Recently, two publications addressed the growing importance of online marketplaces in the B2B corporate procurement landscape. Both publications examined the potential benefits of B2B online marketplaces while also acknowledging that these platforms still have significant limitations, particularly when it comes to supporting the procurement of complex needs like marketing, legal and other professional services.
The Hackett Group Research Report
The first publication was a research report titled “Examining the Value and Use Cases of Business-to-Business Online Open Marketplaces” by The Hackett Group. In this report, The Hackett Group observed that corporate procurement leaders increasingly see online marketplaces as an effective tool for reducing costs, managing tail spend complexity and increasing stakeholder satisfaction.
The report identified several “hard” and “soft” benefits that B2B marketplaces can potentially provide, including:
- Elimination of supplier onboarding
- Elimination of supplier maintenance
- Savings from competition
- Reduced shopping time
- Increased stakeholder satisfaction
- Reduced maverick spending
- Increased visibility into purchases
The Hackett Group also identified several types of purchases not suitable for the current generation of B2B online marketplaces:
- Most services – B2B marketplaces are generally product-only, although this is beginning to change
- Items that require extensive product discovery and/or supplier interactions
- Items that must be purchased under a detailed contract
- Items that require inventory control
The report noted that these considerations will usually eliminate most types of direct materials procurement.
The McKinsey Article
Last fall, McKinsey & Company published the article “How B2B online marketplaces could transform indirect procurement.” McKinsey noted that B2B marketplaces have not yet penetrated large corporate purchasing departments, but that this appears poised to change. The firm argued this shift is being driven by the need to gain better control of indirect spending, particularly tail spend, and by the growing presence of younger procurement leaders who are more comfortable with online buying.
The McKinsey article described several potential perks of B2B online marketplaces, including greater vendor choice, one-stop shopping and cost savings. Perhaps more importantly, the article argued, online marketplaces can effectively free procurement teams from time-consuming and often repetitive transactional work so they can focus more of their time on higher value activities.
McKinsey observed four basic types of B2B online marketplaces, although the boundaries between these categories aren’t always sharp:
Expect these to focus almost exclusively on products like office supplies, MRO supplies, furniture and similar offerings. Think Amazon Business and Alibaba.
These usually offer things like freight services, temporary labor and facilities management services.
A marketplace of this stripe will typically focus on more complex services such as marketing, legal and consulting services.
Corporate spinoff marketplaces
As the name indicates, these marketplaces began as “captive” platforms used by a single company and were later opened to other corporate buyers.
McKinsey acknowledged that the growth of B2B online marketplaces is not assured, but the firm also argued that scope-of-work marketplaces seem positioned for success. McKinsey believes it’s likely that niche marketplaces will evolve to serve specialized markets such as legal or marketing services.
Can Marketplaces Work for Print and Marketing Services?
So, can online marketplaces be effectively used to procure printing and marketing services? In my view, most B2B online marketplaces, as currently configured anyway, are not an optimal solution for sourcing most printing and marketing services. However, an e-sourcing solution that has been purpose built for printing and marketing services can provide most of the important benefits of an online marketplace.
One of the key advantages of an online marketplace is a simple shopping/buying process, and a well-designed e-sourcing solution can provide a similar benefit. When procuring printing or marketing services, one of the core tasks buyers must perform is to provide an adequate description of the desired product or service. Buyers do this by creating detailed project specifications.
A well-designed e-sourcing solution will simplify the process of creating complete and accurate specifications by providing an extensive library of pre-defined product “types” that guides buyers through the task of entering all relevant specifications.
Online marketplaces can be a drawcard by providing buyers access to an expanded set of potential suppliers. An e-sourcing solution for printing and marketing services can deliver a similar benefit if the solution provider creates a robust network of vetted suppliers and gives its clients access to that supplier network.
The bottom line is that online marketplaces are beginning to play a more prominent role in the procurement function of larger enterprises, and that role is likely to grow as the scope of products and services offered via marketplaces expands and their functionality improves.
But today, most organizations will still be better served to use a specialized e-sourcing tool to manage the procurement of printing and marketing services.