A Little Bit About Supplier Networks

Supplier networks have existed for many years and over the initial years slowly gained in popularity. Today, however, these networks are a quickly growing trend and an increasingly cost effective and efficient means to process business transactions and in some cases more (e.g., supply chain finance, supplier discovery). Research from Ardent Partners recent survey showed that the current usage levels of supplier networks are at approximately 19%, but a significant spike in interest is expected over the coming year with 40% planning to utilize supplier networks.

While the network trend is growing fast, there are many different features and capabilities that the different networks offer. Many of the networks in operation today are specialized and tend to focus on specific regions/countries or industries (e.g., oil and gas or automotive) whereas others have broader coverage and offer a wider solution footprint. Overall, I think there are four major differentiators between the different networks:

• The number of existing and active suppliers in the network
• The geographic reach of the network
• The vertical focus of the network
• The solution capabilities made available to buyers and sellers.

In our research we looked into the most important aspects when it comes to selecting a supplier network. As you can see below, when it comes to networks, size matters and this is understandable since the bigger the network, the higher the “match rate” (% of an enterprises suppliers that are currently active on a given supplier network) is likely to be. The effort and time to onboard suppliers is significantly reduced with higher match rates; and, having suppliers already transacting on the network is viewed as a strong plus.

According to Ardent’s research the most important aspects of selecting a supplier network include:

1. Number of existing suppliers on the network
2. Global reach of network
3. Transaction costs (buyer)
4. Capabilities for buyer/supplier collaboration

Number four on the list is an interesting one; easier and improved methods of collaboration can have a direct impact to supplier relationships and performance. For example, collaboration between buyers and suppliers today is largely conducted via traditional methods, phone calls, emails or meetings; networks, however, can enable a higher level of connectivity between trading partners and can increase the time available for strategic interaction and communication by decreasing the time spent on tactical matters. Also, the increase in quality of the communication can be improved similar to how social networks have dramatically impacted personal communication and interaction.

Some networks that come to mind are: Ariba, Basware, SciQuest and Hubwoo

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