Ariba and the price of the Snickers Bar wrapper (part 2)

So on Thursday I mentioned that Mars - my first company - was incredibly focused on 'competitive advantage' as our raison d'etre in procurement.

So how does that link back to Ariba and their “cloud based category management solutions”?

Simply that, if these services are freely available to all and any users of the Ariba Cloud, then there is no way I can see (unless I'm missing something) they can offer any competitive advantage to any specific customer.  If I'm at Mars, and Cadbury and Nestle can access the same suppliers and the same deals, then clearly there can be no advantage and I have a feeling that Forrest Mars would have pointed that out to me in pretty direct terms.  This is no comment on how well Ariba perform the work of course - that is irrelevant to the argument.

Now of course, the same could be said of any procurement outsourcing, and I am certainly not arguing that we should therefore never consider such a step.  And even Mars would have accepted that there is limited scope to derive advantage from procurement of some low spend categories; or it would not be cost effective to do so. (However, I don't buy the argument that there is no potential competitive advantage purely because 'this category is just a commodity product'.  We worked even harder at Mars to drive advantage on 'commodity products' such as Cocoa, Sugar, Peanuts...And a similar argument applies to 'indirect' categories; being indirect does not mean you can't drive for competitive advantage).   But I totally accept that for many organisations, outsourcing some spend will enable them to focus better on the really key areas.

Equally, some types of procurement outsourcing can drive competitive advantage in themselves. The 'enterprise partnership ' model pioneered by BAE Systems and Xchanging is a good example of an outsource that was innovative and arguably created such advantage for BAE through its gain-share arrangement and creation of capital value for BAE.

But when I look at the Ariba list of categories they are offering, (prety much all indirect categories), I can't help thinking that, as a keen young purchasing manager,  I would have relished the challenge of finding some competitive advantage for my firm across IT Services or Capital Goods.  And I can't imagine Forrest saying to me, "tell you what, let's just get someone else to do it".

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First Voice

  1. Jonathan Flowers:

    I have yet to meet a supplier of _anything_ who sees their product as entirely a commodity, who is incapable of adding further and specific value to a customer by an intelligent dialogue.

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