikely to flow out of the country).

So what does Scandinavia have to offer us? That’s a very good question. While SI knows there is a lot of innovation and creativity coming out of Europe in Supply Management, it has to admit it wasn’t expecting the creativity to be centered in Scandinavia. But it does explain why if you are seeking spherical supply solutions that you will succeed in the EU.

The Martin Prosperity Institute, directed by Richard Florida, author of Who’s Your City (referenced in SI’s series on Where Should Your Supply Management Organization Be Located), is the leading think-tank on the role of sub-national factors in global economic prosperity.