Supplier networks have existed for many years and over the initial years slowly gained in popularity. Today, however, these networks are a quickly growing trend and an increasingly cost effective and efficient means to process business transactions and in some cases more (e.g., supply chain finance, supplier discovery). Research from Ardent Partners has shown that the current usage levels of supplier networks remains low (19%), but a significant spike in interest is expected over the coming year (40%).
While the network trend is growing fast, there are many different features and capabilities that the different networks offer. Many of the networks in operation today are specialized and tend to focus on specific regions/countries or industries like B2Boost (retail, Europe), Anachron (eInvoicing), Sproom (Nordics), and Asite (horizontal and vertical focus). Of course, the largest and best known business networks like Ariba and Hubwoo have much broader coverage and offer a wider solution footprint – they are also much, much larger. Our research has also shown that there are five key factors that enterprises consider when choosing a business networks:
1. The number of existing and active suppliers in the network
To start, size matters and this is understandable since the bigger the network, the higher the “match rate” (the percentage of an enterprises suppliers that are currently active on a given supplier network) is likely to be. The effort and time to on-board suppliers is significantly reduced with higher match rate so having suppliers already transacting on the network is viewed as a strong plus.
2. The geographic reach of the network
Geographic considerations are important because there are networks that specialize in ensuring compliance to the unique trade policies and regulations of a specific country or region and they are also able to provide specific language support.
3. The vertical focus of the network
Vertical focus is particularly useful in driving high supplier match rates but networks can also be highly valuable when they are able to aggregate supply markets, identify excess capacity, set industry standards and/or promote best practices.
4. The capabilities and information made available to buyers and sellers.
Number four on the list is an interesting one particularly when it comes to collaboration. easier and improved methods of collaboration can have a direct impact to supplier relationships and performance. For example, collaboration between buyers and suppliers today is largely conducted via traditional methods – phone calls, emails or meetings. Networks, however, can enable a higher level of connectivity between trading partners and can increase the time available for strategic interaction and communication by decreasing the time spent on tactical matters. Also, the increase in quality of the communication can be improved by embedding the communication within a transaction or around a specific issue or opportunity. This is similar to how social networks have dramatically impacted personal communication and interaction.
5. Cost
There is a cost to use all networks, a monetary cost for most and an opportunity cost for all. The cost may be seen as a subscription or license fee to a solution or solution suite that enables network access or it may be direct transaction fees paid buyers and/or sellers. Today, the fees have not chased too many participants away from networks as the cost of processing a PO or invoice is dramatically lower when using a network.
Over time, we expect to see a sixth consideration rise in importance: Value-added services from 3rd parties. As the networks mature, we expect that many companies will see opportunities to develop and deliver services that add value to business networks.
More and more, it’s looking like Andrew was right when he said the 2010’s are the Decade of the Business Network.
