During the late 1990s, there was a huge interest in the idea of e-procurement. As a technology solution, the candle burned bright, but not for long. There were fatal flaws in many of the offerings; especially in the notion of open exchanges, which were so open they took away many of the intricacies of negotiation and the opportunity to make a profit. It also became plainly obvious that many of the vaunted cost savings came about, not through technology, but by simple improvement of process; for which no great technology implementation was necessary.
Effective purchasing is, to a large extent, about creating and managing relationships with suppliers. What Global Procurement Group has done is to create a range of relationships with top-tier suppliers across a range of non-core sectors; mobile phone usage, cleaning, and training, to name but three. A key differentiator is that Global Procurement Group only works with one supplier in each recognized and defined sector. This allows the company to manage the working relationship on behalf of their end-user clients in a completely transparent manner. Think back to the failure of open exchanges and why they didn’t work, and the idea makes perfect sense.
Because this is also a technology solution as well as a business one, Global Procurement Group provides a portal for the end-user which is the central ordering point. On the back of this, it also provides analytics that allow the finance function of any organization to maintain a high level of control and understanding of the purchasing that is taking place across the organization.
The success or failure of such a business model is dependent upon a large number of factors. One needs to ensure that the deals that are struck with the suppliers are of equal or greater value, in respect of price and quality of service, than could be made with other suppliers. These have to be monitored on an ongoing basis. The interaction between the supplier and the client has to be open without the intrusiveness of a third party – even if a third party has involvement. Finally, there has to be a balance between maintaining high levels of discount without a high degree of tie-in to contractual obligations. Global Procurement Group appears to have taken these and many other factors into account in providing a service that works to the benefit of all parties involved.
There are some business models that make eminent sense, and which provide the oft-promoted, but seldom attainable, win-win situation. It would appear that this new pass at e-procurement is one such model.
Source: OpinionWire by Butler Group (www.butlergroup.com)
