Business Networks: Changing the Buyer-Seller Dynamic

Chances are you’re already on Facebook, LinkedIn and other social networking sites that connect you to the relationships, Web services and activities you need to run your daily life. And you’ve experienced first-hand their power to connect you to the right people and opportunities faster. But how networked is your business?

The answer can be a major determinant to your success. In fact, findings from a survey conducted by McKinsey and Company found that two-thirds of the more than 3,200 companies surveyed are using social media and business networks to improve their business. Those doing so most aggressively are seeing significant competitive, cost and profit advantages: “Networked enterprises were 50 percent more likely than their peers to have increased sales, higher profit margins, gain market share and be a market leader.”

Social networks have made it easier than ever to drive conversations, gather intelligence and manage relationships. Just as consumers tap into Facebook and Amazon to connect with friends and family, share and shop, companies are leveraging digital networks to more efficiently discover, connect, collaborate and engage with their trading partners – across the street and around the globe.

Business networks provide an equally easy way to link and coordinate a virtual ‘extraprise’ of partners into a shared community executing improved and coordinated processes in a more informed way than in the past.

Case Study: SHI & AGCO Conquer The Buyer’s Dilemma & The Seller’s Struggle
Take SHI International Corp., a multibillion-dollar global provider of technology products and services and the largest Minority and Women-Owned Business Enterprise (MWBE) in the United States, and AGCO, a leading global manufacturer of agricultural equipment. The two companies recently went virtual with their relationship, implementing online ordering and e-invoicing through a business commerce network.

With five locations across North America, multiple ERP systems running at each of them and no standard process in place for purchasing, AGCO often had difficulty understanding what it was buying and from whom. As a result, it was missing opportunities for significant savings. In addition, the company was still receiving invoices and sending payments manually, driving up costs and error rates.

In an effort to streamline the purchasing process for its customers and enhance relationships and retention, SHI began connecting to them electronically. But this required setting up and maintaining multiple point-to-point relationships via EDI, fax, phone, email, print, mail and stand-alone web catalogs, which was both costly and time-consuming.

To overcome these challenges, both AGCO and SHI connected to the Ariba Network, an open business network used by more than 1 million companies.

AGCO started using the network along with Ariba’s cloud-based applications for sourcing, contract management, spend analysis, supplier and invoice management to transform procurement from a largely manual process into an automated, efficient one. And SHI connected to create a single, centralized interface through which it could connect with customers worldwide.

Then the two companies came together. Through the network, SHI set up a system for online ordering and e-invoicing specifically tailored to meet AGCO’s needs, complete with:
• Customized catalogs and a continually updated list of top-selling products to simplify the purchasing process for AGCO buyers

• Dedicated representatives to assist in ordering non-catalog items in compliance with corporate policies

• Automated matching of POs and invoices to streamline accounts payable process

• Direct access to SHI support team to drive adoption and ensure success

Using the system, AGCO and SHI can seamlessly transact business. AGCO has greater visibility into and control over its spend, which has fueled more favorable contracts and pricing terms. And the automation of invoicing has led to reductions in processing time and faster payments.

For SHI, no-or low-touch orders save time and resources, enabling the company to focus on strategic initiatives that drive business value and revenue with AGCO and other customers. In fact, within 10 months of launching the system for AGCO, SHI added 12 manufacturers to its catalog and realized 100 percent revenue growth.

An Innovative Solution
Cloud-based business networks and applications are ushering in a new, more connected model for business. SHI and AGCO have embraced this model and are unleashing the power of business networks to drive future growth, profitability and differentiation across their businesses. And more companies are joining them every day. Yes, business has gone social. And there’s no turning back.

Tim Minahan

Tim Minahan is senior vice president, Network Strategy, Ariba, an SAP Company

This entry was posted in Emerging Trends, Information Technology, Procurement, TimMinahan. Bookmark the permalink.

Comments are closed.