Why B2B Procurement Teams are Leaving up to 30% of Top Line on Table

Herbert Brecheis is the CIO of Chain IQ, a leading B2B marketplace operator, and Tradeshift partner. He took time to speak with us during a webinar we hosted, exploring both the challenges and opportunities procurement leaders face in a rapidly changing business landscape. Watch highlights from our interview with Herbert below, and read on for more insights from our conversation. 

The full version of our webinar, “B2B Marketplaces; Opportunity and Threat,” featuring further insight from Jayson Humphrey, General Manager, B2B Marketplaces at Tradeshift, is available to view now.

What do you see as some of the major drivers for digital transformation across procurement?

We’re moving fast from an analog world into a digital one. That brings with it a number of new considerations, such as the potential for new levels of transparency in terms of pricing. Put together with other significant trends, such as globalization, we’re seeing immense pressure on margins.

Margin erosion is one of the key catalysts for transformation so that businesses can continue to meet their profitability targets. But that’s not all. Issues such as climate change and geopolitical uncertainty are triggering a wider shift in our priorities and values. That’s driving a reappraisal of how and where we do business and with whom. These are all issues beyond cost-savings that demand fresh thinking and a different approach. This is where B2B marketplace operators like Chain IQ come in.

Are there specific categories of procurement that are ripe for innovation?

Procurement is high on the agenda for businesses in every sector. But indirect procurement remains a relatively neglected space. When we’re speaking to prospects, we typically see that they’re leaving anywhere between 5% and 30% of their top line on the table just by not paying enough attention to indirect.

The journey to world-class procurement often starts with cost savings, but it quickly goes beyond that. For example, customers look to us to help them meet regulatory requirements and uncover market insights. We help clients meet their ESG targets. Indirect procurement has become a strategic issue for our clients.

For the vast majority of prospects we speak to, it’s clear that indirect procurement is not their core business, and there’s a really solid case for outsourcing to a company like ours. For us, it’s core business. We see more and more that procurement teams will look to outsource indirect procurement to a company like ours.

How can procurement teams elevate their role in terms of value creation across the wider business?

It starts with the C-Level in the organization. Procurement teams need to have an acute understanding of the objectives that are formulated at the C-Level and how they can support that. Going back to the 5-30% of savings that’s left on the table, that’s a good example of a shared objective.

In other situations, shared objectives might tie back to compliance or adherence to strong ESG criteria. Aligning these objectives from the outset and then delivering against them gives procurement teams a much greater opportunity to secure their seat at the table.

What makes the marketplaces model such a compelling proposition for procurement professionals? 

I like to frame the opportunity by calling out my ‘three Cs’

• Competitiveness: We do indirect procurement at scale, so we’re creating a lot of extra purchasing power by volume bundling. That’s not something that businesses can do themselves.

• Compliance: A lot of what gets left on the table comes down to a lack of control. People just go off and purchase what they need outside of any approved route. This loss of control has real consequences.

• Convenience: When employees put in a purchasing request, they don’t want to go through a complicated and bureaucratic process. What they really want is the kind of experience they get at home when they’re purchasing online.

The really cool thing about marketplaces in B2B is that the user experience is every bit as good as in the consumer world. In fact, the B2B user experience is even more convenient because you don’t have to pull your credit card. Your buying credentials are already in the background, so every purchase goes against relevant cost centers automatically.

Chain IQ has found huge success as a marketplace operator. What’s your secret? 

Technology is a key ingredient, and that’s taken care of by Tradeshift.

What you also need for a successful B2B marketplace is access to a community of buyers and sellers. If you start with a green field, it will be very hard. You could easily end up in a kind of chicken and egg situation where buyers won’t join until there are sufficient sellers and vice versa.

We’re able to offer our clients a range of options, including consortia marketplaces, public and private marketplaces. On consortia marketplaces, the number of sellers is more restricted, but the cost savings are greater. Private marketplaces offer the benefits of a one-to-one relationship. And on public marketplaces, choice is the main selling point. It’s all about offering solutions aligned to a range of different needs.

What makes partnering with Chain IQ so attractive to procurement leaders?

Number one is savings, and that’s something we guarantee to all of our clients. Then there’s our digital capabilities. We have a full-fledged solution from source-to-pay, built on a best-of-breed concept. We have a number of digital partners, including Tradeshift, which is very important to us.

As an independent company, we retain a very clear focus on indirect procurement. We’re not buying services from other vendors, so there’s never a conflict of interest in terms of what we deliver. We’re also globally diverse, so we can be where our clients need us to be. We create strategies, pipelines, and demand together with our partners in the geographies where they operate.

Finally, we’re leaders in terms of our governance practice. We work closely with our clients to understand their risk appetite, and we help them to curate a supplier panel that’s bespoke to any controls they wish to put in place.

What advice would you give to companies or individuals considering becoming a marketplace operator? 

Successful B2B marketplaces are about scale, and by that, I mean access to buyers and sellers to serve your customers’ needs. If you don’t have that scale, then it may be better to join one of the existing B2B marketplaces in order to achieve your objectives.