Centralized Procurement will Drive the Future of B2B Procurement Industry

Procurement as an industry has evolved a lot from the time of its inception. Businesses are rapidly re-evaluating their procurement operating models and market strategies not just to withstand the market forces, but capitalize on them. In the corporate procurement, this calls for great responsibility requires the procurement executive to be visionary and innovative while being exceedingly committed to fulfilling the requirements.

Paradigm Shift:

B2B e-commerce has been riding the wave of B2C e-commerce across the globe. However, within the next 3-5 years, B2B e-commerce will outgrow B2C e-commerce in terms of volume of sales (GMV). In other words, B2B procurement is expected to face a paradigm shift in anytime sooner. So far, B2B e-commerce has been following the trends of B2C e-commerce, however, the future will be different as both will take their own paths.

Change that is much needed:

Businesses across the globe are looking for consumer-like experience in procurement. Over the last few years, many initiatives across the globe have successfully consumerized B2B e-commerce and e-procurement. The major reasons why businesses are switching from traditional commerce to e-commerce include several fundamental benefits of e-commerce such as a self-serve model, better efficiency in making decisions, more transparent information, and better analytics and structured buying. This drives this to a change which is obvious and the need of the hour one.

How does the future of procurement look?

The future of procurement is expected to be driven by an increasingly centre-led approach, characterized by constant connectivity to the sublets and enabled by technology.

The current system used for purchasing office supplies is a fill-in-the-need system. Simply put, it can help to find the best supplier for a location. Though we have made incredible advances in procurement and technology, a centralized procurement process has remained much the same.

Centralized Procurement then:

In early 2014, centralized procurement was all about “control”, “power” and “authority”. And ultimately, if the organization is run in a reasonably de-centralized manner, it was unlikely to accept a highly controlling centralized procurement function. The purchasing decision makers were at the company headquarters. But it was never designed to mislead you into a bureaucratic system.

Centralized Procurement later:

In the new paradigm, we will have to start looking at it from the perspective of “process optimization”, “cost reduction” and “setting a direction”. An organization’s activities could be spread over a number of plants or locations. And for a large organization, it requires a massive amount of resources and tools in order to operate at peak levels. One of the primary reasons why companies have trouble managing their purchasing practices is because different purchasing teams procure in different locations and are “not tracked”.

Future trends in the sector:

Business buyers are consumers too, hence the fundamentals remain the same. However, unlike B2B e-commerce, where the buyers are more impulse driven and are often shopping for fun/leisure, business buyers are buying for their business and their purchase designs are needed driven.B2B e-commerce will not only out-grow B2C e-commerce in terms of volume of business but also the application of technology.

Another interesting trend will happen in B2B e-commerce is the success of niche players. Unlike B2C e-commerce where we have seen generalists have had an upper hand over specialists, in B2B e-commerce, specialists who would provide best solutions to the niche problems faced by businesses towards purchases will find more success than generalists.

With companies switching to B2B e-commerce, more and more real-time procurement data will be captured. This data will help B2B e-commerce players to better understand the behaviour of the business buyer and offer data-driven insights. B2B e-commerce companies will use this data to provide a personalized experience to every buyer/business.

In a nutshell…

Over the years, procurement companies have started looking into how strategy with technology could address the dilemma in the process. Whereby how can procurement gain some of the undoubted benefits of aggregation and transparency. The centre-led approach in procurement will assure a hassle-free procurement experience which cut unnecessary and additional costs as well as creates a healthy platform for reliable and transparent procurement.

This article was published on entrepreneur previously and has been republished with the author’s permission.