Oihab Allal-chérif and Marc Favier, both of whom hold a PhD in management science, offer an easily understandable definition of what a marketplace is. A marketplace is an electronic platform where buyers and suppliers involved in the same market can interact and manage their transactions online. More specifically, organisations can use these systems to bring "rogue buying" or Tail spend under control by increasing transaction reliability and improving how contracts are monitored and deployed. Ultimately, marketplaces represent a solution for reducing administrative costs and accelerating the entire transaction. Xavier Laurent, Director of Value-Added Services at Manutan, offers his vision of marketplaces...
"Source to contract" vs. "Procure to pay"
Marketplaces that are incorporated into procurement information systems mainly comprise two processes:
- Prior to contract formation: "Source to contract" (S2C)
These tools are not really designed for buyers, but can help with the process of deploying contracts and streamlining the many low value-added administrative tasks. Buyers particularly use these systems for qualifying leads, managing their existing supplier portfolio and coordinating their RFPs (SRM*, CLM**, etc.).
- After contract formation: "Procure to pay" (P2P)
Marketplaces aim to create an all-digital purchasing process, from choosing the product through to managing the transaction.
Development in marketplaces
Until recently, these processes (S2C and P2P) were dominated by German firm SAP and US company Oracle. But over the last few years, new marketplaces have emerged as alternatives for managing transactions (P2P). New companies have entered the scene, which has changed the structure of the market: B-process was bought out by Ariba, which in turn was taken over by SAP, while Hubwoo and Perfect Commerce merged, as did Tungsten and OB10.
The French market is currently dominated by Ariba and Perfect Commerce. But other platforms are cropping up, such as Coupa, IBX, Ivalua, Determine and Basware, as well as many other small solutions. However, there is a clear trend in specialisation between marketplaces for managing orders (Ariba, Perfect Commerce, Ivalua, Coupa, etc.) and marketplaces for invoicing and trusted third parties (Basware, Tungsten, Tradeshift, etc.).
"Procure to pay": functional coverage of the marketplaces
The P2P process mainly covers the following five functions:
- Expression of the need: looking for and selecting the product.
- Validation of the need: namely the workflow for approving the purchase requisition.
- Sending of the order to the right supplier.
- Receipt of the products and matching the delivery notes with the order.
- Receipt of the invoice and matching with the order.
As experts in the "Procure to pay" process, we have yet to come across a marketplace that truly covers all these features, except Ariba. With the takeover of B-process, only Ariba offers a real P2P strategy.
We have seen that many customers have installed two solutions: one for the ordering process (selecting products, validating the purchase requisition and sending the order) and the other for digitising invoices. These solutions are often managed by different departments: procurement deals with the ordering process, since it is a solution for keeping "rogue buying" under control, while finance oversees invoicing to reduce costs (invoice matching) or handle legal constraints (Chorus Pro).
Lastly, the delivery note/order matching process has yet to reach maturity, although the various companies are starting to unveil roadmaps to address the situation.
A number of marketplaces are busy expanding their range of services by offering to connect their customers with the products available from the suppliers with which they are already networked. The main features available include:
- Quotation management (sending quotations, receiving replies, validating and managing orders, etc.).
- The ability to issue RFPs to suppliers involved in the network.
- Access to the products from certain non-contract suppliers.
The first two features have long existed, but are infrequently used for non-strategic purchases. However, providing products from mainstream suppliers in addition to the ranges already negotiated and signed by customers seems to be a much more relevant approach. This solution gives users access to an extremely wide product range for their spot purchases (i.e. their tail spend) without bypassing their procurement solution (purchases therefore under control).
Two of the main marketplaces today have prioritised this type of service:
- Ariba with the "Spot Buy" solution operated by Mercateo
- Coupa with the "Coupa Advantage" solution in partnership with Amazon in the US
Many solutions are available, but the decision to work with marketplaces does not ultimately lie with the suppliers. Customers are the ones who determine which marketplace they want to work with. That is why it is so important for suppliers to be agile and reactive enough to connect to any marketplace as easily as possible. Such is the case with Manutan, which can draw on its technological solution (HubXML and ETL) and its IT team to engage with any marketplace without exception in record-breaking time!
*Supplier Relationship Management
**Customer Lifecycle Management
 Favier, Marc and Allal-chérif, Oihab. The business model of electronic marketplaces. Lavoisier, 2008. 228 p.