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Optimising Indirect Procurement With Marketplaces

Discover the roles, values and desirable characteristics of
the ideal marketplace to support indirect procurement savings, using the example of an IT hardware and accessory marketplace to illustrate the key points.
We reveal the most important features, factors and considerations that can help CPOs, CTOs and IT buyers in international companies make an informed choice about how to choose, and when to use, IT marketplaces to save time and money on their growing indirect IT procurement needs.

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Optimising Indirect Procurement With Marketplaces

  1. 1. OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES PROS, CONS AND PITFALLS OF SELECTING AND WORKING WITH MARKETPLACES OCTOBER, 2020 In this report you will discover the roles, values and desirable characteristics of the ideal marketplace to support indirect procurement savings, using the example of an IT hardware and accessory marketplace to illustrate the key points. We reveal the most important features, factors and considerations that can help CPOs, CTOs and IT buyers in international companies make an informed choice about how to choose, and when to use, IT marketplaces to save time and money on their growing indirect IT procurement needs.
  3. 3. October 2020WWW.MARKIT.EU 3 OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES WHAT ARE MARKETPLACES? Call them what you will, souks, bazaars, mercados, marketplaces have been around for millennia. In sim- ple terms a marketplace is defined as a location where people regularly gather for the purchase and sale of provisions, livestock, and other goods (Source: Oxford University Press). Physical marketplaces have existed for thousands of years, for as long as humans have engaged in trade. Fast forward to the digital age where marketplaces have evolved into essential internet-powered tools to enable international company procurement teams to save time and money on their purchases. In 2003, Markit began developing one of the world’s first dedicated IT hardware and accessory market- places. IT IS SAFE TO SAY THAT EFFECTIVE MARKETPLACES SAVE COMPANIES TIME AND MONEY. With less time spent vetting vendors, chasing information and quotes, handling mountains of emails and paperwork, diminishing maverick spend, and ensuring compliance, procurement teams can devote more of their time and energy to higher-value, or more strategic, work. Broadly speaking there are 4 types of marketplace (Source: McKinsey). 1. Product-focused marketplaces e.g. Amazon Business, Alibaba and Markit 2. Time-and-materials marketplaces e.g. transport, travel, or labour services. 3. Marketplaces offering professional services e.g. digital services, marketing etc. 4. Corporate spin off marketplaces. InnoCentive, spun off from Eli Lilly, is a prominent example.
  4. 4. OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES October 2020WWW.MARKIT.EU 4 Even though B2C e-commerce is now widespread, it’s the recent evolution of B2B e-commerce, and especially vertical or specialist marketplaces, that is gaining the close attention of procurement professionals all over the world. With the topic heating up over the last few years there are clear indica- tors as to what users look for and expect from online B2B marketplace. • Nearly 60% of B2B buyers—58.8%—now conduct at least 25% of their business purchasing on a mar- ketplace, according to an August 2020 survey of purchasing executives by Digital Commerce 360 B2B. • According to Gartner, at least 70 percent of enterprise marketplaces will serve B2B transactions by 2023. • There are more than 70 vertical marketplaces in more than 13 diverse industries, according to research compiled by Digital Commerce 360 B2B. • According to McKinsey industry analysts, by 2021, indirect spending will be led and directed by tech-procurement people at up to 60 percent of large enterprises. • Among the different platforms used to research and purchase B2B products, marketplaces stand out as the leading destinations for U.S (United States) buyers. Source: Statista • Buyers expect consistent, error-free buying experiences. From Sapio’s Research - The B2B buying process report 2019. • Ease and speed are key: 25% want easier and faster checkout, easy repeat ordering, quicker deliv- ery, and improved tracking as a priority. • 44% of B2B buyers experience online order errors from their top 10 supplier websites at least every two weeks. KEY RECENT STATISTICS ABOUT ONLINE MARKETPLACES
  5. 5. October 2020WWW.MARKIT.EU 5 OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES OPTIMAL ROLE OF A MARKETPLACE IN INDIRECT IT PROCUREMENT The sweet spot for a marketplace is when the products being bought coincide with the following parameters: • They are available in a wide variety of options • They have a relatively low unit cost • They have a high annual order count • They form a significant part of total annual spend In other words, where the aggregate savings potential is high. This situation is especially the case for IT accessories e.g. headsets, cables, and webcams and other such products. In some scenarios, traditional tenders may still make sense for a large order of notebooks, but does it really make sense to tender frequent orders of low-cost items, especially those with in variable specifi- cations e.g. cable lengths? No, it doesn’t - quite simply the cost of the time taken plus the fact that that time could be put to better use, means time-wasting tendering of IT accessories should be consigned to the past. In the past it may have been reasonable to turn a blind eye to maverick spending as it was labelled under another name, “long tail spend” but that is no longer pertinent when we look at IT accessory purchasing. THE EXPLOSION OF CHOICE AND USAGE OF IT ACCESSORIES MEANS THE LONG TAIL HAS MORPHED INTO THE BODY. THE TAIL IS WAGGING THE DOG! 2010 2015 2020 Number of IT accessories per notebook/desktop 4.76 6.48 8.69 Increased usage and demand of IT accessories +36 % +83% Source: Markit purchasing data of more than 10 000 companies Quite often, with regards to IT accessories, employees and business units look to avoid time-consum- ing purchasing and tendering processes and buy outside their existing approved channels which are often considered slow and inefficient for small orders. This maverick spending hurts the buying organ- isation and is a headache for every CPO. Not only is it hard to control but it’s also the cause of multiple time-consuming inefficiencies. Maverick spending means paying above company-negotiated prices plus there is another downside - the added time spent on purchasing which results in a negative “double hit” on the total cost of purchase. A triple hit occurs when the invoice reaches the accounts department.
  6. 6. OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES October 2020WWW.MARKIT.EU 6 Margus Vahemäe Head of Sales Markit Holding AS margus.vahemae@markit.eu OPTIMAL ROLE OF A MARKETPLACE IN INDIRECT IT PROCUREMENT It’s clear that IT accessories are no longer part of the “20%” in the 80-20 rule. In fact, in some organisa- tions, IT accessories can account for more than 40% of indirect IT spend. Markit data also shows that the number of accessories ordered per computer has risen 83% over the past 10 years. “Even if companies do not use marketplaces to buy all their IT devices, they certainly should for IT accessories. It just makes sense. The aggregate time and money savings on frequent orders of low-cost IT accessories are significant.” An elevated level of buyer adoption of approved IT marketplaces also demonstrably reduces the percentage of maverick spend. Our clients’ data prove this. However, maverick spend issues can still occur even when companies officially use marketplaces due to low adoption and usage rates. The most notable reasons for low marketplace usage are: • Weak product choice. • Insufficient technical product information. • Lack of transparent, competitive, real time pricing, stock availability and delivery times. • Lack of accountability. What is important to understand and note - most marketplaces do not handle RMAs, instead they defer responsibility to the vendor. They do not take responsibility for fulfilment, deliveries, and warranties on the products they sell. CPOs and IT buyers do not want that. They want a supplier AND a marketplace all rolled into one. THE CPO NEEDS A “MARKETPLACE-AS-A-SUPPLIER” RUNNING A SINGLE VENDOR MODEL, NOT A BROKER MODEL
  7. 7. October 2020WWW.MARKIT.EU 7 OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES HOW TO EVALUATE AN IT MARKETPLACE Time is money, and your time is precious, so we provide a quick checklist of some of the most important questions and characteristics to consider when choosing a marketplace to buy your IT hardware and accessories. As a reference we also outline the relevant features and facts about Markit’s marketplace. QUESTIONS TO ASK TO EVALUATE AN IT MARKETPLACE IMPACT AND RELEVANCE MARKIT MARKETPLACE FEATURES AND BENEFITS OPERATIONAL CONSIDERATIONS RELEVANT TO IT BUYERS, CTO AND CPO 1. How large is the vendor and product choice locally, nationally, and internationally? Size of selection matters. You need to able to find “all” your IT hardware and accessory needs in one place or buyers will be forced to look elsewhere. 3 million SKUs made available from 300+ leading international IT distributors across 35 coun- tries. Markit is probably the world’s largest IT hardware and accessory catalogue. 2. Detailed product information available to search and find products that match your needs? Detailed information, images and technical specifications help speed up product comparison and buying. Poor search functions increase prod- uct search time. Integrated CNET data and smart search functions including multi- lingual predictive, and paramet- ric search functions make needs matching easy. Synonym search due Q4 2020. 3. Search results displaying comparable products with transparent, dynamic (real time) pricing and stock availability? Real time pricing for available stock saves potentially wasted time on failed purchases due to lack of avail- ability. It is important to be able to instantly see and compare the prices of available items from a range of local/national suppliers. Able to compare real time pricing and stock availability from 300 leading IT distributor catalogues in 35 countries. 4. International and regional IT buyers buy everything from one online location? Supplier’s geographic footprint match yours? Local language support? A single point of entry removes the requirement for multiple logins to different country marketplaces al- lowing global and regional buyers to “buy locally and act globally.” Markit’s marketplace is a “one stop shop” with a single login for 35 countries. Buy anywhere from everywhere, with local language support in most countries. 5. Is the marketplace easy to use? Does it offer experience similar to B2C purchasing? Marketplaces that are easy to understand and use increase user adoption. Difficulties in adoption can increase maverick spending. Markit NPS (Net Promoter Score) of 64.5 suggests clients find our marketplace and systems clear, simple, reliable, and engaging.
  8. 8. OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES October 2020WWW.MARKIT.EU 8 HOW TO EVALUATE AN IT MARKETPLACE QUESTIONS TO ASK TO EVALUATE AN IT MARKETPLACE IMPACT AND RELEVANCE MARKIT MARKETPLACE FEATURES AND BENEFITS OPERATIONAL CONSIDERATIONS RELEVANT TO IT BUYERS, CTO AND CPO 6. Is transparent supplier data available? Can you see their identity and performance history? Knowing who is the ultimate supplier and their performance can influence purchasing decisions Transparent supplier data inside the marketplace (available Q4 2020) 7. Is the marketplace catalogue customisable? It can be that no standard market- place suits everyone. Personalised marketplace experiences increase adoption and savings levels. Markit options include customis- able favourite lists, access rights, buying limits, restricted products and more. 8. Does the marketplace offer invoice consolidation with multiple payment options in multiple currencies? For international companies, a wide variety of payment options is essential. Being able to pay in local currencies increase global procure- ment options and avoids currency exchange costs. Markit accepts payment in the currencies of 35 countries and payments methods are flexible. Invoice consolidation by time period or geography is available. 9. Are delivery costs and times transparent and competitive? Pre-negotiated or transparent ship- ping rates and delivery terms ensure cost effective, fast deliveries on commodity IT items. Markit offers cost-effective and speedy logistics with advanced tracking capabilities. Each order displays shipping times in real time. 10. Is there an ability to optimise price, delivery speed and logistic variables on every order? Intelligent basket options calculate and offer the best available price, speed, and shipment volume combinations on each order. Basket optimisation is a standard on every order. Options to prioritise price, delivery speed or shipment volume are transpar- ently displayed in real time at the checkout. 11. Are returns and refunds pro- cessed promptly by the market- place or are issues referred to vendors? Numerous hours can be wasted dealing with inefficient RMA han- dling processes Dedicated client support services in local languages to handle returns, repairs, and refunds if needed. Markit is fully account- able for every order.
  9. 9. October 2020WWW.MARKIT.EU 9 OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES HOW TO EVALUATE AN IT MARKETPLACE QUESTIONS TO ASK TO EVALUATE AN IT MARKETPLACE IMPACT AND RELEVANCE MARKIT MARKETPLACE FEATURES AND BENEFITS OPERATIONAL CONSIDERATIONS RELEVANT TO IT BUYERS, CTO AND CPO 12. How good are the spend management and compliance tools/functionality? Helps CPOs to take control of the spending e.g. set up limits by buyer role. This in turn helps reduce mav- erick IT purchasing. Markit clients can create restrict- ed catalogues or favourite lists for various buying groups. Mar- ketplace content can be custom- ised with rules set to comply with CPO requirements. 13. Is the marketplace objective: vendor-agnostic and ad-free? Bias and ad-free marketplaces allow fact-based decision making free of distractions. No ads. No spam. No vendor pushing. No distractions. STRATEGIC AND MANAGEMENT CONSIDERATIONS RELEVANT TO CTO, CPO, CFO 14. Does the marketplace support your ongoing reduction in total-cost-of-ownership / purchase goals? Do they have proof of delivery results? Reducing the total cost of procure- ment is now the number one issue. Provable time and money savings are what counts in IT procurement. Source: The Hackett Group Markit saves clients an average of 12.5% on product costs and is also able to deliver significant S2P & P2P process time reductions. Read more about procurement time savings with Markit. 15. Is the marketplace (and company behind it) big enough to handle your requirements but still small enough to care? Personal service and dedicated account management to ensure an agile, flexible partnership approach. Markit’s user-centric market- place development approach means we listen to our clients and their input helps define our roadmap. Our super-efficient team of 130 Markiteers are helping clients succeed in 35 countries. 16. Does the company take full responsibility for every delivery, return and warranty claim? Does the marketplace act as a single vendor or a broker? A “single vendor” model provides consistent SLAs (Service Level Agreement) and RMA handling. A broker model does not provide this to a client. Markit operates as the supplier (single vendor model) and takes responsibility for the fulfilment, delivery, and warranty of every item ordered.
  10. 10. OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES October 2020WWW.MARKIT.EU 10 HOW TO EVALUATE AN IT MARKETPLACE QUESTIONS TO ASK TO EVALUATE AN IT MARKETPLACE IMPACT AND RELEVANCE MARKIT MARKETPLACE FEATURES AND BENEFITS STRATEGIC AND MANAGEMENT CONSIDERATIONS RELEVANT TO CTO, CPO, CFO 17. Are there integrated financial service options? Flexible payment methods are required to match a wide range of company procurement policies. Purchasing, leasing and factoring options are all available in Markit (subject to approval). 18. Instant availability of stan- dardised & transparent perfor- mance metrics? Performance data needs to be con- stantly available. Internal presentations of how well the marketplace performs are critical to support and develop buy- in from your C-Suite and other key stakeholders. Single point access to a dash- board of transparent perfor- mance data and transaction histories. Contact us for more details. 19. Does the marketplace owner have provable solid IT vendor and distributor partnerships in all the countries where you operate? Reliability and flexibility in securing best available prices, global bid matching and stock availability comes from strong industry relationships. Read about Markit’s strong international IT vendor and distributor relationships. 20. Is the marketplace cost effective to trial and maintain? Are there any hidden or expensive extra fees? Reaching ROI as early as possible in the current economic climate is essential. Predictable transparent costs allow everyone to focus on delivering results. Markit charges a simple, trans- parent percentage on each sale. Nothing else. No setup, integra- tion, consultancy, or maintenance fees. 21. Can the marketplace integrate with your SRM (Supplier Rela- tionship Management), ERP (En- terprise Resource Planning) and punchout (S2P & P2P) platforms? Do these integrations cost extra? Integrations are necessary speed and simplify negotiations, contract compliance, end user ordering, accounting, reporting and so on. Markit offers FREE integration with all common platforms. Read about Markit integrations with most common punchout platforms. 22. Onboarding, advanced training, and account management rolled into the service? To ensure maximum and speedy adoption rates the level of education and onboarding must be high. Markit offers free, personalised account management and onboarding for committed international clients.
  11. 11. October 2020WWW.MARKIT.EU 11 OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES HOW TO EVALUATE AN IT MARKETPLACE QUESTIONS TO ASK TO EVALUATE AN IT MARKETPLACE IMPACT AND RELEVANCE MARKIT MARKETPLACE FEATURES AND BENEFITS STRATEGIC AND MANAGEMENT CONSIDERATIONS RELEVANT TO CTO, CPO, CFO 23. Is the marketplace built on a solid technical foundation? Is it strong enough to handle a huge volume and variety of transactions? Support is needed for instant pur- chasing, bespoke orders, and instant RFPs to suit all purchasing scenarios Markit’s large team and future-proofed system is built to scale and handle high loads - and is also flexible enough to handle complex procurement process flows. 24. Proof of credible and technically solid company behind the marketplace? Switching suppliers is a big step. Technology features are not enough, the relationship must be founded on demonstrations of expertise and trust too. Markit’s custom built market- place is used by 9500+ compa- nies across 35 countries – includ- ing 20% of Forbes 2000. Our clients’ success stories prove our ability at helping them save time and money. Our market- place has 99.9% uptime. 25. Does the marketplace recognise your global bid pricing agree- ments but also offer override possibilities? Global bid recognition is essential however on rare occasions a local supplier may be able to beat negoti- ated global bid prices. In Markit the global bid recog- nition is configurable with an override possibility and available on all orders. 26. Are there co-branding or own-branding options? Can you customise the product categories and lists? Customisation helps buyers know they are in the right place, “feel at home” and access only the products the CPO and CTO want them to see. In Markit the marketplace prod- uct categories and lists are fully customisable. 27. Does the marketplace support your organisation’s sustainable IT purchasing and other CSR goals? Sustainable IT procurement compli- ance is a key and growing require- ment for publicly listed and interna- tional companies In Markit the parametric eco-fil- ters find products under 7 sus- tainable IT label categories. Global-to-local buying with local-to-local deliveries ensure lower last-mile distances.
  12. 12. OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES October 2020WWW.MARKIT.EU 12 THE “BEST PRICE” MYTH “THERE IS NO SUCH THING AS A BEST PRICE. A GOOD OR BEST PRICE IS ALWAYS THE FUNCTION OF CONSISTENT, STRONG AND RELEVANT COMPETITION” How else can you achieve a good or “best” price, or even know if that it is a good price? How do you make sure and how would you maintain good pricing? The bottom line is that you need to be able to create competition for your required items and that should be the focus of attention. Also con- sidering the total P2P or S2P process, what are the costs of the pre- and post- transaction steps? The value of the time alone is significant, chasing a great unit price for hours or days doesn’t always make sense – you could be left with a great price in the middle of an expensive time-consuming mess. Therefore, successful or even optimal purchasing is NOT about the PRICE, but about the buyer’s ability to create consistent and relevant competition for the total cost of your items. You can most effectively create that competition and cost-efficiency through strong single-vendor model marketplaces.” Andres Agasild CEO Markit Holding AS andres.agasild@markit.eu
  13. 13. October 2020WWW.MARKIT.EU 13 OPTIMISING INDIRECT PROCUREMENT WITH MARKETPLACES LOOKING AHEAD TO THE FUTURE OF PROCUREMENT According to various research, and from what we at Markit know from 17 years of experience of market- place development, the future of IT marketplaces could see some or all the following developments: • New areas of both standardised and tailored performance evaluation at supplier, vendor and even transaction level. • Shifting of roles where the marketplace provider and buying organisations collaborate further on customisable marketplace development plans to support individual company needs. • Further development of co-branded/own-branded internal company marketplaces run by external marketplace owners. • Closer strategic ties between marketplace and international buyers to develop long-term innovation roadmaps that help both parties’ evolution of their digital procurement-related processes • Improved transparency so “nothing is hidden” from the client about price, end vendor status and margins. • Stronger focus from marketplaces on designing for value creation especially where IT commodity item pricing becomes less of a differentiator. • Consolidated IT purchasing on both a local and global level as required. In that way, spend visibility rises, risk reduces, and compliance with various criteria can be met. To view the choice of IT hardware and accessories available in your country, visit the Markit IT market- place now or contact us for a discussion about saving time and money on your international IT require- ments.
  14. 14. TAKE THE CHASING OUT OF IT PURCHASING WWW.MARKIT.EU LET’S TALK ABOUT YOUR INDIRECT IT PROCUREMENT CHALLENGES Our extensive experience, industry-recognized abilities and singular focus on the indirect IT category mean we know how to unlock the time and money savings potential in your IT purchasing processes. Markit is transforming the indirect IT procurement function. We have helped over 400 Forbes Global 2000 companies save time and money on their IT hardware and accessory purchasing. We can do this for your company too, by listening carefully, deeply understanding the challenges and tailoring a managed service and IT Marketplace Solution to deliver significant savings.