Procurement is an ever-changing term that comes with a similarly fluid job description.
Today, procurement involves the process of choosing vendors, establishing payment terms, vetting the vendors and negotiating contracts to purchase goods or services. Tomorrow, who knows what the definition of procurement could be?
Organisations are using technology to procure more effectively than ever before and it is the job of the SME to find ways to streamline this process further. Price comparison websites (PCWs) are leading the charge in this new future and proving that procurement is still as valuable as it once was.
Is procurement still valuable?
In days gone by, procurement was done via a sales team, who a procurement team would negotiate with to find the best deal available. In this new era, however, the price comparison website is undercutting sales in finding the real best deals.
In the managed print services industry, price comparison sites have revolutionised the way that procurement managers source their print contracts, for example. Rather than having sales representatives from brands pushing to convert a sale, PCWs have cut out the middleman, allowing procurement teams to quickly see which print contracts best suit their businesses needs. From there, the team can effectively budget for and obtain the best-managed print contract for them.
While procurement teams typically aim to build good relationships with the brands and services that they are looking to use, this can be time-consuming. A PCW can quickly show which brands are worth partnering with and buying from based on the needs of the business.
How have PCWs impacted the B2B supply chain?
Recently, price comparison service (PCS/PCW) websites are more and more popular due to its features in facilitating transparent price and promoting rational purchase decision. The growth of the PCW industry has made the job of the procurement manager much more manageable. Whereas previously a business would be waiting for a sales team to handle a contract, ManagedPrintCompare.com dramatically reduces the amount of time a business is waiting in the supply chain by handing print suppliers already signed contracts. The speed in which businesses can now procure goods through PCWs is an important innovation. PCWs also work well with scalability. While some procurement teams refuse to work with partners who are too small, or too large for their needs, the price comparison site can scale its results to an appropriate size. PCWs have already proven themselves to be an invaluable aid in the B2C market, where consumers have demonstrated their popularity. Popular sites such as CompareTheMarket and GoCompare have helped millions of people find the best car insurance, gas and electricity deals, and now the industry is moving towards B2B clients. Certain sites are now helping businesses find the best business rates on gas, electricity and internet. The move to support B2B clients is another evolution of the industry and is certainly set to expand further in the future.
Price is one of the key competitive dimensions of purchasing a product. As consumers are eager to have access to the better price information in the market, price comparison service (PCS) is naturally born. The PCS provides specific product information and price differences for consumer’s reference. By checking the PCS, consumers are able to compare prices with other retailers and make better decisions. For example, Skyscanner, an online air ticket price comparison website, helps online consumers to compare flight prices of any given route over a month period among different airline and agents.
Potential shortcomings to be considered
Lack of accuracy?
To the average person, comparing everyday pricing on key brands in the cash & carry channel could seem straightforward, particularly if you don’t have to consider the cost of delivery. But with tailored packages for different customers across different channels, price-comparison could start to get messy.
While it’s early days for both sites, wholesalers have already voiced serious concerns over the impact they could have on the wider supply chain. Depot managers have the freedom to ‘wheel and deal’ at a local level, but if everything becomes available online, all our wholesalers’ negotiations will become void.
Perhaps one of the biggest concerns for wholesalers that find themselves listed on price-comparison sites is that, after ironing out the technical creases, these sites could encourage customers to become too price-oriented. From a wholesale perspective, price-comparison encourages customers to pick and choose what they buy a lot more. You will probably end up not selling any more or less, but just selling what’s the cheapest, which could have an impact on margin.
This could be a problem for wholesalers expanding their offerings – from, for example, on-trade to general grocery or grocery to foodservice – to satisfy customer demand for a one-stop shop. Will the investment pay off if everything is about price?
Do we need it?
Faced with fierce competition from the multiples, many retailers already have an idea of who sells what at what price. The same can be said of caterers and foodservice operators, begging the question of whether the channel really needs price-comparison sites at all.
It’s true that good retailers and caterers already know their prices. A few say that they wouldn’t use a site that compared price alone, but would be keen to use one that looked at other areas of service.
There’s only one pot.
The issue of supplier investment is also another important consideration when looking at whether to collaborate with these sites. These websites may want to attract advertising from suppliers, but there’s only one pot and it could affect the amount that suppliers invest in other parts of the channel, like point-of-sale materials and trade advertising.
A clearer view of the supply chain
One important characteristic that PCWs bring to the supply chain is the ability to see a more transparent view of the industry. A PCW doesn’t care about individual sales teams, only giving the user the best deals based on the data that they’ve shared.
A sales team will usually muddy the water to make a sale, claiming that their product is better than everyone else’s, but that isn’t always the case. A PCW will always be transparent by showing what the actual best deal is.
The price comparison website is certainly looking to innovate the procurement process and the supply chain industry. While they may just be getting started, history has taught us that innovation in the supply chain doesn’t take long. Watch this space.