eCommerce: eProcurement and Punchout

Video: eProcurement & Punchout

eProcurement and Punchout

In this video, Justin King discusses Amazon’s eProcurement process.

Many large institutions, companies, and government organizations use procurement systems to manage their internal purchasing processes. Rather than have staff purchase items from a variety of distributors, companies use procurement systems to consolidate spending.

Amazon examined how customers buy, realized that larger customers were using procurement systems, and developed multiple integrations with common procurements systems. So when companies purchase a procurement system, it is already integrated with Amazon.

Highlights:

  • Large companies rely on procurement systems to manage their internal spending
  • When employees go to purchase something from a procurement system, it punches out to a distributor site. Then it returns to the procurement system for the checkout process
  • By talking to their customers and then observing how they bought, Amazon was able to solve a problem for their customers and create a business opportunity for themselves
  • Amazon has created a number of integrations to procurement systems, making it incredibly easy for large businesses to connect their procurement systems to Amazon Business

Takeaways:

Amazon’s making huge strides in the eProcurement and Punchout space, and distributors need to take note. Most notably, Amazon created this huge business opportunity for themselves by talking to their customers, observing how their customers purchased things, and then by making the process simpler. Distributors can mimic this strategy and utilize customer input to create solutions that will drive business.

Full Transcript

When they looked at the customer, and they looked at the customer and what they were doing, and the customer being these large institutions first, OK? The large institutions – as they looked at how they bought things – they realized that large institutions, those hospitals and things like that, governments; they buy through procurement systems, meaning they’ve seen a problem in their own business – these are customers of distributors, right?

The customers have seen a problem in their business where they realize that they have people that are buying from all these different sources because of the Internet, right? They’re like, we gotta get a handle on this, we’ve got to consolidate our spending, so they create procurement systems.

So, if I want to buy something inside of a university, I have to login to my procurement system. And I have to use my procurement system to find the product that I want to buy, right? So, real easy example was that I want to buy a new computer, right? I want to get a new computer for my office. My computer zonked out. So, I log in to a procurement system, and I look for computers, and it shows me the three computers I’m allowed to buy, right?

Now, it doesn’t show me the 50,000 ones I can’t; the three items that they have actually contracted to buy, and so when I click on the computer that I want to buy, it punches out to a distributor’s website, and I look at it and I purchase that computer there, and then when I hit – instead of checkout – when I hit checkout, the order doesn’t go through the distributor, the order comes back into my procurement system and then they use EDI to actually make the purchase.

So that’s what? . . . A punchout. So I’m punching out to the distributor’s website, and then I’m coming back to my procurement system actually. When Amazon was talking to their customers, because Amazon’s not trying to build an Amazon.com-like experience, they said, “what do you need, how do you buy today?” and they watched their customers buy and they realized their customers bought through these procurement systems.

So what they did was . . . the first thing that they’ve done and they’ve concentrated on is that they’ve actually built integration to all those procurement systems. So they have like – I don’t know how many it is right now – over 50 for sure. Over 50, out-of-the-box integrations to procurement systems. That means when I buy a procurement system from like Oracle, right? So I’m a local . . . I’m a university and I buy a procurement system from Oracle. Or I’m a GM plant, and I buy a procurement system. When I turn that thing on, it automatically has integration to Amazon Business.

That . . . that is incredibly scary. (Second person: “that’s huge”). Right? Yeah. But . . . but . . . we gotta know how they did that, right? They . . . they did that by just talking to their customers and realizing that this is how their customers wanna buy.