The Purchasing Department: The Next Frontier for Social Media?

social media in the supply chain

Almost all of the attention on social media has come from the sales and marketing department, and deservedly so. That is certainly where the low-hanging fruit appears to be and there is an urgent need to respond to customer demands and communication preferences.

I have also written about enterprise applications of social media, where large companies are implementing internal versions of social networks to improve communications, creativity and collaboration across a far-flung base of employees. Studies show that this may return the biggest financial gains of social media to companies and I agree.

But there’s also a new area of buzz right now — application to the purchasing department and the complex supply chain. The topic is starting to pop up in conferences and there are no fewer than four new LinkedIn Groups dedicated to the topic. At first blush, this might seem a little far-fetched but let’s dig a little deeper into the opportunity.

There are three primary areas of relevance in this area for social technologies:

1) Supplier connection, collaboration, problem-solving

Every company has their own administrative systems and entrenched way of doing business through their own software systems. And systems across companies rarely talk to each other in reliable ways without some enormous IT efforts. That is not always practical.

What if we could apply a new layer of private social technologies that everyone can use to communicate and collaborate? Even your very smallest vendors could sign on and contribute searchable information or learn of new short-term supply needs and opportunities. It could significantly speed up knowledge transfer and problem-solving.

2) Supply chain monitoring

Let’s say two key strategic components for your company are sourced through companies in The Philippines and in Philadelphia.  Without warning, an earthquake hits Manila and traffic in Philadelphia is disrupted by a trucker’s strike. Real-time monitoring of events in those areas could give you the edge to respond and react in time to find alternatives and perhaps keep your company out of serious trouble. Adjusting and finding an emergency supply with an early warning system could provide a significant competitive advantage.

3) Demand sensing

There is nothing more challenging (or aggravating) than trying to predict demand. That’s why many companies are eager to look at social media signals for leading indicators of patterns and conversations that may translate into demand signals.  Look at this example of a brand I am working with and some conversation patterns revealed by the social research company Appinions:

social media and the supply chain

This example shows that both the volume of conversation and the sentiment of that conversation changed dramatically within just a few days (a scan of more than 5 million online data sources).  Is this in response to our advertising and promotions? Or is there something more organic going on here that would indicate a spike in sales? Could this even portend a new long-term sales trend? By clicking on these individual daily data points, we can dive down into the specific conversations to discover whether we need to react or let it ride.

At this point, applying social media to the purchasing process is still in the very early stages but certainly the potential is there for some exciting applications to some age-old supply chain problems.

What do you think?  Is there a potential application in your company? Already experimenting? Any opportunity I’ve missed?

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  • Mark: I want to discuss this issue with you. As an experienced purchaser and member of a Supply Chain Management association, I definitively see great opportunities with applying social media activities on the work-life of a purchaser. I recently wrote a post (in Swedish) on how this profession should get educated on the possibilities with new media.

  • Considering one of my clients is a supply chain manufacturer, I’m curious your perspectives on how the industry on a whole is using social technologies and how it’s not.

  • There is very considerable opportunity to use SM in a demand forecasting role, particularly for Consumer goods. Building sensitivity to various types, locations and expenditures on advertising in various media channels, and promotional activity options will fast become (in my view) a key role in generating a competitive position, and a ROI on marketing expenditure.
    The emerging role of the “Data scientist” will probably play out in this arena before many others.

  • I look forward to learning from you! Thanks for commenting.

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  • Agree. I’ve often said that marketing is now math. And Procurement is too.

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  • Mark,

    This post is dead on.

    The action in the space had something to do with SAP buying Ariba last year.

    We happen to work with a client in what’s called the Spend Management category called Coupa.

    One quick example that I think you’ll find interesting.

    Like an automated road sign that flashes your car speed at you, a similar technique can be used to encourage employees to spend money judiciously. If social functionality shares with employees the average price for say a hotel room in NYC, they’re more inclined to book their hotel room at the average price or below.

  • Interesting suggestion Mark.

    The culture of a company determines the level of ‘social’ in the business. Making purchasing social will ask a lot of a business.

    I think there is a big difference in receiving (necessary) information through social media and using social media as a purchaser.

    We already ask business to be open and silo free.., how far can (or should) ‘we’ take that?

  • It’s an interesting idea. B2B buy-side social collaboration is challenging due to the friction between corporate buyers and suppliers. Large buyer users probably wouldn’t want to be inundated by over-eager supplier advances. Since an employee representing a company is far more likely to be conservative, it might be difficult to get high participation as well – but I am sure someone will figure out a smart approach!

    I saw this interesting startup TradeSparq that lets purchasers use their social networks to filter the qualified suppliers. It acts as a social commerce/ peer-referral system, much better than evaluating detailed RFP responses. Since all B2B transactions are about trust (more than B2C), using your social network is a good proxy to find the trusted vendors – thought that was pretty smart.

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  • Fascinating Lou! Thanks for sharing this example!

  • Agree completely. Most companies are fortuante to get a marketing effort off the ground. But here is what I know — if there is way to use a technology to make money or save money, people who compete in business will figure out how to make it work!

  • Many thanks for taking the time to share your experiences here today Alex.

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