Social media becomes purchasing tool for travel buyers

The recent Supply Management article by Angeline Albert, "Social media becomes purchasing tool for travel buyers", summarised findings of research conducted by American Express into the use of social media by individuals responsible for corporate travel purchasing. The article highlights the ignorance among purchasing professionals on the potential these platforms hold and the evolution of these tools from consumer to business-to-business use.

Half of the respondents indicated they use social media to support travel management, and usage is highest (59 per cent) among firms that spend more than $3 million annually on airline travel.

The three key behaviours/objectives noted were:

1. social networking to look for preferred vendors and services for travelers;
2. seeking to uncover travel patterns that could lead to better vendor rates and services;  and
3. networking with industry peers [to share knowledge and gain new ideas.]

" The top priority for 48 per cent of travel management departments was incremental cost savings, while 14 per cent thought identifying new or competitively priced vendors and services was most important."

“It is encouraging to see corporate travel departments becoming more comfortable with this form of collaboration,” said Alicia Tillman, vice-president, corporate affairs and marketing services, American Express Business Travel.

"The most significant barrier to adoption of social media has been the lack of awareness of direct benefits. Some 20 per cent found the business case for social media tools and usage within travel management programmes unclear. Lack of support from upper management (15 per cent) was another obstacle."

The value of the new conversation platforms will soon be recognised by all across multiple industries. We can hence expect a rapid expansion of this new trend from travel purchasing into other commodities in the near future.

“Social Media in Supply” platform completed

MarketSqr Supply Networks announced last week that the implementation of the technology platform for its professional network has been completed. The aim of this platform is to establish a professional network serving the role players on all sides of the Purchasing and Supply processes. It originated from the belief that social media can ideally support improved relationship management between buying organizations and their suppliers.

It is believed that people playing different roles in organizations will all derive unique value from the solution. Purchasing people will find great value in the pooled intelligence on supplier ratings and recommendations and also being able to collaborate with co-customers of their suppliers in solving problems or driving product enhancements. Sales professionals will see improved leads generation while marketing leaders will have ample opportunity to build brand and improve company image.

The company will place very specific emphasis on supporting larger procurement organizations and all tiers of their suppliers. The company will now focus on building content and adopting early users before official launch in Q4 2010.

Supplier relationship programs – Procurement’s “Long Tail”

Long-held beliefs in Procurement tie back to simple concepts. Know who you buy from. Negotiate tough but fair. Do business with as many different suppliers as you need, but not 1 more than that.

By attempting to understand how "Long Tail" concepts can be applied to Procurement, we can begin to challenge some of the most basic assumptions around Procurement best practices.

For today, I'll challenge this widely-held belief:

Reducing your supply base is good

In traditional supply chains, vendors who do well in a particular area tend to grow out to serve other areas. For example, a bolt supplier might decide to carry wing nuts. And if your bolt supplier has been easy to work with, offering fair and reasonable prices, an attractive return policy, etc, you might naturally grow your relationship. In this way, suppliers (who tend to be or become distributors) grow their revenue by selling you more and more widgets for different parts of your business. The downside, for those that value it, is your supplier becomes less expert on each area as he begins offering you a broader and broader set of goods.

This tradeoff made sense 10 or 20 years ago. The incremental cost of forming and keeping a relationship with a dedicated "wing nut" supplier was just too high. Reducing overhead by consolidating the supply base was an easy way to produce great returns.

But in many areas, and for a variety of reasons, that's changed. Some firms are cultivating more supplier relationships, not fewer. And they aren't doing it to become inefficient. They are doing it because they are efficient. And because they view having a very diverse supply base of "point experts" as a way to produce strategic advantage.

Using the best supplier collaboration tools around, and preferring seamless & automated transaction processing, these buying organizations can flip-a-switch to "onboard" new suppliers. Tremendous investment has been ploughed into technology, supplier "onboarding" capabilities and outsourced supplier networks to make this a reality today.

The change in behaviour brought about by Social Media enables the management of many more relationships. Sharing of supplier credentials becomes very practical if the joint knowledge of a large network of procurement professionals is pooled and accessible.

Leading-edge firms now cultivate new sources of supply all the time. They do it to stay on top of the latest trends in areas that connect directly to their businesses long-term success.

So, as you proceed with your supply base rationalisation program, think long and hard about the objectives for the categories under management. Should the category be whittled down to just a few suppliers? Or is this an area you should be expanding your supply base in – reaching out for new sources & taking the time to understand how the market may move in the coming years.

Procurement's Long Tail: Grow your supply base in key areas to produce strategic advantage. Think about it.