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Who’s Smarter: Buy-side or Sell-side?

January 31, 2012

Few can have failed to notice IBM’s ‘Smarter Planet’ advertisements. For an organization with ‘Think’ as its motto, this initiative is worthy of attention. I have found many of the ‘advertorials’ of real merit and … well, thought-provoking.

Within the overall Smarter Planet concept, IBM also discusses ‘Smarter Commerce’. A few days ago, the Financial Times ran a quarter page advertisement (which unfortunately I have lost on my travels) which discussed the relative maturity of corporate capabilities at supply management, compared with sales or market management.

The IBM view is that businesses have invested heavily in building integrated supply management (i.e. sourcing) capabilities and that the maturity of these processes has far out-distanced the competence of the sell-side operations. It calls for companies to work on integrating the areas of market management in order to implement ‘smarter commerce’.

I find this perspective interesting. It sounds a bit like consultant-speak to me and perhaps a rather superficial analysis. It is certainly true that many organizations have invested massive sums in standardizing their procurement and logistics process. Much of the investment in ERP focused on integration of these areas with manufacturing and operations. They have also attracted major investments in stand-alone software to oversee compliance, spend management and – more recently – category management.

But in the end, has this actually resulted in ‘smarter commerce’? It seems to me that many investments have actually led to dumber commerce. Rigid standards. Inability to adjust to shifting market conditions. Limited insight to risk. Continuing inability to link to critical financial performance measures. So we continue to see pressure for improved analytics, greater commercial skills, better understanding and management of supply risk …..

So does this mean that IBM has got the assessment completely wrong? I don’t disagree that the sell-side has a long way to go, but I think the challenge is simply different. While buy-side investments were being made in standards and tools, the sell-side was gaining greater investment in skills. The two are fundamentally different. Winning business for the sell-side means needing to be flexible and responsive to customer demands. Much of the software developed over the last 20 years has been designed to disable these characteristics. Sales and commercial efforts have often had to be directed to overcoming the complexity created by such systems.

So my view is that buy-side and sell-side are in quite different positions, but true ‘Smarter Commerce’ demands continuing developments by both – and in each case, it is to find systems and processes that enable more flexible and collaborative relationships, based on stable commercial principles and values.

What do you think?

One Comment
  1. Alan Roach permalink

    I would agree with your summary Tim. Many times our basic processes and requirements (policies) are too inflexible for the ever changing circumstances of the world-wide network of suppliers and customers. I had an instance the other day to get a call from an internal resource mad that a supplier was going to be late with an item and wanted to know what we could do. I reviewed the contract and we called them. It was a Japanese company that was impacted by the tsunami. The internal person didn’t understand where their goods came from or the supply chain, they just wanted them. The supplier was trying to not declare force majeure and was offering us options. There wasn’t a reasonable voice.
    From my side I believe customers that have strong category management groups tend to have a better pulse on the supply chains of their suppliers and can help foresee and manage many of these problems.

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