Often we hear our customers talking about ways of reducing the numbers of vendors they work with in strategic areas. 

Most organizations implement vendor marketplaces to aggregate spend. Without question, implementing vendor marketplaces has significant benefits:

  • Achieve better pricing through larger aggregated spend
  • Dramatically increase your opportunities for continuous improvement and innovation from vendors who will learn your business and invest in your account
  • Create better competition between your suppliers. They will serve you better and work harder for you if you provide them with a larger total spend

Typcially, the barriers to implementing vendor marketplaces are internal:

  • Your business units always seem to find their own niche providers who they feel are the only vendors qualified to understand their complex challenges
  • It takes time and effort to anlayze the market, select a small number of vendors in significant spend areas, and stay committed to working with the pre-qualified suppliers.
  • There is so much inertia in current procurement spend - for example, some organizations use a large number of contractors to deliver services and it is difficult to release the contractors -they are almost employees now.

So, given the challenges, how should you proceed to implement one or more vendor marketplaces? We suggest this approach:

  1. Identify your most significant procurement categories. These will typically be areas which represent a significant amount of your manufacturing supply, project services, or operating expense. A typical example would be IT development services to support projects. You may decide the marketplace would include your primary project services - SAP implementation, salesforce development, and miscellaneous application development.
  2. Select a list of proponents to include in your process. You may cast a wide net to start, but you should only include vendors with which are prepared to do business.
  3. Conduct a market test or RFI. Send out an RFI to your long list of vendors. Ensure you have a good list of critieria which will filter out players. In the earlier example of IT development services, you would clearly be asking the vendors to provide rate cards in addition to describing their bench strength in the various technologies, offshore capabilities, etc.
  4. Select your initial list of vendors, with a view to running a pilot. Selecting a number of sourcing events to run through a pilot. Assess how well the process is working and refine.
  5. Once the pilot is finished, finalize your vendor marketplace vendors and processes.
  6. Be flexible. Every once is a while you might need to conduct a sourcing event where you use your vendor marketplace, plus one or more vendors suggested by the business.