We’ll specifically examine how “spot buy” approaches enable companies to make time-sensitive and often mission-critical purchases, even in complex and dynamic settings, like Latin America.
Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.
To learn more about the rising tide of such tactical business buying improvements, please join our guests, Karen Bruck, Corporate Sales Director at MercadoLibre.com in Buenos Aires, Argentina; Diego Cabrera Canay, Director of Financial Planning at MercadoLibre, and Tony Alvarez, General Manager of SAP Ariba's Spot Buy Business. The panel was recorded at the recent 2017 SAP Ariba LIVE conference in Las Vegas, and is moderated by Dana Gardner, principal analyst at Interarbor Solutions.
Here are some excerpts:
Gardner: SAP Ariba Spot Buy has been in the
market a few years. Tell us about where it has rolled out so far, why certain
markets are being approached, and then about Latin America specifically.
 |
| Alvarez |
Alvarez: The concept is a few years old, but we've been delivering
SAP Ariba Spot Buy for about a year. We began in the US, and over the past 12
months the concept of Spot Buy has progressed because of our customer base. Our
customer base has pushed us in a direction that is, quite frankly, even beyond Spot
Buy -- and it’s getting into trusted, vetted content.
We are approaching the
market with a two-pronged strategy of, yes, we have the breadth of content so
that when somebody goes into an SAP Ariba application they can find what they are
looking for, but we also now have parameters and controls that allow them to vet
that content and to put a filter on it.
Over the last 12 months,
we've come a long way. We are live in the US, and with early access in the UK
and Germany. We just went live in Australia, and now we are very much looking
forward to going live and moving fast into Latin America with MercadoLibre.
Gardner: Spot buying, or tactical buying, is different from
strategic or more organized long-term buying. Tell us about this subset of
procurement.
Alvarez: SAP
Ariba is a 20 year-old company, and its roots are in that rigorous, sourced
approach. We do hundreds of billions of dollars through contract catalog on the
Ariba Network, but
there's a segment -- and we believe it's upward of 15% of spend -- that is spot
buy spend. The procurement professional often has no idea what's being bought.
And I think there are two approaches to that -- either ignorance is bliss and they
are glad that it’s out of their purview, or it also keeps them up at night.
SAP Ariba Spot Buy allows them
to have visibility into that spend. By partnering with providers like MercadoLibre,
they have content from trusted and vetted sellers to bring to the table – so it's
a really nice match for procurement.
Liberating limits
Gardner: The trick is to allow for flexibility and being
dynamic, but also putting in enough rules and policies so that things don’t go off-track.
Alvarez:
Exactly. For example, it’s like putting a filter on your kids’ smartphone. You
want them to be able to be liberated so they can go and do as they please with
phone calls -- but not to go off the guardrails.
Gardner: Karen, tell us about MercadoLibre and why Latin America
might be a really interesting market for this type of Spot Buy service.
Bruck: MercadoLibre
is a leading e-commerce platform in Latin America, where we provide the largest
marketplaces in 16 different countries. Our main markets are Brazil, Mexico, and Argentina, and that’s where
we are going the start this partnership with SAP Ariba.
 |
| Bruck |
It’s
complicated because there are different rates of inflation in different
countries, and so contracts can be hard to complete. What we bring to the table
is an assortment of great payment and shipping solutions that make it easy for
companies to purchase items. As Tony was saying, these are not under long-term
contracts, but we still get to make use of this vast supply.
Gardner: Tony mentioned that maybe
15% of spend is in this category. Diego, do you think that that number might be
higher in some of the markets that you serve?
Cabrera Canay: That’s probably the number
-- but that is a big number in terms of the spend within companies. So we have
to get there and see what happens.
Progressive partnership
Gardner: Tony, tell us about the partnership. What is
MercadoLibre.com bringing to the table? What is Ariba bringing to the table?
How does this fit together for a whole that is greater than the sum of its parts?
Alvarez: It really is a
well-matched partnership. SAP Ariba is the leading cloud procurement platform,
period. When you look in Latin America, our penetration with SAP Enterprise
Resource Planning (ERP) is even greater. We have a very strong installed
base with SAP ERP.
Our
plan is to take the SAP Ariba Spot Buy content and make it available to the SAP
installed base. So this goes way beyond just SAP Ariba. And when you think
about what Karen mentioned -- difficulties in Latin America with high inflation
-- the catalog approach is not used as much in Latin America because everything
is so dynamic.
For
example, you might sign a contract but in just in a couple of weeks that
contract may be obsolete, or unfavorable because of a change in pricing. But
once we build controls and parameters in SAP Ariba Spot Buy, you can layer that
on top of MercadoLibre content, which is super-broad. If you're looking for it
you’re going to find it, and that content is constantly updated. You gain real-time
access to the latest information, and then the procurement person gets the
benefit of control.
So
I'm very optimistic. As Diego mentioned, I think 15% is really on the low-end
in Latin America for this type of spend. I think this will be a really nice way
to put digital catalog buying in the hands of large enterprise buyers.
Gardner: Speaking of large enterprise
buyers, if I'm a purchasing official in one of your new markets, what should I
be thinking about how this is going to benefit me?
Transparent, trusted transactions
It
saves a lot of time, it makes the comparison very transparent, and you
are able to control the different options. Overall, it's a win-win ... a
partnership, a match made in heaven.
Bruck: Let me talk about this
from experience. As a country manager at MercadoLibre, I had to do a lot of the
procurement, together with our procurement officers. It was really frustrating
at times because all of these purchases had to be one-off engagements, with a different
vendor every time. That takes a lot of time. You also have to bring in price
comparisons, and that’s not always a simple process.
So
what this platform gives you is the ability to be very transparent about prices
and among different supplies. That makes it very easy to be able to buy every
time without having to call and get the vendor to be in your own buying
platform.
It
saves a lot of time, it makes the comparison very transparent, and you are able
to control the different options. Overall, it’s a win-win. So I do believe this
is a partnership, a match made in heaven.
We
were also very interested in business-to-business (B2B) industries. When Tony and SAP Ariba came to our offices to offer
this partnership, we thought this would be a great way to leverage their needs
with our supply and make it work.
Gardner: For sellers, this enables them to do repeated
business more easily, more automated and so at scale. For buyers, with
transparency they have more insight into getting the best prices, the best
terms of delivery. Let's expand on that win-win. Diego, tell us about the
business benefits for all parties.
Big and small, meet at the mall
Cabrera Canay: In the past few years, we have been working to make MercadoLibre the
biggest “mall” in e-commerce. We have the most important brands and the most
important retailers selling through MercadoLibre.
 |
| Cabrera Canay |
Obviously, from the side of
sellers, this all provides higher demand, it raises the bar in terms of having
qualified buyers, and then giving the best services. That’s very exciting for
us.
Gardner: Tony, we mentioned large enterprises, but this cuts
across a great deal more of the economy, such as small- to medium sized (SMB)
businesses. Tell us about how this works across diverse economies where there
are large players but lots of small ones, too?
Alvarez: On the sales side, this gives really small businesses
opportunity to reach large enterprise buyers that probably weren’t there
before.
Diego was being modest, but
MercadoLibre's payment structure, MercadoPago,
is incredibly robust, and it's incredibly valuable to that end-seller, and also
to the buyer.
Just having that platform
and then connecting -- you are basically taking two populations, the large and
small sellers, and the large and small buyers, and allowing them to commingle
more than they ever had in the past.
Gardner: Karen, as you mentioned from your own experience,
when you're dealing with paper, and you are dealing with one-offs, it's hard to
just keep track of the process, never mind to analyze it. But when we go
digital, when we have a platform, when we have business networks at work, then
we can start to analyze things for companies -- and more broadly into markets.
How do you see this
partnership accelerating the ability to leverage analytics, leverage some of
the back-end platform technologies with SAP HANA
and SAP Ariba, and making more strides toward productivity for your customers?
Data discoveries
Bruck:
Right. When everything is tracked, as this will be, because every single
purchase will be inside their SAP Ariba platform, it is all part of your “big
data.” So then you can actually drop it, control it, analyze it, and say, “Hey,
maybe these particular purchases mean that we should have long-term contracts,
or that our long-term contracts were not priced correctly,” and maybe that's an
opportunity to save money and lower costs.
So once you can track data,
you can do a lot of things, and discover new opportunities for either being
more efficient or reducing costs – and that's ultimately what we all want in
all the departments of our companies.
Gardner: And for those listeners and readers who are
interested in taking advantage of these services, and ultimately that great
ability to analyze, what should they be doing now to get ready? Are there some
things they could do culturally, organizationally, in order to become that more
digital business when these services are available to them?
Paper is terrible for companies; you have to rethink your purchase processing in a digital way.
Cabrera Canay: I can talk about in our own case, where we are rebuilding
our purchase processes. Paper is terrible for companies; you have to rethink
your purchase processing in a digital way. Once you do it, SAP Ariba is a great
solution, and with SAP Ariba Spot Buy we will have the best conditions for the
buyers.
Bruck: It’s
a natural process. People are going digital and embracing these new trends and
technologies. It will make them more efficient. If they get up to speed
quickly, it will become less about controlling stuff that they don't need to
control. They will really understand the benefits, so it will be a natural
adoption.
Gardner: Tony, coming back full circle, as you have rolled
SAP Ariba Spot Buy out from North America to Europe to Asia-Pacific, and now to
Latin America -- what have you learned in the way people use it?
Alvarez: First,
at a macro level, people have found this to be a useful tool to replace some of
the contracts that were less important, and so they can rely on marketplaces.
Second, we’ve really found
as we’ve deployed in the US that a lot of times multinational companies are
like, “Hey, that's great, I love this, but I really want to use this in Latin
America.” So they want to go and get visibility elsewhere.
Turn-key technique
Third, they want a tool that
doesn't require any training. If I’m a procurement professional, I want my
users to already be expert at using the tool. We've designed this in the process
context, and in concert with the content partners. You can just walk up and start
using it. You don’t have to be an expert, and it keeps you within the
guardrails without even thinking about it.
Gardner: And being a cloud-based, software-as-a-service (SaaS)
solution you're always analyzing how it's being used -- going after that
ultimate optimized user experience -- and then building those improvements back
in on a constant basis?
Alvarez:
Exactly. Always.
Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. Sponsor: SAP Ariba.
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