Supplier networks – spend analysis beyond the norm?

We’re looking here at a topic that is relevant to both private and public sector buyers, although my thinking comes from a session I facilitated last week for ProcServe. They provide the UK government e-marketplace and what is in effect a “supplier network” for many public sector bodies. I’ll cover more detail around the specifics of that session shortly, but today I want at look at the bigger picture.

That’s around the useful management information we may be able to extract from supplier marketplaces / networks.  We’re all familiar with spend analytics, and developing breakdowns of spend by supplier, category and so on, but the ProcServe session made me realise that there are further dimensions of data and therefore deeper analysis that networks / marketplaces might allow us to perform.

As context, it’s worth saying that ProcServe has now seen over £ 1 billion of spend going through the public sector marketplace. That’s well short of the global Ariba or Basware type volumes of course, but it is significant enough to provide some serious data to work with.  We should also note that some of the ideas around potential analysis given below require a certain amount of data sharing between buyers and buying organisations that use the network. That may be easier in the public than the private sector  (although not necessarily!)

Anyway, here are a few “for instances” that came up at last week’s session and have interesting potential in terms of using the network or marketplace data. The first set are relatively obvious:

  • Comparing the price paid for the same item from different suppliers or by different users within your organisation.
  • Comparing the price paid for the same item from a single supplier over time or by different users / buyers in the organisation.
  • Comparing the prices paid by different organisations for the same item – both from common suppliers and across the supply base.

Now these are probably the most obvious and basic analyses that we can consider. But then things could get really interesting as the amount of data builds. We might be able to use detailed price comparisons for example to get into areas like these:

-          establishing economy of scale curves for specific products. What is the correlations between the quantity ordered – or the overall usage – and the price paid? Do big buyers actually get better pricing?

-          do certain buyers of a particular type consistently get better pricing – based on industry / geography / size etc?

-          considering the competitiveness of certain types of suppliers- for example, smaller (SME) firms, minority owned or “local suppliers”.  We could start to establish whether programmes to support certain types of suppliers actually have a cost to the buyer, and if so, what that is.

Now apart from the willingness to share data, this also relies on being able to make true like for like comparisons, as Adam Leach pointed out in Supply Management here. That might restrict the spend areas where such comparisons are truly meaningful. But that still leaves some interesting categories where such analysis could be enlightening.

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