Future Proofing Procurement – Social Sourcing and Supplier Networks

Traditional procurement processes and methods are being overtaken and replaced. While they still have a role to play, how can you make sure your procurement organisation is ready to meet the future head-on?

A few weeks ago, I was involved in a Twitter chat on behalf of Procurious on the subject of social media, supplier networks and social sourcing. It got me thinking about how procurement can prepare for an expanding strategic role in the coming years.

Social media is well established for connections and networking for individuals, and forward-thinking procurement teams are ensuring that their brands are positioned to take advantage. But where should they be going next?

Supplier Networks

Supplier Networks are built on the premise of using social media to create a pool of organisations, which have the same or very similar requirements, and combine resources in order to achieve favourable rates on large-scale purchases.

The favourable conditions are not just for the buying organisations. Suppliers who are part of the network are able to access more organisations, combine orders (allowing for more efficient manufacturing or production processes) and reduce their own costs too. Think of this as a ‘win-win’ situation.

It was on this thinking that Innovo was created. Innovo is a free online business-to-business (B2B) marketplace for all goods and services. The platform aims to connect buyers and suppliers on the basis of requirements.

Buyers outline what they need and suppliers are notified when buyers are looking for their products. The site then facilitates volume sharing between buyers, rebating savings for bulk purchasing across the group, and enables suppliers also to share volumes and reduce their own prices.

While not directly linked to the ‘traditional’ social media platforms, sites like Innovo are facilitating online relationships and allowing procurement to both add value for organisations through improved supplier relationships, but also deliver savings for the bottom line.

Social Sourcing

Social sourcing is defined as buyers or purchasing organisations using social media platforms, such as Twitter and LinkedIn, to access a wider supplier market, where new solutions, supplier innovation and alternative products can be found.

What may be holding procurement back in this regard is the need to be open in a public environment with requirements or products issues. While this is not something that has been widely done in the past, there are a few organisations that are using social media to good effect in this regard.

This openness tends to be around lower value, non-critical products currently, but the possibilities of using this more widely will grow as more organisations become comfortable with it.

Currently there are a few examples of good practice in the market, but we’ve highlighted two of the best here.

• LV= (Liverpool Victoria): The UK-based financial services organisation realised that they could use social media to share issues and ideas and attract responses from a wider community of small to medium sized suppliers.

This approach, seen as less formal and more flexible, has enabled LV= to have more collaborative discussions with a much wider community and benefit from innovative thinking.

• GE and Quirky: General Electric and Quirky, a crowd-sourced innovation platform, to create a new platform to enable innovation. The platform enables crowd submission of new products and small-team designs, giving suppliers access to GE and GE a ‘renewable’ source of crowd innovation.

These smaller organisations also have the advantage of being able to access retail relationships that would have been difficult previously, as now they have the support of GE.

(Note – Quirky filed for Chapter 11 bankruptcy this year. However, their innovation journey continues on Wink.)

Securing Procurement’s Future?

Procurious are big advocates of using social media as part of the procurement process. Through conversations we have been having with procurement professionals around the world, as well as technological and industry experts, we believe that these are the conditions the majority of procurement will be carried out in the future.

Adopting a new approach to procurement is a big transformation for organisations, however, in order to ensure that procurement remains relevant, adds value for organisations and retains a strategic presence, the profession needs to keep up with the times.

The benefits of social media are there to see – you don’t need to jump in with both feet straight away, but can ease into it slowly in order to make a smoother transition. Our challenge to you would be – what could you be doing differently in your procurement process? Why not be the one to take the first step and ultimately get ahead of your competitors and up your social media game.

If these organisations are leading by example, what is yours doing? Is your organisation future-proofed? We’d love to hear more from you if you have a great example to share!