“Most significantly marketplaces provide CPOs with the means to offload the tactical, repetitive work that dominates procurement, so they can focus on more strategic activities.” McKinsey & Company
SHIFTING THE PRICE FOCUS
The continued focus on price alone should change due to the heavy, hidden cost of slow processes to cope with varied indirect procurement requirements.
Andres suggested that the cost of procurement process is undervalued because it is undermeasured and that in many cases, a company’s total cost of purchasing is higher with tenders than when using marketplaces. He pointed out that Markit’s solution here involves a number of benchmarks, metrics and technical solutions (including the public P2P process time savings calculator) to prove the process time value saving when using Markit’s marketplace-as-a-supplier.
Markit also has the ability for historic IT device price comparisons where CPOs want evidence of price savings. Companies can supply their previous transaction history and Markit can show how much they would have paid / saved (through the Markit marketplace) for any given SKU on a given date.
This combined ability to compare current prices in real time and historic prices against previous market price can provide clear and undisputable evidence of cost savings that CPOs can rely on.
TRANSPARENCY, COMPETITION AND CONSOLIDATION
CPOs naturally want the best of all worlds, but one apparent dilemma in using marketplaces has also been solved when the marketplace in question operates a single vendor model, as Markit does.
The dilemma is that on the one hand they want to consolidate their supplier base to cut down on the administrative burdens but at the same they need constant competition to ensure optimal and transparent pricing.
For Markit this is nothing new – delivering provable time and cost savings with global clients. Perhaps this is why Markit and one of its clients, Danfoss, have been shortlisted as finalist in two categories of the World Procurement Awards.
Wrapping up his presentation, Andres shared the Danfoss Success Story and also drew attention to the need for total transparency by marketplaces. No hiding of margins, no hiding of names etc. Everything “open book”.
From transparency comes trust and from trust develops mutual beneficial supplier-client relationships that can deliver value for years and years to come.
Full slide deck from Andres's presentation available on SildeShare