Government is a Major Driver of B2B Commerce

While organizations of all kinds the world over benefit from B2B technology and practices, one of the most prominent is government, according to Bob Cohen, North American vice-president for Basware.

“Governments are forerunners in pushing connected commerce,” he wrote in his column Paythink recently. “More than fifty governments around the world are in the process of implementing e-invoicing mandates and are pushing for a supportive infrastructure to enable agile e-commerce.”

He cited tax compliance and fraud reduction as significant drivers in the push, noting that efficiency and savings were major factors domestically, with the U.S. multi-agency Invoice Processing Platform resulting in a $20 processing cost reduction on federal invoice processing.

For the European Union, borderless commerce has been the goal, he said, with an interoperable e-invoicing standard. Government suppliers must now conform to the standard, which is causing it to proliferate within private industry as well.

Other benefits emanating from government e-commerce include the untethering of financial process, he added, through the exploitation of cloud technology and mobile platforms. Business and supplier networks, experiencing rapid growth, are simplifying and accelerating governmental requisition processes in turn.

Finally, he noted, the increasing demand for real-time payment and financing options by businesses in general have made government uptake of B2B prudent in any case. And the analytics that modern B2B methodologies and systems enable are causing both governmental purchasing systems and suppliers to grow ever more efficient over time.

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Acquisition of Salesforce Could Have a Profound Effect on the Procurement Market

Speculation about the fate of CRM giant Salesforce includes its potential impact on the procurement market, suggested Pierre Mitchell, Managing Director of Azul Partners, in a recent article for Spend Matters Network.

With Salesforce currently valued at $50 billion, the circle of potential buyers is very small, but also very interesting, Mitchell pointed out. Depending on who bites, in the end, Salesforce’s vast armies of users might find their world changing dramatically.

A number of the potential buyers are already in the procurement business, it turns out, and many – Microsoft, IBM, Google, Oracle, Amazon – are already gigantic platform providers. To which of them would Salesforce be a strategic plus?

Mitchell pointed out that Microsoft’s cloud presence is strong and growing rapidly, but that it isn’t yet a player in procurement. Acquiring Salesforce would change that. How would this affect current Salesforce users’ perceptions of security and ease of use? Azure has expanded a great deal, but is still an evolving creature.

IBM, Mitchell said, is strong in the market, but passe and in need of a face lift, which Salesforce could provide. Oracle could buy Salesforce without missing the money, but already owns Siebel.

Google might be the most interesting buyer, because it has steered clear of real business integration and would have to rally and innovate to make it work.

Whatever happens, Mitchell concluded, the potential impact on terms, pricing, service and security could be significant, and all players should have their responses gamed out in advance.

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Is Single-Vendor Sourcing Still the Way to Go? Assessing Vendor Risk

Single-Vendor Sourcing has been a strategic go-to for many years, offering companies stronger collaborative relationships, easier relationship management, stronger supplier response and greater cooperation in production/logistics synchronization and sharing of data.

But Joshua Nelson, The Hackett Group’s Director in the Strategy and Operations Practice, recently suggested that single-vendor might not always be the best sourcing strategy.

Globalization, for instance, may increase the risk brought on by a single-source strategy, he pointed out: single-vendor sources are often foreign, and as such can introduce intellectual property risks, financial risk from foreign exchange fluctuations, and political instability – risks that are all mitigated by a multi-vendor sourcing approach.

Some companies, like Pricewaterhouse Cooper, eschew single-vendor sourcing altogether, implying that a one-size-fits-all strategy may not exist, and that there are scenarios where vendor sourcing is an open question.

Nelson suggested that a strong discriminator for choosing between single- and multi-vendor sourcing may be the degree of dependency between partners. He described “lopsided dependency,” in which the relationship is not a symmetrical one: both sides will tend not to respond consistently with behaviors that are mutually beneficial, because one partner is far more powerful than the other and has far less at stake in the relationship (Walmart is a classic example).

When the partnership is lopsided in favor of the supplier, the buying partner must live with it when capacity shifts result in reducing the buyer in priority. When the partnership is lopsided in favor of the buyer, demand shifts can leave the supplier unable to respond quickly enough, increasing financial pressure and threatening stability.

Both of these scenarios are mitigated by a multi-vendor sourcing strategy, Nelson concluded. Where a partnership is “lopsided,” multi-sourcing is safer all around.

When dependency is mutual, however, and both partners consider the relationship of high importance, the supplier is more responsive and flexible when demand changes, and both sides are motivated to keep costs low and quality high. In this scenario, single-vendor sourcing makes more sense.

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Lean supply chain, Pt. 4: resource planning in parallel

Manufacturing resource planning is increasingly essential to lean supply chain efficiency. But having MRP in place may be only a partial measure.

Process expert Jakob Bjorklund has suggested that, while having MRP in place is certainly a step toward operational efficiency in manufacturing, it can often take the enterprise only halfway as far as it might go.

“Even as companies try to focus on the disciplines normally associated with the idea of a lean supply chain,” Bjorklund said, “another fundamental paradigm shift that must take place within their organization, and it is often overlooked.”

That paradigm shift involves re-thinking the points at which manufacturing operations commit, keying ever more closely on demand. When demand is stable and highly predictable, “make-to-stock” (MTS) is a model that works well: resource planning is simple when demand is flat. Raw materials may be ordered in large, inexpensive quantities, because the timing of their use is easily established.

The problem, said Bjorklund, is that it seldom works out this cleanly in the real world. Even when some demand is flat, it is more typical that a significant portion of any manufacturer’s products will be ordered with fluctuating frequency, rendering a “make-to-order” (MTO) model more advisable.

His take-home point is that it makes sense to simply run both planning processes in parallel: identify flat-demand patterns and plan manufacturing resources for those products accordingly, but implement MTO planning for those products where customer demand requires more agile responsiveness.

“By continuously analyzing demand patterns and inventory turns, the point of postponement can be changed over time to achieve the optimal balance between efficiency and responsiveness,” he said.

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