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Assignment V
Question 1
Businesses are always looking for competitive advantage in the market, which helps them to
maximize their profitability. Business spend management companies, such as Coupa and SAP
Ariba, use technology to connect operations such as procurement, invoicing, and payment under
one platform. In such a way, business spend management helps firms to reduce costs of goods
and services, increase procurement leverage, create process efficiencies, enjoy strategic benefits,
and mitigate risks.
To begin with, business spend management companies help other enterprises to reduce
their overall spending. The centralization of all spending in one platform provides these firms
with unprecedented insights into the nature of expenditure within their departments. Companies
can make savings from avoiding unnecessary purchases, purchasing goods at lower prices,
benefitting from early payment discounts, and eliminating duplicate and improper invoices from
purchases made (Patterson). Therefore, by streamlining all facets of a company’s operations
through business spend management companies a firm can gain control over their spending and
realize savings in many areas.
Moreover, business spend management companies are crucial in increasing procurement
leverage for their clients. The automation of services such as sourcing, supplier management, and
catalog management creates free time for procurement employees to perform other important
activities. Additionally, through the system, procurement officers gain access to comprehensive
data that enhances their decision-making. These two advantages, when operating together, boost
their capacity for finding saving opportunities, discounts, and lower prices and eliminate
unwanted contract renewals (Patterson). Therefore, business spend management companies help
firms to maximize the productivity of their procurement staff.
Additionally, business spend management companies create process efficiencies in the
businesses of their clients. While it is often challenging to link hard costs to process
inefficiencies, eliminating them can contribute to vital cost savings. The automation of services
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creates savings by eliminating processes such as handling costs, invoice preparation, and audit
costs (Patterson). The improved efficiency in handling these processes can allow a company to
reallocate resources to other revenue creation exercises. In light of this, business spend
management firms create process efficiencies that maximize the profitability of companies.
Another benefit of business spend management companies to their clients is the
mitigation of risk. The firms provide an increased visibility into supplier data, which is critical in
decreasing liabilities that occur due to supplier non-compliance and reducing issues created by
supplier non-performance (Patterson). Therefore, the increased visibility that is enjoyed due to
the centralization of all data in one platform is vital in mitigating risk.
Lastly, firms that higher business spend management companies enjoy strategic benefits.
Such a step leads to benefits like enhanced transparency into the procurement process and offers
an unprecedented insight into a firm’s expenditures and contract commitments. While these
advantages may be more difficult to quantify than others, for example direct savings, they
improve the decision-making of a company’s management, leading to better financial control,
enhanced organizational agility, and improved employee productivity (Patterson). The benefits
can be multiplied in a large organization where a company can leverage its buying power when
procurement is handled centrally, resulting in the maximization of profitability. Therefore,
business spend management companies are crucial in realizing strategic benefits.
Question 2
During a reverse auction, suppliers compete against one another by decreasing the prices of their
goods and services. The process reduces the purchasing cost, enhances the procurement process,
and provides access to a global supplier base. A successful reverse auction is dependent on
factors such as a transparent bidding environment and auction run time.
One of the primary reasons for the success of a reverse auction is the transparency of a
bidding environment. Suppliers require a level-playing field where they can bid in real-time. The
transparency of the bidding process provides them with confidence, which leads to a competitive
process. A company running a reverse auction should provide complete procurement details to
all the parties that were bidding after the finalization of a tender. Where separate systems are
used, bidders should have at hand price comparison statements of all the accepted bids through
an e-portal (Sonavale and Londhe 4). In such a way, a company can offer the best price for
products or services sought.
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Another key factor is the auction run time. This concept defines the mandatory time that
an event will stay open for bidding even when there are no offers. In some instances, a bidder
may be struggling with internet connectivity issues. By providing extensions to the bidding time,
a reverse auction will give sufficient time for suppliers to participate in the event, which
improves the competition on the platform (Sonavale and Londhe 3). A reverse auction should
also provide for an auto-extension period when some bidders submit their offers in the last few
minutes. This time is crucial in reacting to snipers and revising a bid strategy based on the price
set by other competitors. However, the auto-extension forces serious bidders to return at the end
of the process and during subsequent extensions. Therefore, the success of a reverse auction is
dependent on the auction bid time.
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Works Cited
Patterson, Neil. “5 Major Ways Business Spend Management Delivers Value.” Coupa, 2 Oct.
2018, www.coupa.com/blog/technology-innovation/5-major-ways-business-spendmanagement-delivers-value.
Sonavale, Sandeep S., and B. R. Londhe. "Factors Influencing the Success of Electronic Reverse
Auctions in Public Procurement in India." International Journal in Management and
Social Science, vol. 7, no. 5, 2019, pp. 1-9.