Exploring Supplier Funded Pricing Models

Over on Procureville, Provade's Henry Hwong recently explored supplier pays pricing models in a series of 2 posts (which you can find here and here). Supplier pays funding models for technology and solutions investment are nothing new in the procurement world. In fact, they've been around as long as the GPO business model (which skims a percentage of the transaction value from suppliers). In fact, FreeMarkets even played around with this model in the early going, but dropped it for a number of reasons which is a topic for a future post.

More recently, we've seen successful supplier-pays models -- in both indirect (flat fee for participation) and direct ways (% of transaction) ways -- from a number of vendors in the supply risk (JV Kelly), sourcing (MFG.com), supplier compliance (VendorMate), and supplier enablement / transaction worlds (Ariba ASN). And thanks to Henry's example, we can also add an example in the services procurement world as well. If you're curious about how these models can work, his two posts are excellent primers.

I also wrote about the subject some time ago as well, and included a mention of "a large global diversified conglomerate [who] charges over $3000 a year to its suppliers to gain access to their supply portal to list their goods and services in their online catalog system." A fascinating model, but in the end, is the procurement organization really paying more if the supplier-pays fees are just getting billed back in higher prices? Food for supplier-pays thought, I suppose ...

Jason Busch

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