Case Study: How digital procurement platforms are transforming traditional markets
In the development of the digital economy, platforms play an important role as a successful business model. Particularly in the area of procurement, experts are predicting huge market potential which is increasingly being tapped.
Product platforms forging ahead in many sectors
Whether electronic components, craft and industrial supplies or tool technology, digital marketplaces are not only increasingly influencing purchasing behavior in the consumer sector: In procurement, too, new product platforms are contributing to the transformation of entire industries. Contrasting with the top B2C allrounders, procurement platforms with their product portfolios generally cover a specific market, enabling extensive, and even worldwide, access to required goods and production resources.
“Procurement platforms provide for hitherto unparalleled levels of transparency and information and process certainty. A great sense of optimism is currently perceptible in many industries. That said, there’s a clear trend towards large, central platforms that radically simplify the classic procurement process.”
Conventional procurement processes often extremely cumbersome and time-consuming
The extent to which digital procurement platforms can fundamentally transform an industry becomes clear with a comparison to traditional day-to-day operations in e.g. the electronic components sector. “In the past, the entire ordering process would often take several days or weeks – especially for key accounts – and was very heavy on personnel resources,” Nill explains.
In some cases, customers would send distributors their product needs – with up to 100 000 articles per order – by fax, which would then have to be sent on to various traders. The distributors would next collate the traders’ responses in Excel lists and return these to the buyers. A major problem with this essentially analog process was that, due to the dynamic fluctuations in prices and availabilities, the compiled lists were often already out of date shortly after being sent. “Digital platform technology shortens the entire ordering process down to just a few minutes – a huge efficiency improvement for all those involved which enables strategic procurement and frees up substantial resources for further corporate growth,” says the digitalization expert.
Procurement platforms: Significant competitive advantages for all involved
Besides significant time savings and efficiency gains, buyers who use digital procurement platforms benefit from far greater sourcing certainty. The platforms allow sustainable, cross-border purchasing strategies at the click of a mouse, and reduce reliance on individual suppliers by offering access to international product portfolios.
“Procurement platforms also offer suppliers and traders an attractive model which they can use to tap into new markets, opportunities and revenue sources,” says Nill. And last but not least, the platform operator that had hitherto used traditional intermediary techniques also benefits from the introduction. “The role of sales representative, for example, is changing from that of a salesperson to one of product trainer or consultant. Consequently, focus is increasingly being placed on personalized customer and vendor support, and developing new business fields, thereby generating additional added value for the company,” Nill adds.
User added value is decisive for the success of a procurement platform
“One of the critical success factor determining whether a digital product platform establishes itself on the market is that the concrete added value for all users be made visible and ensured for all users during the entire procurement process. Customers must therefore by systematically involved in the development process to ensure maximum user friendliness of the final system,” emphasizes Nill.
Sometimes highly complex technological demands are also placed on the operation of the procurement platform. “With electronic components, we’re not talking about five or six components in the shopping baskets and product lists, but often about material requirements planning involving several thousand items,” stresses Nill.
The data volume that the platform must process is correspondingly large. And despite an extremely diverse product database, it is vital that the technological processes offer top performance and have reasonable response times.
Enormous potential for a wide range of business areas
Daniel Nill sees enormous potential in many business fields concerning the opportunities that procurement platforms offer for digital transformation: “Wherever products are manufactured and procurement processes can be automated accordingly, such platforms can contribute positively towards a successful transformation.”
A real-life example: Sourcengine – a global live trading platform for electronic components
With Sourcengine, US-based distributor Sourceability commissioned Berlin-based digital agency Turbine Kreuzberg with developing a global live trading platform for trading in electronic components. For the first time, the digital procurement platform offers buyers worldwide transparency regarding the prices and availability of all electronic components, and enables them to research autonomously and place orders in real time. Sourcengine currently provides access to 550 million different articles from over 2 500 suppliers, and cuts inquiries for unit prices from several days to just a few minutes.
You can find further information and exciting insights into the live trading platform Sourcengine in our latest case study.
