Procurement, Trust and the Delayering of Supply Chains

3rd April 2018

The experience people have of buying products in their personal lives has had an understandable influence on their…

The experience people have of buying products in their personal lives has had an understandable influence on their behaviours and expectations in B2B purchasing. This sets a high bar when you consider how seamlessly efficient organisations such as Amazon are in creating satisfied customers. Nevertheless, it’s a challenge that has to be accepted and it’s important to understand what lessons can be learned from B2C providers.

One of the key drivers of satisfaction lies in interactions with technology. This isn’t just about the use of specific technologies such as eProcurement platforms but also a more generalised approach to how firms interact with clients and technology. People want technology that is easy to use and intuitive. This includes the ability to learn about products and services.

There are some aspects of organisational procurement that are unique however. For example, there are logistical and compliance issues that must be taken into account, especially for sophisticated and multi-layered purchasing decisions. There is no reason why B2B transactions can’t aspire to the same levels of excellence as those in the B2C market, but they are often far more complex. In complex business transactions, there is often almost as much focus on the journey as the destination.

While an Amazon customer will be happy to order a book and have it delivered the next day, there is no interpersonal relationship involved beyond the technological interface and no need to delayer the supply chain; for example by ordering the book from Amazon and then having it delivered by a courier of your choice because you don’t trust the one Amazon uses or you think you have a better option.

By contrast, the procurement of a workplace typically involves a complex supply chain, a long decision-making process, careful selection of suppliers or a primary supplier, the choice of procurement model and so on.

Of course, the simplest route for procurement is the selection of a single trusted supplier who then manages all of the sub-contractors and suppliers and shoulders most of any risk. Ideally this will be a transparent relationship, especially when it comes to issues such as the environmental standards of everybody in the supply chain or compliance with legislation, so the important thing is to develop trust and a mutually beneficial relationship.

However, sometimes the demands can appear contradictory. End users may want to strike the right balance between short term value and long-term return on investment. They want to work with a trusted partner, who they also want to carry most or all of the risk of the project. And they want to maintain, long-term relationships with a trusted group of suppliers while maintaining freedom to choose another procurement route.

These are not insurmountable issues and they can be overcome primarily by the development of long term relationships and a focus on long term goals. Expediency may encourage organisations to take on more risk by delayering the supply chain, and that may be the right decision in the right circumstances.

Data plays an important role in decision making about the supply chain. A 2015 study from Deloitte called Business Ecosystems Come of Age identifies the ways in which complex supplier networks that focus on knowledge sharing and collaboration add more value than simple transactions. The data sharing of everybody involved in a relationship creates new insights and allows the partnership to develop for the benefit of all parties. Thus, creating a modern way in which common problems within this area can be avoided and solved.

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