Combining consumer and business purchasing to digitalize the component supply chain

Combining consumer and business purchasing to digitalize the component supply chain

Feature articles |
By Nick Flaherty

It is now impossible to imagine a world without e-commerce. The convenience of being able to browse an enormous global range of products, get personalized suggestions, read detailed product information, order in a few clicks and have the goods arrive at your door within days (or even hours), explains why e-commerce will soon account for 17.5 percent of global retail sales.

This business-to-consumer (B2C) purchasing is clearly very different from business-to-business (B2B) buying, but here too, e-commerce is booming. Global B2B e-commerce sales were forecast to be over $6.6tnby 2020 – more than double the figure for B2C. And within the B2B space, e-commerce websites and marketplaces increased sales by 18.2% in 2019, to $1.3 trillion.

A shift in approach

Despite this growth of online B2B purchasing, many electronics component purchasing professionals defer to traditional sales-team centred procurement. Buyers build up relationships with sales representatives and speak to them directly when they need to establish prices, component availability and lead time as well as getting the inside track on new solutions. This can run across numerous franchises or hybrid distributors meaning buyers can end up replicating the process any number of times before completing their BOM.

While this approach has served purchasing managers well for decades – especially in terms of buyer trust and access to expertise, its drawbacks in today’s market are becoming increasingly evident.

Nowadays, the ability to respond fast to opportunities and threats, by bringing new or updated products to market, is more important than ever. This demands a level of agility that traditional procurement doesn’t necessarily support in isolation. In an industry that must navigate a supply chain that crosses borders, time zones and potentially volatile markets – the benefits of a digitalized model can no longer be dismissed.

A digitalized supply chain

A  truly digitalized supply chain should build on the strengths of conventional electronics component sourcing in terms of trust and reliability but adds many of the advantages and conveniences that buyers will be familiar with from B2C e-commerce.

At the heart of the digital supply chain is effective e-commerce, giving buyers the opportunity to purchase components from a very large number of vendors. For each one, buyers must be able to view all the information they need, including full technical data, up-to-date pricing, availability and lead-time information. These details enable buyers to make informed decisions on what to purchase, and when, without needing to spend time browsing multiple suppliers’ websites, or contacting different sales representatives.

Having a wide portfolio of products available also means an e-commerce marketplace can offer buyers alternatives to the components they’re looking at. Perhaps there’s a cheaper option, a more capable product or one with a shorter lead time. And if a product isn’t available, a good marketplace will point buyers towards alternatives, rather than simply searching for the same MPN from other sources.

A question of trust

To be of real value to purchasers, the e-commerce marketplace experience needs to provide more than simply a list of products.

There are crucial differences when it comes to buying B2B as opposed to B2C. First and foremost is the critical need for quality-assurance: it is essential buyers can trust that what they’re buying is genuine and of the necessary specs to support its application and meet regulation and safety requirements.

To support this, a good B2B e-commerce marketplace will vet all the suppliers it lists, and rank them in terms of traceability. In addition, like aggregate sites, buyers will have access to components from franchised distributors for many of the big brands as well as more unfamiliar brands or markets that may offer better prices or lead times. Unlike aggregate sites, any trusted marketplace should undertake its own stringent quality checks and guarantees on every product – providing genuine and reliable choice.

BOM management and delivery scheduling

When searching for components online, the norm has been to compare pricing and availability before jumping from vendor to vendor to complete purchasing. This has been a stumbling block in the digitalization of the supply chain by arguably creating more work for purchasing managers then it saves.

In order to streamline procurement, buyers should be able to build, manage and procure their complete bills of materials (BOMs) in one place. This includes completing the purchase of all components in a single transaction – something that has been a given in the B2C world for years thanks to the likes of Amazon.

There is even a good precedent to be found in B2C terms of shipment scheduling. The Amazon ‘subscribe and save’ feature lets users re-order, cancel and pace out regular purchases. While electronics component sourcing presents additional complexity in the back end, and will inevitably involve much larger orders, why shouldn’t buyers be able to schedule an order into multiple shipments, with deliveries timed to align with logistical, production and cash flow needs?

This naturally leads to the question of tracking. The fulfilment phase is absolutely vital to keep all teams in the production process in the loop and allow for a quick response to any issues or delays. Digital tools that facilitate real-time tracking mean that buyers can see the status of their order at-a-glance (and often, remotely), without needing to reach out to individual sales representatives or vendors.

API/ERP integration

Lastly, but perhaps most importantly, one of the biggest game-changers of the digitalized supply chain comes with API integration with in-house ERP systems. A consumer obviously has no need to track their purchases alongside anything more complicated than a monthly budget spreadsheet. This is clearly not the case in B2B transactions, and certainly not those taking place with electronics.

Ensuring that purchasers can plug purchasing tools into their own internal processes ensures that information is exactly where they need it, allows them to share detail with the wider team and digitally align purchasing with internal production timelines – resulting in a significant productivity boost.

With all of the value e-commerce and digital purchasing tools bring, it is important to note that the heart of the B2B procurement process is still beating strong. By automating many of the more mundane, procedural steps, a digital supply chain delivers significant benefits. However, it is still powered by human expertise – be it from sales teams or component quality inspectors.

Freed up contacting every single supplier to arrange sales and shipments, sales representatives can provide greater value, helping their larger customers manage their complex global supply chains, while now also having time to advise and support smaller organizations. Procurement specialists themselves can carve out more time to seek out new solutions in this fast-paced industry, helping to accelerate innovation within their companies.

Human insight also plays a crucial role in maintaining up-to-date information around traceability, geopolitical matters, material availability or other issues to feed into digital platforms. Having this reliable, up-to-date view into the current the global supply chain is critical.

The best of both worlds

Our vision is a truly digitalized supply chain that combines the convenience B2C e-commerce with B2B levels of trust. The suite of services we have built, including the Sourcengine e-commerce marketplace which features a ‘one-click’ purchasing BOM tool – are all geared towards putting the effective and reliable digital tools into the hands of procurement professionals.

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