How Amazon plans to disrupt professional procurement
The procurement process in the B2B sector is fraught with problems. Complex procedures and slow fulfillment drive up costs and cause bottlenecks. Amazon is taking steps to make procurement simpler and save companies time and money. It is estimated that 75% of all products in the B2B segment will be purchased via online marketplaces by 2022 and this will be driven by Amazon.
Amazon is probably one of the best known companies in the world. We all use their services, whether it’s to purchase products or their cloud services. Now Amazon is shifting their focus to big procurement contracts.
There are significant complaints about traditional procurement systems in large companies and many employees and managers believe that the solution lies with Amazon.
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Procurement contracts are moving online
Market researchers at Gartner are assuming that by 2022, 75% of all procurement contracts will take place via online marketplaces. Amazon is probably in a better position than any other company to take advantage of this new reality.
At the first “Amazon BusinessNow inform Exchange”, to which the e-commerce giant invited buyers from all over Europe to London, Amazon’s appeal became clear. Big procurement managers are crying out for greater efficiency.
“We still have far too many free text orders,” says Dietmar Harteveld, Head of SCM EMEA at Siemens UK, who manages an annual spending budget of $2.2 billion (€2 billion). “Colleagues write what they need and then a process starts,” he explains.
It can take up to three weeks for the right supplier to be found and there are a number of complications in most company’s processes. Suppliers needed to be entered into the ordering system, PO numbers need to be issued, deliveries tracked and payments made. There is a lot of friction in this process and a lot can go wrong, with real financial consequences. . “We wanted to reduce this, because it’s not efficient and it’s not the world we should be living in,” says Harteveld.
The digital procurement Business Intelligence via an online marketplace shortens this process from three weeks to three days, as Todd Heimes, director Amazon Business in Europe, promised.
Through a connection to the B2B marketplace, business customers have access to over 250 million products, which can be delivered within 24 hours and hundreds of thousands on the same day. This gives professional purchasers access to a huge assortment while reducing the maintenance effort for internal suppliers.
Employees want Amazon Business
The most important argument for the e-commerce giant, however, is that almost every buyer who orders by profession also orders privately on Amazon and considers the customer experience to be better compared to traditional procurement channels.
Because employees know the ordering processes on Amazon, it makes change management in companies that switch to digital procurement comparatively inexpensive. Acceptance problems are also unlikely. On the contrary, it is often even the employees themselves who demand that they are simply allowed to order the products they need themselves on Amazon.
“We have found that we order 200,000 pounds a year from Amazon, even though employees at our 630 facilities have so far been explicitly forbidden from ordering there,” says Keelie Leahy, Director of Innovation at the UK’s Busy Bees childcare chain.
But because the employees were not always able to find what they needed from the 300 suppliers recorded throughout the company, they switched to Amazon without permission and then settled their purchases by credit card. This, however, caused enormously cumbersome handling processes. To make life easier for herself, Leahy declared. “We have decided: If you can’t beat them, join them,” she says.
(Featured image by Bryan Angelo via Unsplash)
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First published in INTERNET WORLD BUSINESS, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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