Future Purchasing: the Extended-Enterprise connector

The Doctor made it again: Michael Lamoureux from the Sourcing Innovation Blog launched another cross-blog series on a thrilling item – The Future of Sourcing – and succeeded to get almost a dozen of SME (Subject Matter Expert) bloggers to post their POV (point of view) on this bottomless topic. How could I miss contributing to this exercise when I personally value so much collaborative work and team spirit. Indeed, I couldn’t, although I am not committed to do it and 200% busy on starting-up a new business . That’s the beauty of communities and Michael’s obstinacy. Well done Micheal.

I’ve read all of the posts published so far and, to be honest, I felt, in a way, I gave to myself an additional constraint, having to provide a different perspective to the others. Amazingly, I didn’t have to make so much an effort. That’s the beauty of diversity. My SCM (Supply Chain Management) consultancy background definitely structured the way I look at businesses, and the Extended-Enterprise concept I worked on for many years is my projection of the ideal business-model of the future.

Considering purchasing, i.e. the supplier relationship management, the trend will be industrialisation, commoditisation and automation: Sell-side vertical eMarketplaces, with a commodity focus and advanced configuration features, will become more numerous. You’ll get something like 2 or 3 eMarketplaces per commodity and per logical geographic region. Fruits of the globalisation, eMarketplace will feed globalisation: only top performing companies will survive in a world where products specifications and prices can be compared real-time. Indeed, online requisition standards, configurable templates and automated processes will be progressively defined and released per product, good and services. Online benchmarking on product specifications, prices, delivery and commercial conditions will be available for real-time comparison and selection. The outcome will be a major gain in temporal/physical flexibility: Changing supplier will be possible within a couple of seconds (in best cases) or days/months otherwise due to logistic constraints but not for contracting purposes as per today. What we know today as a purchasing department will become a business – plug and play – connector within what is called the extended-enterprise: an aggregation/network of independent and top-performing companies, working together to supply products or services as effectively as they can.

This will not happen tomorrow and another quarter of a century will probably be necessary to make this business transformation visible and crystal clear. Nevertheless, some ‘signals’ are already there: look at Adwords or Adsense enabling online marketing within a couple of minutes; look at price comparison portals; look at IT development portal, at job boards… if you take a step back, I guess you can perceive how faster business can be done. And this is just the beginning.

This business evolution will come along a deep evolution of the purchasing function. Sourcing will not be the focus any more – for commodities -, nor Supplier relationship management. Core business for the purchasing function of the future will be to continuously improve/upgrade/optimise the configuration of what I called the « plug and play business connector » and the eMarketplaces it will be connected to. To give you a better idea, I will say that the purchasing function will be comparable to a trading function: digesting hundred of parameters in order to forecast the performance (logistic, price, long term contract vs short term…) of their potential suppliers in the future, evaluating risks, taking options (short term, long term, speculation…) for, at the end of the day, select the best options, changing suppliers several times a day, in order to maximise their company performance.

There would be much more to say and to think about: How and where will this happen short term, what will be the road-map from here to there, which products will be impacted the soonest by this automated process… but I guess this is enough by now, at least for me.

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