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Redefining Procurement Efficiency with Demand Aggregation

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Value for money continues to be the focus of procurement teams. B2B brands have deployed various strategies and procurement efficiency levers to contain costs. Demand aggregation acts as key efficiency lever leading to higher buying power for the buying organization resulting in higher discounts and cost savings.



I reminiscence, how I used to go to different stores to buy grocery, household items and other essentials just a few years ago. As years passed, all these items were available in a supermarket where I could not only buy everything under one roof but also choose from a wide variety of brands, volume, and price. As a shopper, you could pick, add, pay and check out of the store in no time. This not only cut down the travel time to different stores but offered shoppers - volume-based discounts, a plethora of choices and improved the frequency of buying. 
Are we still buying in the same manner at present? Although we still have supermarkets, it is now a combination of supermarkets and virtual marketplaces like Amazon and Flipkart. The virtual marketplaces are taking over, which not only give us better pricing, the convenience of buying from home and offers a superior experience.

The point I am trying to make is, as the selling model evolved, the buyer is naturally drawn to considering the benefits the new model offers. Which in most cases is being cost-effective, convenient, time efficient and relevant. When we look back and analyze how the model has evolved over time, technology has played a vital role by catering to our changing lifestyle and demographics. Virtual marketplaces have cut down the divide between rural and urban buyers bring in improved accessibility. Technology has also been instrumental in improving the overall shopping experience irrespective of the channel. 

Similarly, on the B2B side too, the buying models have evolved. Value for money continues to be the focus of procurement teams. B2B brands have deployed various strategies and procurement efficiency levers to contain costs. Demand aggregation acts as key efficiency lever leading to higher buying power for the buying organization resulting in higher discounts and cost savings.

Aggregation is an established way of driving larger economies of scale. This not only results in reduced costs / or higher value from suppliers but also reduces costs of operations as a result of reduced buying or sourcing events. Another benefit that accrues is of standardization which leads to inherent efficiencies. Demand Aggregation could be simply at an organization level or even beyond the organization boundaries.

Aggregation of demand from multiple businesses who buy the same products or services, probably from the same supplier but have not been able to achieve the benefits of the volume pricing or centralized delivery even though they all probably need it in the same time period. Despite the advantages- businesses still grapple to aggregated business demand outside of their organization. Perhaps what's stopping them is the absence of a compliant layer or channel which can aggregate and fulfill the demand as per the policies and procedures of their Procurement organization such as Amazon or Walmart of the retail world. 

Many emerging startups over the last few years like Uber, Airbnb and OYO have focused on the creation of mobile/ tech-enabled customer facing marketplaces. This helps in aggregating customer demands efficiently. In the B2B scenario, too many businesses have deployed strategies to aggregate the demand and consolidate the supply base. This has resulted in many significant suppliers restructuring themselves as aggregators like Grainger in MRO space or managed service providers to meet the demand of their clients for a bouquet of service / product portfolios.

The Procurement service providers so far have been concentrating on improving the efficiency and compliance of the process through technology, outsourcing or automation and it has enabled us to change the game altogether and concentrate where the future value is going to come from. Alternative buying models leveraging collaborative buying is an emerging opportunity where the new age Procurement service providers can play a significant role.

Issues like taxation laws, logistics, IP legislation across and sometimes within borders can add multiple layers of complexity and often act as a deterrent to demand aggregation. However, as aspiring demand aggregators and collaborative partners have to invest time, effort and money to define and resolve the differences and establish a universally adaptable yet local model to sustain in the long run.


Authored By 

Kiran Huthanahalli Manjunath 

Domain Lead

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