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IDENTIFICATION OF THINK PROCUREMENT’S POTENTIAL SUPPLIERS Applied Research Project Report
4/13/2015
think Buying Better Profits Authored by: Ankit Sinha Arun Palaniappan Chaitali Karnik Shuyaasha Misra
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1. Executive Summary 1.1 Abstract Purpose: The objective of the project was to conduct a research on think’s potential suppliers, and narrow down their requirements and aspirations from a distribution strategy whether online or conventional. Once the must-haves and want-haves were discovered, think would leverage these insights to create marketing strategies and case study materials, which would augment their marketing efforts, and drive higher supplier enrolment. Method: We designed a series of questions, in close conjunction with the client team, thus ensuring that the research methods were aligned with think’s goals, at every point. To this end, we followed the process:
Ø Designed a survey on basis of the questionnaire designed.
Ø Sent the survey across to small and medium range of suppliers across industries and geographies, to include sectors like IT, Healthcare, Travel, Retail and countries such as India and Australia.
Ø A total of 32 responses were noted. The sample size was 450, which means a response rate of 7%, was recorded.
Ø Post this, we analyzed the results, by grouping together various question variables like the target market, and availability of portal.
Ø The techniques used were Descriptive Statistics, Discriminant Analysis, Chi-Square testing.
Ø Secondary Research and Porter’s five forces analysis was also carried out.
Findings: Our key findings from the research project are enumerated below:
Ø Think procurement should adopt and propagate an aggressive content strategy across social media platforms like LinkedIn, Facebook etc.
Ø The survey showed that debtor’s days and invoicing were the key problem areas for the suppliers. Thus the organization should use these at the core of their marketing tactics.
Ø The industry type determined the priority for suppliers. For instance, IT rated the number of distribution channels, whereas Hospitality rated customer loyalty as the highest.
Ø Suppliers ‘debtors’ days can be reduced by 75% by use of online portal.
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1.2 Introduction ‘Procurement’ may be defined as the business function dealing with the sourcing and acquiring of goods and services. A series of activities and processes fall under the purview of procurement. These include, and are not limited to vendor relationships and evaluation, sourcing, negotiation of existing and new contracts. E-‐procurement, thus, means performing of this function electronically, which not only makes procurement tasks easy, but also highly cost effective. E-‐procurement deals not only in the act of buying and selling, but also consists of additional steps like request for information, payment systems, vendor management, and catalogue maintenance. The market for e-‐procurement is set to grow, as the transparency and ease due to e-‐procurement strategies is a key selling point. The burgeoning need for e-‐procurement, in both small and large organizations, will accelerate. Think is an e-‐procurement organization, which was founded back in 2005, by Adam Ryan, who is one of the founding members of seek.com. Headquartered in Melbourne, Australia, its primary aim is to bring together buyers and suppliers on a single, B2B transactional platform, facilitating business, and driving up consumer value. Think is thus, a firm that provides innovative SaaS based e-‐procurement solutions and procurement services to its client base, thereby allowing them to enhance performance, by re-‐engineering their procurement initiatives. It holds a simple philosophy of ‘creating low cost, and high value’ solutions for its clients. The think team has in its repertoire, a wide ranging set of experiences that cuts across industries and procurement technologies. Some of the key features of the think platform include: data cleansing, 3-‐way matching system, catalogue management, comprehensive travel and expense management systems integrated into the platform itself. Currently, think’s business model allows its suppliers to register on its platform for free, giving them access to the buyer information, and a stage on which to manage their clients. The suppliers not only get to manage their buyers, they also get to ensure buyer contract compliance, limit off contract purchasing, and enable conformance to a 3 day payment period.
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In addition to this, think is not just isolated software, limited to a single client – it brings together many suppliers and buyers on the same platform. It does this, while also maintaining security and policy adherence. Think generates invoices efficiently on behalf of the supplier, with all invoices being integrated into the supplier’s ERP system. Also, the back office costs incurred by think are significantly reduced, all at zero marketing cost. A typical think process order, when placed by a buyer, is submitted to policy and security approvals, following which the order is checked out. The admin is notified, and once acceptance is granted, the order is specified. The invoice, purchase order and transaction summary are created. This way, the process is simplified and streamlined for both the supplier and buyer. This is a P2P system, which means the payment systems are either integrated with the buyers’ banks, or EFT, credit and debit payments are made via the think system. Given their user friendly interface, and a highly convenient integrated system, think is now looking to understand the market that it operates in, with a special focus on the suppliers. Essentially, an approach to marketing was to be ascertained. The market that think operates is fairly new, and the need for simpler procurement solutions is making itself felt. Other players as well suppliers’ own systems make differentiation absolutely critical. This report aimed at putting together a database of information that think could leverage either as marketing materials, or as the crux of their strategies, in order to attract more suppliers into its fold. Thus, our project was aimed at the specific segments of suppliers that think intends to target, and to develop a key understanding of the distribution strategies they have in place, whether they have an understanding of what e-‐procurement is, and how they could benefit from coming on board.
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Table Of Contents 1.Executive Summary…………………………………………………………………………………..2
1.1 Abstract……………………………………………………………………………………2 1.2 Introduction……………………………………………………………………………….3
Table of Figures………………………………………………………………………………………...6
2. Objective……………………………………………………………………………………….7 3. Research Problem……………………………………………………………………………..7 4. Research Question…………………………………………………………………………….9 5. Secondary Research…………………………………………………………………….........10
5.1 Literature Review………………………………………………………………………..10 5.2 What is Research Design………………………………………………………………...11 5.3 Cloud Invoice Management……………………………………………………………..12
6. Research Concept…………………………………………………………………………....16 6.1 Theory……………………………………………………………………………………16 6.2 Propositions……………………………………………………………………………...16 6.3 Develop measures and samples…………………………………………………………17 6.4 Collect Data………………………………………………………………………………17 6.5 Analyze Data……………………………………………………………………………..17 6.6 Implications………………………………………………………………………………17
7. Research Design……………………………………………………………………………...17 8. Data Analysis…………………………………………………………………………............18
8.1 Descriptive Statistics…………………………………………………………………….18 8.2 Comparison using Chi-‐square test………………………………………………............22 8.3 Discrimant Analysis to predict…………………………………………………………..23
9. Recommendations…………………………………………………………………………...26 9.1 Marketing Strategies…………………………………………………………………….26 9.2 Identify supplier groups…………………………………………………………………27 9.3 Brand Positioning………………………………………………………………………..27 9.4 Content Strategies for Think Procurement…………………………………………….29 9.5 Key Takeaways…………………………………………………………………………..31
10. Bibliography…………………………………………………………………………….........32 11. Appendix……………………………………………………………………………………..33
10.1 Survey Questions for think Suppliers…………………………………………………...33
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Table of Figures
Figure 1: Porter’s 5 Forces……………………………………………………………………………..8
Figure 2: The logic of a research process…………………………………………………………….11
Figure 3: Top Objectives while considering Automation…………………………………………….12
Figure 4: Challenges faced in using paper-‐based invoicing system…………………………………13
Figure 5: Online Portal Test…………………………………………………………………………...18
Figure 6: Payment gateway summary………………………………………………………………..18
Figure 7: Effectiveness of Current Online Portal…………………………………………………….19
Figure 8: Industry Segmentation……………………………………………………………………..19
Figure 9: Importance of factors for online distribution……………………………………………..20
Figure 10: Functionalities mean responses…………………………………………………………..21
Figure 11: Online Portal v/s Problems faced………………………………………………………….21
Figure 12: Online Portal Availability v/s Debtors Days……………………………………………….22
Figure 13: Wilk’s Labda result………………………………………………………………………...23
Figure 14: Test of Equality of Means…………………………………………………………………24
Figure 15: Standardized canonical coefficients table………………………………………………..25
Figure 16: Unstandardized canonical coefficient table……………………………………………...25
Figure 17: Clasiification of Results……………………………………………………………………26
Figure 18: Current Scenario of e-‐ procurement industry……………………………………………28
Figure 19: Change in e-‐procurement industry………………………………………………………29
Figure 20: Utilitarian Experience…………………………………………………………………….30`
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2. Objective The objective of our research was to conduct a survey on think’s potential suppliers. The base we explored for this was a range of small and medium level entrepreneurial ventures, with annual revenues under the bracket of 20 million. Think holds a wide base of buyers, and in order to attract the suppliers, they wished to understand the key issues that suppliers faced, in their existing and aspirational strategies. Thus, our goals were three pronged, aiming at getting a firm understanding of the points enumerated below: 1) The current distribution strategies deployed by these organizations, their benefits and drawbacks; whether they are traditional or original. 2) In the absence of an already existing online strategy, the expectations of the suppliers from an online model. 3) Their business models, and requirements and how think may be mapped to address them. 3. Research Problem The problem we sought to address was closely related to the issue identified. Essentially, an identification of the need – aimed at the suppliers’ requirements and aspirations from a distribution strategy, was needed by think. To this end, we sought to build on the objectives stated above. As per our conversation with the think team, the firm needed us to conduct a market research on what suppliers need, and how they could leverage the insights to convert these suppliers into early adopters. These insights were related to the suppliers’ current strategy – online, traditional and the pros and cons in place. They also included information regarding the supplier invoicing, debtors’ days, annual turnovers, and the key features that they would want in their strategies, so as to differentiate their business better..
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Porter’s Five Forces We carried out a brief analysis of the industry wherein think functions – e-‐procurement, e-‐commerce platforms, using Porter’s five forces as a basis.
Findings: 1. New Entrants/ Substitutes: The field of e-‐procurement is still fairly new, which is an advantage for think. However, secondary research shows us that there are various cloud based platforms available in the market, such as Tradogram, eRequester, RS e-‐Procurement etc. In Australia itself for instance, there are existing organizations, which offer SaaS based solutions for e-‐Tender, e-‐Procurement, such as TenderSearch. These also leverage ‘Cloud Computing’ technology. Further, as substitutes, many organizations go for their own websites, or third party websites. (RS E-‐procurement) (TenderSearch) (Capterra)
Figure 1: Porter’s 5 forces
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2. Degree of Rivalry: The field of e-‐procurement seems set to grow, given the positive sentiment surrounding the initiatives, as was seen with the launch of the Victorian eProcurement system EC4P back in 2002, and the subsequent interest in online procurement management strategies generated. As per the Australian Government’s department of finance, since the Commonwealth Electronic Procurement Implementation Strategy was launched in 2000, the two outcomes seen are the processes have now become easy, as well as highly transparent. (CIO) (Australian Government -‐ Department of Finance) 3. Bargaining Power of Buyers and Suppliers: Given the budding stage of this market, buyers and suppliers are not yet fully aware of the organisation and the niche segment. The current target sector for think is small and medium level enterprises, which would have lesser bargaining power, unless they are established. In order to mitigate the challenges and risks posed by this growing market, think must leverage its key differentiators, such as: One of the disadvantages think may encounter would be that it is a standalone application, and not one that can be seamlessly integrated into the organization’s already existing procurement processes. (TenderSearch) Thus, think must take necessary steps to make the platform as appealing to the market as possible, by development and propagation of persuasive, effective marketing strategies. (Australian Government -‐ Department of Finance) 4. Research Question
In any market research the research question is of paramount importance. All of the research concept, research design, literature review, data collection, survey and a part of the data analysis are given direction by this research question.
“Do you have an online selling portal of your own or a third party website? And if not, would you be interested in creating an online presence with the help of a third-‐party provider?
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5. Secondary Research
5.1 Literature Review
Our literature review and secondary research primarily revolved around understanding the following objectives:
• Research Design and purpose • Advantages of automating your procurement process. • Best practices and standards in invoicing. • Advantages of electronic invoicing • Gaps in the electronic invoicing process • Importance and usefulness of analytics in e-‐procurement • Indicators of a successful e-‐procurement platform
Below are the articles and journals the group will read as part of our literature review and secondary research Table 1: Name of the article, publication and the author used for Literature review Name of the article Publication/ Author
What is Research Design? nyu.edu
Cloud Invoice Management-‐SMB Aberdeen group
Excellence in order management Aberdeen group
Are you getting the most out of your VMS
Aberdeen group
Achieve business agility through e-‐invoicing and other key AP automation initiatives.
Aberdeen group
Leader’s winning strategies for common issues in AP and AR electronic payments
Aberdeen group
The Deloitte Global CPO Survey 2013 Deloitte
Understanding and embracing value based approaches from procurement
Sourcing interest group
Driving smarter spending Verian
Duplicate payments and duplicate
Christine L. Warner
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vendors
Top 10 metrics to strengthen organizational practices
Richard Waugh
Some of the key insights and the takeaways from these articles are elaborated as follows: 5.2 What is Research Design?
Research needs a design or a structure before data collection or analysis can commence. The function of a research design is to ensure that the evidence obtained enables us to answer the initial question as unambiguously as possible. Research design is different from the method
by which data are collected. It is not uncommon to see research design treated as a mode of data collection rather than as a logical structure of the inquiry. But there is nothing intrinsic
about any research design that requires a particular method of data collection. Research design refers to the structure of an enquiry: it is a logical matter rather than a logistical one.
Figure 2: The logic of a research process (NYu.edu)
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Papers published by the Aberdeen group
5.3 Cloud Invoice Management-‐SMB
100 accounts payable (AP) professionals from business of all sizes were surveyed to understand better the challenges they face as far as invoicing is concerned. The focus of this paper was the 74 small and mid-‐size businesses (SMB) and some of the key insights are as follows:
• 53% of respondents felt cost reduction was the most important factor. • Cash flow visibility and possibility of payment fraud came in as the other two most
important factors. • 73% wanted to automate their invoicing process. • Large businesses on an average processed 1200 invoices a month per full time
employee (FTE) and SMB processed 970 FTE, this difference in performance was only due to gaps in technology.
• SMBs lag far behind large enterprises in their adoption of technologies.
(Aberdeen group)
Excellence in order management
This report explores the top objectives for automating the order processing and following are some of the insights:
The ability to serve customers quickly and provide timely order confirmations provides a competitive edge in today’s business environment.
Figure 3: Top objectives while considering automation
(Aberdeen group)
4 factors companies hoping to drive success through the entire processing cycle should consider are as follows:
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• Time is money, cash is king. • Automation is the silver bullet. • Standardization and integration are the future. • The cloud is rising
(Aberdeen group)
Are you getting the most out of your VMS?
• The three benefits of having a VMS are as compliance, Productivity, and Visibility. • Only 36% are satisfied with their current provider. • The 3 factors to consider while choosing a new provider are the delivery model,
analytics and integration. • 50% of organizations think integration is the most important factor while choosing a
new vendor. • 37% of organizations think analytics is the most important factor while choosing a
new vendor.
(Aberdeen group)
Achieve business agility through e-‐invoicing and other key AP automation initiatives.
The number one challenge for organizations today in AP is difficulty finding or managing paper based documents.
Days Payable Outstanding:
• Best-‐in-‐Class: 21 • Industry Average: 33 • Laggards: 34
Figure 4: Challenges faced while using paper based invoicing systems
(Aberdeen group)
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4 key segments in invoicing automation initiative which are:
• Technology selection • Employment engagement • Supplier collaboration • Technology Implementation
(Aberdeen group)
Leader’s winning strategies for common issues in AP and AR electronic payments
The article focuses on electronic payments of accounts payable and accounts receivable by companies. It suggests that companies that have their accounts payable and accounts receivable processes automated tend to benefit more and emerge as market leaders.
• Electronic transactions reduce the processing costs by 25% for the leaders. • Leaders with automated accounts payable procedures take only 7.3 days to process
an invoice • Similarly for AR the DSO (day’s sales outstanding) for followers is 85% greater than
for leaders.
The aforementioned statistics suggest that companies which use electronic payments and automation for their accounts payable and receivables can significantly improve process time, capture discounts, reduce complexity and improve financial visibility.
The above information is of critical importance to Think Procurement as the Think platform offers electronic reconciliation of accounts receivable leading to lesser DSO and improved financial visibility.
(Aberdeen group)
Deloitte UK CPO Survey 2013: It talks about the key priorities for CPOs, the top three of which are – new product development, cost reduction, and organic expansion. With globalization still charting murky waters, CPOs must remain focussed on cost control, using procurement strategies to aid organizations’ return to profitable growth. The findings from the survey highlight that only about 60% of CPOs are effective at delivery this value, which as research showed, stemmed from a host of reasons like right agenda, misaligned objectives, lack of relevant measures, etc. The survey then looked at how procurement can aim to be more effective, suggestions included – tailored measures, creating partnership based roles, increased capability by means of improved tools. The report examined the changes to be factored into procurement from a risk accountability perspective, digital age, future implications viewpoints, across regions and industries. For instance, procurement and technology are closely inter-‐linked, but on the analysis of analytics, findings showed that most CPOs still emphasise on retrospective data, and although spending on technology is set to show a
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steep rise, there still remain barriers to adoption of data/analytics. To this end, the report makes recommendations on the steps to be taken by CPOs, in order to invest effectively in digital assets.
(Deloitte Group )
Duplicate payments and duplicate vendors:
Duplicate payments and invoices are a major problem for organizations across industries. Many companies do have in-‐built duplicate payment detecting processes; however these usually require deep querying to effectively give results. It enlists the common mistakes made by establishments, delineating algorithms and strategies to overcome these pitfalls in identifying duplicate invoices. Further, in order to improve accuracy, certain logics have been given in the report, for different scenarios, such as when the duplicates have same vendor, same date or same amount, which may be used in conjunction with the company’s existing systems. Similarly, the article delves in detail about duplicate vendors, in which multiple vendor numbers are used for the same vendor. This is a concern because it leads directly to double payments. As is the case with duplicate payments, companies usually have accounting packages which catch duplicate vendors. In our project, we have combed through the report, and although there are suggestions that would be good to take up, we believe an organisation operating with the think platform would have no need of it – given their feature of 3-‐way matching. The 3-‐way matching allows the automatic tracking of the invoices, thus greatly reducing chances of invoice duplication.
(Christine. L. Warner)
Top 10 metrics to strengthen organizational procurement practices
The article talks about the importance of efficient procurement. It introduces the term spend under management (SUM) which is spending that is actively managed and controlled by the procurement team. 100% SUM is only possible in theory however successful firms have a majority of their spending being done as “managed spending”. Also with SUM the company has to adhere to line wise spending in order to have visibility on its overall expenses and stay efficient with the costs. With spend under management 20% of the suppliers account for 80% of the spending.
An important aspect of effective organizational procurement practices is supplier management. Procuring only from a set of suppliers ensures uniformity in products as well as the opportunity to earn volume discounts. This can majorly increase a company’s negotiating ability and in turn increase revenues. (Richard Waugh)
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6. Research Concept We conceptualize the research using a 5-‐staged approach that we discovered in our literature review , which is as follows:
6.1 Theory
This stage involved testing a theory postulated from observations based on secondary research. The theory to be tested was as follows:
o Issues in invoicing and average number of debtor days are major concerns for Suppliers due to lack of automation.
The test this theory the prediction that an online distribution strategy could help minimize these issues by means of automation in processing.
6.2 Propositions The following propositions were made to test the above-‐mentioned theory:
Ø Proposition1: An effective online distribution strategy can help reduce costs of invoicing & improve the average debtor days for suppliers
Ø Proposition 2: An online distribution strategy is not that effective in reducing costs of invoicing & improving the average debtor days for suppliers
Ø Proposition 3: Benefits outlined by means of reduction in invoicing costs and time would attract Suppliers to adopt Think Procurement’s online distribution portal.
6.3 Develop measures & samples
Basis the theory and deduced propositions a survey questionnaire was designed to gather information from the supplier’s. The survey questions focused on 4 major areas that were in line with the objectives of the research. The questions were divided in 3 groups: Suppliers with an online portal, Suppliers without an online portal & both.
• Suppliers with an online portal: o Rate the effectiveness of their existing distribution channels o Select the factors that they wish to improve in their current online distribution
strategy.
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• Suppliers without an online portal: o Factors determining success of an online distribution strategy. o Factors that enable them to adopt an online distribution strategy
• Supplier having both own & third party website: o Information regarding invoicing and debtor days. o Factors considered important to the overall business
6.4 Collect Data
• Creating a survey and circulating the same via email and social media. • Convenience sampling adopted
6.5 Analyse Data This data was then analysed through various statistical methods such as:
• Descriptive Summary • ANOVA • Chi-‐squre • Disciminant Analysis
6.6 Implications
The data analysis presented some inferences, which were then used as implications for Think Procurement. 7. Research Design
We wanted to target potential suppliers which are small or medium scale organizations. These suppliers were mostly having an annual turnover of less than $20 million. We started with a list of 400 possible suppliers located in India and Australia. So this a type of convenience sample.
To all these possible suppliers we circulated a survey by the means of phone, mail as well as social platforms like Twitter and Linkden.
The survey itself is attached in the appendix section.
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8. Data Analysis 8.1 Descriptive Statistics For many qualitative responses, we summarized it using Descriptive statistics.
Below are some questions and their summary taken on mean values.
Fig.5: Online Portal Test
The figure 5 represents the percentage of suppliers having an online portal for selling products and services. It was observed that 72% of suppliers did not have an online portal in place, and out of those, 70% of suppliers showed interest in signing up for an online portal to enhance their business.
Fig.6: Payment Gateway Summary
0% 10% 20% 30% 40% 50% 60% 70% 80%
Online Portal in place No Online Portal Percentage of people interested in signing
up who do not have an online portal in place
Online Portal Test
0% 20% 40% 60% 80%
No payment gateway Payment gateway in place
Payment Gateway Test
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Figure 6 represented the percentage of suppliers having a payment gateway to sell their products online. 60% of suppliers believed it to be an important aspect for effective business solution.
Fig.7: Effectiveness of Current Online Portal
A descriptive summary test was done as represented in figure 7, on the suppliers who currently have online portal and the factors, which are most effective for their online selling. The observation here was:
Irrelevant of whether the supplier owned the online portal or it was hosted by a third party, they rated Number of clicks and Profits as the two most important outcomes of the online portal.
Fig.8: Industry segmentation
0 0.5
1 1.5 2
2.5 3
3.5 4
4.5 5
Revenue Profits No of clicks
Effectiveness of current online portal
Own website Third Party
0
1
2
3
4
5
6
7
Healthcare Hospitality IT Manu & Construction
Retail
Industry wise factors important to business
No of distribution channels Revenue Customer loyalty
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Industry wise segmentation on factors such as Number of distribution channels, Revenue and Customer Loyalty revealed that Customer Loyalty was the most important factor across all industries, viz. Healthcare, Hospitality, IT, Manufacturing & Construction and Retail. Number of distribution channels is the second most important factor for all industries but IT but for IT revenue is the second most important factor.
Q: Which is the most important factor for an online distribution channel?
Option responses were as follows:
1. Increase in number of customers 2. Reducing Accounts Receivables 3. Sales Conversion Percentage 4. Increase Profit 5. Stock Turn-‐over
Fig.9: Importance of factors for Online Distribution
From the responses received, we inferred that Increasing in number of customers and reducing the accounts receivables were the most prominent factors for suppliers opting for Online Portal.
Q: What are the functionalities that affect your choice of Online Distribution?
Option responses were as follows:
1. Minimal Investment 2. Analytics 3. User Interface 4. Ease in reconciling invoices
0% 5% 10% 15% 20% 25% 30%
Stock turn-‐over
Increase profit
Sales conversion percentage
Reduce accounts receivables
Increase in number of customers
Importance of factors for Online Distribution
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Fig.10: Functionalities mean responses
From the responses for this question, it was inferred that Invoices restoration and Comfortable User Interface were significantly important functionalities in selecting as Online Distribution. Many suppliers also stated Analytics as an important factor, since it helps them to analyse customer preferences.
Fig: 11 Online Portal v/s Problems faced
0%
5%
10%
15%
20%
25%
30%
35%
40%
Minimal Investment
Analytics User Interface Ease in reconciling invoices
Functionalities affecting choice of Online Distribution
0 2 4 6 8 10 12 14
Duplication
Descriptor differences between customer
Difficulty in follow ups
Customer Losing Invoices
Debt Collection
Online Portal vs Problems faced
Yes No Online portal
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8.2 Comparison using Chi-‐square Test
Chi-‐square concept was used to test the frequency distribution significance for the Problems faced by suppliers against the suppliers having or not having an Online Portal. The two most important conclusions for this are:
• Suppliers not having an Online Portal rate Debt Collection as their strongest Concern followed by Losing Invoices, whereas
• Suppliers having an Online Portal face the problems of Duplication in Invoices.
Fig: 12 Online Portal Availability v/s Debtors days
Another significant chi-‐square result was obtained on Average Debtors days against the availability of Online Portal. The conclusions are:
• Suppliers having an Online Portal, on an average have debtors days as less than 14 days, whereas
• Suppliers having no online portal for selling, on an average have debtors days as 60 days (averaged between 31-‐60 & 61-‐90 days)
Hence an inference that follows from this is –
If a Supplier opts for an online Portal for selling tits products and services, it can reduce its Debtors days by a huge 75%.
0%
10%
20%
30%
40%
50%
60%
70%
<14 15-‐30 31-‐60 61-‐90 91-‐120
Online Portal Availability vs Debtors Days
No Online portal Online Portal in place
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8.3 Discrimiant Analysis to Predict signing up Finally, we used Discriminant analysis to predict the suppliers’ interest in signing up for an online distribution channel.
Dependent Variable: Signing up (Yes/No) for suppliers
Independent Variables –
Demographics such as
• Company Turnover • Average Debtor days • No of invoices raised Psychographic factors such as
• Target Market (B2B, B2C or Both) and • Availability of Online Portal (Yes/No)
Figure 13: Wilk’s Lambda and significance value for Discriminant Analysis
The Wilk’s Lambda or Viability test value of 0.331 proves that only 33.1% of variation in prediction is not accounted by the independent factors. Almost 67% of variability is explained by the factors. This proves that the model is decent and we can proceed with further tests.
The significance value of 0.002 indicates that there is at least one value, which is significant.
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Figure 14 Test of Equality of Means and importance of each factor
From the Test of equality, it can be easily observed that the psychographic factors – supplier broad target market and Availability of online portal are highly significant in explaining the variation in the prediction model.
Figure 15. Standardized Canonical Discriminant Function Coefficients
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The standardized function coefficient table signifies the loading of the independent factors. It accounts for the weight of each factor.
Figure 16. unstandardized coefficients table
Finally the unstandardized coefficient helps in building the model equation.
From all the above tables and data, the model equation can be formed as:
Y = -‐2.352 + 1.159*X1+ 0.885*X2
Where-‐
Y = Interest in signing up for an online portal
X1 = Supplier broad target market, and
X2 = Availability of Online Portal.
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Figure 17. Classification results
From the classification results, we can observe that we can accurately predict the model with 78.1 % confidence.
9. Recommendations Basis the data analysis and statistical outputs below are some recommendations that Think Procurement can use to develop customized marketing strategies, identify supplier groups and create a niche brand positioning.
9.1 Marketing Strategies:
• The data analysis revealed that suppliers do not consider online distribution channels to be effective when it comes to driving the top line billing for their firms.
• Implication: Think Procurement can use this information to develop their marketing communications strategy wherein the focus would be on acquiring more customers for the suppliers and in turn drive their top line billing.
• In terms of the problems faced by suppliers, debt collection was rated the highest by a majority of the suppliers and the discriminant analysis showed significance in the average debtor days predicting the adoption of an online distribution portal.
• Implication: Think Procurement should focus on statistics such as “75% reduction in debtor days” in their marketing material to address dire issues faced by the suppliers and present a solution.
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• The secondary research and Porter’s 5 forces identified Think’s fluid user interface to be a competitive edge.
• Implication: Think should leverage its user experience and interface as its USP in the market.
• Think’s 3 way matching process can be used as an order winner to help resolve some issues faced by suppliers such as customers losing invoices.
9.2 Identify Supplier groups:
The research identified 5 major industries of suppliers: Healthcare, Hospitality, IT, Manufacturing & Construction, Retail. Analysis of the research data revealed that the factors that suppliers consider important to the business vary from industry to industry and hence Think Procurement can customize their marketing strategies basis these supplier groups:
Healthcare, Hospitality & Retail: These industries consider customer loyalty as the most important factor to their business. Think Procurement should try and inculcate this insight in their marketing communication to these industries.
IT: The IT industry considers the number of distribution channels to be least important & customer loyalty to be the highest; this insight can help Think procurement to target their communication.
Manufacturing & Construction: This industry ranked the number of distribution channels & customer loyalty to be of most importance. Hence whilst talking to professionals from this industry Think can highlight how they can drive the above mentioned factors for their business.
9.3 Brand positioning:
Basis our research and the Porter’s 5 forces model we have identified a gap in the e-‐procurement industry. The current scenario of the e-‐procurement industry is as illustrated below:
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Figure 18 Current scenario of e-‐procurement industry
(http://contentmarketinginstitute.com/about/mediaroom/latest-‐press-‐releases/north-‐american-‐business-‐to-‐business-‐b2b-‐software-‐marketers-‐using-‐more-‐content-‐marketing-‐tactics-‐than-‐their-‐peers/)
In the current scenario there are 4 different entities that play 4 distinct roles. Think Procurement has the opportunity to assume a larger role in this industry. The time to do so would be now as this industry is in its nascent stage.
Research shows, 99% of software marketers are using content marketing as per a research conducted by the Content Marketing Institute. The research also outlined that these software marketers allocate 29% of their marketing budgets to content marketing.
Think Procurement should assume the role of an industry leader and adopt an aggressive content strategy.
The role of a service provider as well as a publisher can help Think to migrate from a seller to an evangelizer. The content strategy would comprise of the following facets:
• Distributing materials on industry best practices, issues faced by procurement managers & solutions to resolve these issues should be used as marketing material and distributed via social media channels such as Twitter, Facebook, LinkedIn.
• Create a community of buyers & suppliers interested in the e-‐procurement industry by means of an e-‐magazine and email digests.
• Conduct conferences on new trends & benefits of e-‐procurement. These conferences can help potential suppliers to interact prospective and/or existing buyers. By these means Think Procurement can also acts as a facilitator of quality supplier & buyer relations and in turn earns the trust of the industry.
• Majority of Think Procurement’s promotions should contain communication revolving around “What is e-‐procurement?” “What are the benefits of e-‐procurement” and then directing them to the Think procurement website which
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would host all the white papers, Case studies etc as opposed to selling the online distribution service directly to customers.
The above practices and change in strategy can help Think procurement appear on top of the e-‐procurement industry and create a larger role for them as illustrated below:
Figure 19 Change in e-‐procurement industry
(Content Strategy for Professionals: Engaging Audiences for Your Organization)
9.4 Content Strategy for Think Procurement
Providing insights, research data and sharing best practices can enable Think Procurement to provide their users with a “Utilitarian Experience” of content.
Such an experience propagates a loyal behaviour amongst the readers and generates higher levels of interaction due to the sheer importance of the data and information being presented to them.
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Figure 20 the Utilitarian Experience
(http://www.insidecxm.com/new-‐approaches-‐for-‐content-‐marketing-‐promotion-‐better-‐use-‐of-‐marketing-‐analytics-‐and-‐leveraging-‐sensors-‐for-‐improved-‐customer-‐experiences/)
The strategic approach to content creation and distribution for a brand should follow the below mentioned stages:
1. Development of a concept that would lay the outline and guide the content touch points for the brand.
2. These touch points define the length and extent of the content produced by the brand and in turn create experiences for the audiences.
3. The experience of the audience determines their level of interaction and expectations as well as the actions they take post experiencing the content.
4. The mission of the brand turned publisher must be to contribute to the audience not regarding their products or services but regarding the value they can provide to the audience.
Sustaining the “utilitarian experience” and monitoring the user’s attitude towards Think Procurement:
• The data and insights provided by Think Procurement should be direct & easy to read keeping in mind that the audience would primarily be CEO, CFOs and Managers of supplier companies and CPOs or Procurement managers of buyer companies.
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• Articles on issues faced by procurement teams with an expert representing Think Procurement providing solutions to them.
• Coverage of industry interface events that would enable the audience to stay on top of the industry trends and news.
The success of the content strategy can be determined when the readers think, “The way to stay on top of the e-‐procurement industry is to read ____ (Think Procurement’s published articles”
(Content Strategy for Professionals: Engaging Audiences for Your Organization)
Types of content pieces that are predominantly used by Technology companies (in order of importance):
1. White papers 2. Blog posts 3. Earned media 4. Webinars 5. Info graphics 6. News releases 7. Videos 8. Case Studies 9. Research Reports
(http://www.insidecxm.com/new-‐approaches-‐for-‐content-‐marketing-‐promotion-‐better-‐use-‐of-‐marketing-‐analytics-‐and-‐leveraging-‐sensors-‐for-‐improved-‐customer-‐experiences/) 9.5 Key Takeaways There are several insights and takeaways from the survey and the secondary research that we were able to gain which are as follows:
• 53% of respondents felt cost reduction was the most important factor. • 73% wanted to automate their invoicing process. • Only 36% are satisfied with their current provider. • Electronic transactions reduce the processing costs by 25% for the leaders. • Leaders with automated accounts payable procedures take only 7.3 days to process
an invoice • 70% of suppliers did not have an online portal. • 72% of suppliers that did not have an online portal were interested in signing up with
an e procurement vendor. • 60% of suppliers think having a payment gateway is an important consideration.
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• Irrelevant of whether the supplier owned the online portal or it was hosted by a third party, they rated Number of clicks and Profits as the two most important outcomes of the online portal.
• 37% think ease in invoicing is the most important functionality as far as making a choice of an online portal is concerned.
• Debt collection is the biggest problem as far as invoicing is concerned. • If a Supplier opts for an online Portal for selling tits products and services, it can reduce its
Debtors days by a huge 75%. • The psychographic factors – supplier broad target market and Availability of online portal
are highly significant in explaining the variation in the prediction model. •
10. Bibliography
Bibliography Porters five forces model. (n.d.). Retrieved April 8, 2015, from CrackMBA: http://crackmba.com/wp-‐content/uploads/2012/03/Porters-‐5-‐forces-‐Model.jpg
RS E-‐procurement. (n.d.). RS E-‐Procurement. Retrieved April 8, 2015, from RS Australia: http://documents.rs-‐components.com/EITC/XA/online-‐services/RS-‐E-‐Procurement-‐au.pdf
TenderSearch. (n.d.). e-‐procurement solutions. Retrieved April 8, 2015, from Tender Search: https://www.tendersearch.com.au/Services/eProcurementSolutions.aspx
Capterra. (n.d.). eRequester. Retrieved April 8, 2015, from Capterra: http://www.capterra.com/procurement-‐software/spotlight/5681/eRequester/Paperless%20Business%20Systems
CIO. (n.d.). E-‐procurement. Retrieved April 8, 2015, from CIO: http://www.cio.com.au/article/126743/why_government_isn_t_buying_e-‐procurement_/
Australian Government -‐ Department of Finance. (n.d.). E-‐procurement Guidance for Agencies. Retrieved April 8, 2015, from Australian Government -‐ Department of Finance: http://www.finance.gov.au/policy-‐guides-‐procurement/e-‐procurement-‐guidance-‐for-‐agencies/
NYu.edu. (n.d.). https://www.nyu.edu/classes/bkg/methods/005847ch1.pdf. Retrieved from https://www.nyu.edu/classes/bkg/methods/005847ch1.pdf
Aberdeen group. Cloud Invoice Management-‐SMB.
Aberdeen group. Excellence in order maangement.
Aberdeen group. Are you getting the most out of your VMS.
Aberdeen group. Achieve business agility through e-‐invoicing and other key AP automation initiatives .
Aberdeen group. Laeder's winning strategies for common issues in AP and AR electronic paymenst.
Deloitte Group . The deloitte global CPO survey.
Verian. Driving smarter spending .
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Christine. L. Warner. Duplicate payments and duplicate vendors.
Richard Waugh. Top 10 metrics to strengthen organiational practices.
http://contentmarketinginstitute.com/about/mediaroom/latest-‐press-‐releases/north-‐american-‐business-‐to-‐business-‐b2b-‐software-‐marketers-‐using-‐more-‐content-‐marketing-‐tactics-‐than-‐their-‐peers/. (n.d.). Retrieved from www.contentmarketinginstitute.com: http://contentmarketinginstitute.com/about/mediaroom/latest-‐press-‐releases/north-‐american-‐business-‐to-‐business-‐b2b-‐software-‐marketers-‐using-‐more-‐content-‐marketing-‐tactics-‐than-‐their-‐peers/
Content Strategy for Professionals: Engaging Audiences for Your Organization. Medill on Media Engagement Abe Peck and Edward .
http://www.insidecxm.com/new-‐approaches-‐for-‐content-‐marketing-‐promotion-‐better-‐use-‐of-‐marketing-‐analytics-‐and-‐leveraging-‐sensors-‐for-‐improved-‐customer-‐experiences/. (n.d.). Retrieved from www.insidexm.com: http://www.insidecxm.com/new-‐approaches-‐for-‐content-‐marketing-‐promotion-‐better-‐use-‐of-‐marketing-‐analytics-‐and-‐leveraging-‐sensors-‐for-‐improved-‐customer-‐experiences/
11. Appendix
11.1 Survey Questions for think suppliers:
1. Supplier name: 2. Supplier broad target market (B2B, B2C, both)? 3. Do you have an online portal to sell your products/services (Yes, No)?
4. Does this online portal have a payment gateway? ( Yes, No, In process )
5. Is this portal
• Your own website • Third-‐party, please specify which_____ • Both
6. Would you consider your online portal to be a business differentiator? • Yes • No • Can’t say
7. Please rate the effectiveness of your current portal for the following on a scale of 1 to
7:
1. Revenue: 1-‐7 2. Profits: 1-‐7 3. No of clicks 1-‐7
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8. Which of the below functionalities affect your choice of an online distribution portal? Please check all that apply:
• Analytics • User Interface • Ease in reconciling invoices • Minimal Investment 9. Which from the below factors would you like to improve in your current online
strategy: -‐ Reconciliation of accounts -‐ Invoicing generation cost/time -‐ Time to get invoice to the customer -‐ Accounts receivables -‐ Customer reach -‐ Ease of Use -‐ Ability to easily analyse data and represent it graphically -‐ Ability to deploy a system at a low cost and with minimal business disruption -‐ Other (please specify) 10. How many invoices are raised per month? 11. How many people do you employ for invoicing? 12. What are some problems your business faces with invoicing? -‐ Duplication -‐ Debt collection -‐ Customer losing invoices -‐ Difficulty in follow ups -‐ Descriptor differences between customer purchase order and our invoice -‐ Other (please specify) 13. What are your average debtor’s days? (No of days it takes to close accounts receivable) -‐ <= 14 days -‐ 15 -‐ 30 days -‐ 31 -‐ 60 days -‐ 61 -‐ 90 days -‐ 91 -‐ 120 days -‐ 120 -‐ 180 days 14. Rate the below factors on a scale of 1-‐7, as per importance to your business: 1 2 3 4 5 6 7 -‐ No of distribution channels -‐ Revenue -‐ Customer loyalty
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15. Please enter your Industry type: -‐ Healthcare -‐ IT -‐ Travel -‐ Hospitality -‐ FMCG -‐ Retail -‐ Other (please specify) 16. Please enter your location of business 17. Designation held by the respondent: -‐ CEO -‐ CTO -‐ CPO -‐ Other (please specify) 18. Company annual turnover (in USD millions): -‐ 1 -‐ 5 -‐ 5 – 10 -‐ 10 – 20 -‐ 20 – 50 -‐ 50 million and higher
