Amazon Business – A Compelling Proposition for Tail Spend?

Molly Dobson, Head of Enterprise Customer Success for Amazon Business Services gave a very professional and fact-filled presentation at eWorld recently.

She talked about procurement trends, and that despite all the talk of value and procurement moving up the maturity curve, cost management is still high on priority lists. Procurement is also seeking to increase internal stakeholder satisfaction – we get “rogue spend” when people can’t easily get hold of what they need to do their jobs. Procurement needs to be a partner to the business, but at the same time, procurement teams are shrinking in numbers.

Most organisations still have too many small suppliers, with the associated costs such as onboarding. And that of course is where Amazon comes in – offering three major benefits for corporate users: choice, competition and transparency.

She quoted work done by our US Spend Matters colleagues – “Fixing the Tail” – which also identified some of the requirement for good tail spend management through a catalogue-type solution.  There should be integration with other applications, rich reporting and analytics capability, and easy access to approved suppliers and items. “Procurement people need to control, restrict and curate what is available to their buyers” (end users).

Dobson made an interesting point about the “dynamic pricing model” which is inherent within the Amazon platform. It is fundamentally different form traditional contractual negotiations, which tend to fix prices for a certain period. The constant changes from the multiple suppliers on the platform provides that market adjustment – although we might argue that prices can go up, as well as down, so sometimes locking in prices for some time ahead is not a bad idea!

But there is something in the argument that for tail spend, buying at a very competitive “best in market” price is likely to be better than many procurement deals, and certainly better than users nipping down to the high street for occasional purchases. Using Amazon will give procurement folk the visibility of what is being spent and controls can be built into the process as well.

She is also correct when she mooted that problems with tail spend management can be indicative of other problems with procurement – that might be capability or poor stakeholder relationships causing issues.

Amazon can also help with the business case, providing a return on investment calculator to support that. It includes the various time and therefore costs to managing suppliers and so on that might justify the Amazon option.

As we said earlier, Dobson was impressive – we were cynically wondering whether the lack of time for questions was because she did not want any quizzing on some of the meets-issues around Amazon (an amazing company that has delivered huge benefits to many – or a force for economic and social evil – discuss). But it did seem as if it was genuinely a case of a presentation that took up the whole allotted time.

Those questions will remain, and as Amazon penetrates further into B2B and the government world, there will be more discussion about the firm’s business practices, tax strategy and the like, we suspect. But their proposition for tail spend, from a purely business perspective, is well worth a look for many organisations.

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