SAP Ariba a First-Mover as Blockchain Comes to B2B Procurement

Transcript of a discussion on the major opportunity from bringing Blockchain technology to business-to-business procurement and supply chain management.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast, coming to you from the 2017 SAP Ariba LIVE conference in Las Vegas.

I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host the week of March 20 as we explore the latest in collaborative commerce and learn how innovative companies are leveraging the networked economy.

Our next digital business thought leadership panel discussion examines the major opportunity from bringing Blockchain technology to business-to-business (B2B) procurement and supply chain management. We will explore how Blockchain’s unique capabilities can provide comprehensive visibility across global supply chains and drive simpler verification of authenticity, security, and ultimately control.

Fox

To learn more about how Blockchain is poised to impact and improve supply chain risk and management, please join our guests, Joe Fox, Senior Vice President for Business Development and Strategy at SAP Ariba. Welcome back, Joe.

Joe Fox: Thanks, Dana. It's good to be here.

Gardner: We’re also joined by Leanne Kemp, Founder and CEO of Everledger, based in London. Welcome, Leanne.

Kemp

Leanne Kemp: Thank you, great to be here.

Gardner: Joe, Blockchain has emerged as a network methodology, running crypto currency Bitcoin, as most people are aware of it. It's a digitally shared record of transactions maintained by a network of computers, not necessarily with centralized authority. What could this be used for powerfully when it comes to gaining supply chain integrity?

Fox: Blockchain did start in the Bitcoin area, as peer-to-peer consumer functionality. But a lot of the capabilities of Blockchain have been recognized as important for new areas of innovation in the enterprise software space.

Those areas of innovation are around “trusted commerce.” Trusted commerce allows buyers and sellers, and third parties, to gain more visibility into asset-tracking. Not just asset tracking in the context of the buyer receiving and the seller shipping -- but in the context of where is the good in transit? What do I need to do to protect that good? What is the transfer of funds associated with that important asset? There are even areas of other applications, such as an insurance aspect or some kind of ownership-proof.

Gardner: It sounds to me like we are adding lot of metadata to a business process. What's different when you apply that through Blockchain than if you were doing it through a platform?

Inherit the trust

Fox: That's a great question. Blockchain is like the cloud from the perspective of it’s an innovation at the platform layer. But the chain is only as valuable as the external trust that it inherits. That external trust that it inherits is the proof of what you have put on the chain digitally. And that includes that proof of who has taken it off and in what way they have control.

As we associate a chain transaction, or a posting to the ledger with its original transactions within the SAP Ariba Network, we are actually adding a lot of prominence to that single Blockchain record. That's the real key, marrying the transactional world and the B2B world with this new trusted commerce capability that comes with Blockchain.

Gardner: Leanne, we have you here as a prime example of where Blockchain is being used outside of its original adoption. Tell us first about Everledger, and then what it was you saw in Blockchain that made you think it was applicable to a much wider businesscapability.

Kemp: Everledger is a fast-moving startup using the best of emerging technology to assist in the reduction of risk and fraud. We began in April of 2015, so it's actually our birthday this week. We started in the world of diamonds where we apply blockchain technology to bring transparency to a once opaque market.

And what did I see in the technology? At the very core of cryptocurrency, they were solving the problem of double-spend. They were solving the problem of transfer of value, and we could translate those very two powerful concepts into the diamond industry.

At the heart of the diamond industry, beyond the physical object itself, is certification, and certificates in the diamond industry are the currency of trade. Diamonds are cited on web sites around the world, and they are mostly sold off the merit of the certification. We were able to see the potential of the cryptocurrency, but we could decouple the currency from the ledger and we were able to then use the synthesis of the currency as a way to transfer value, or transfer ownership or custody. And, of course, diamonds are a girl's best friend, so we might as well start there.

Dealing with diamonds

Gardner: What was the problem in the diamond industry that you were solving? What was not possible that now is?

Kemp: The diamond industry boasts some pretty impressive numbers. First, it's been around for 130 years. Most of the relationships among buyers and sellers have survived generation upon generation based on a gentleman's handshake and trust.

The industry itself has been bound tightly with those relationships. As time has passed and generations have passed, what we are starting to see is a glacial melt. Some of the major players have sold off entities into other regions, and now that gentleman's handshake needs to be transposed into an electronic form.

Some of the major players in the market, of course, still reside today. But most of the data under their control sits in a siloed environment. Even the machines that are on the pipeline that help provide identity to the physical object are also black-boxed in terms of data.

We are able to bring a business network to an existing market. It's global. Some 81 countries around the world trade in rough diamonds. And, of course, the value of the diamonds increases as they pass through their evolutionary chain. We are able to bring an aggregated set of data. Not only that, we transpose the human element of trust -- the gentleman's handshake, the chit of paper and the promise to pay that's largely existed and has built has built 130 years of trade.

We are now able to transpose that into a set of electronic-form technologies -- 

Blockchain, smart contracts, cryptography, machine vision -- and we are able to take forward a technology platform that will see transactional trust being embedded well beyond my lifetime -- for generations to come.

Gardner: Joe, we have just heard how this is a problem-solution value in the diamond industry. But SAP Ariba has its eyes on many industries. What is it about the way things are done now in general business that isn't good enough but that Blockchain can help improve?

Fox: As we have spent years at Ariba solving procurement problems, we identified some of the toughest. When I saw Everledger, it occurred to me that they may have cracked the nut on one of the toughest areas of B2B trade -- and that is true understanding, visibility, and control of asset movement.

It dawned on me, too, that if you can track and trace diamonds, you can track and trace anything. I really felt like we could team up with this young company and leverage the unique way they figured out how to track and trace diamonds and apply that across a huge procurement problem. And that is, how do a supplier and a buyer manage the movement of any asset after they have purchased it? How do we actually associate that movement of the asset back to its original transactions that approved the commit-to-pay? How do you associate a digital purchase order (PO) with a digital movement of the asset, and then to the actual physical asset? That's what we really are teaming up to do.

That receipt of the asset has been a dark space in the B2B world for a long time. Sure, you can get a shipping notice, but most businesses don't do goods receipts. And as the asset flows through the supply chain -- especially the more expensive the item is -- that lack of visibility and control causes significant problems. Maybe the most important one is: overpaying for inventory to cover actual lost supply chain items in transit.

I talked to a really large UK-based telecom company and they told me that what we are going to do with Everledger, with just their fiber optics, they could cut their buying in half. Why? Because they overbuy their fiber optics to make sure they are never short on fiber optic inventory.

That precision of buying and delivery applies across the board to all merchants and all supply chains, even middle of the supply chain manufacturers. Whenever you have disruption to your inbound supply, that’s going to disrupt your profitability.

Gardner: It sounds as if what we are really doing here is getting a highly capable means -- that’s highly extensible -- to remove the margin of error from the tracking of goods, from cradle to grave.

Chain transactions

Fox: That’s exactly right. And the Internet is the enabler, because Blockchain is everywhere. Now, as the asset moves, you have the really cool stuff that Everledger has done, and other things we are going to do together – and that’s going to allow anybody from anywhere to post to the chain the asset receipt and asset movement.

For example, with a large container coming from overseas, you will have the chain record of every place that container has been. If it doesn't show up at a dock, you now have visibility as the buyer that there is a supply chain disruption. That chain being out on the Internet, at a layer that’s accessible by everyone, is one of the keys to this technology.

We are going to be focusing on connecting the fabric of the chain together with Hyperledger. Everledger builds on the Hyperledger platform. The fabric that we are going to tie into is going to directly connect those block posts back to the original transactions, like the purchase order, the invoice, the ship notice. Then the companies can see not only where their asset is, but also view it in context of the transactions that resulted in the shipment.

Gardner: So the old adage -- trust but verify -- we can now put that to work and truly verify. There's newstaking place here at SAP Ariba LIVE between Everledger and SAP Ariba. Tell us about that, and how the two companies -- one quite small, one very large -- are going to work together.

Fox: Ariba is all-in on transforming the procurement industry, the procurement space, the processes of procurement for our customers, buyers and sellers, and we are going to partner heavily with key players like Everledger.

Part of the announcement is this partnership with Everledger around track and trace, but it is not limited to track and trace. We will leverage what they have learned across our platform of $1 trillion a year in spend, with 2.5 million companies trading assets with each other. We are going to apply this partnership to many other capabilities within that.

Kemp: I am very excited. It’s a moment in time that I think I will remember for years to come. In March we also made an importantannouncement with IBM on some of the work that we have done beyond identifying objects. And that is to take the next step around ensuring that we have an ethical trade platform, meaning one that is grounded in cognitive compliance.

We will be able to identify the asset, but also know, for example in the diamond industry, that a diamond has passed through the right channels, paid the dutiful taxes that are due as a part of an international trade platform, and ensure all compliance is hardened within the chain.

I am hugely excited about the opportunity that sits before me. I am sincerely grateful that such a young company has been afforded the opportunity to really show how we are going to shine.

If you think about it, Blockchain is an evolution of the Internet.

Gardner: When it comes to open trade, removing friction from commerce, these have been goals for hundreds of years. But we really seem to be onto something that can make this highly scalable, very rich -- almost an unlimited amount of data applied to any asset, connected to a ledger that’s a fluid, movable, yet tangible resource.

Fox: That’s right.

Gardner: So where do we go next, Joe? If the sky is the limit, describe the sky for me? How big is this, and where can you take it beyond individual industries? It sounds like there is more potential here.

Reduced friction costs

Fox: There is a lot of potential. If you think about it, Blockchain is an evolution of the Internet; we are going to be able to take advantage of that.

The new evolution is that it's a structured capability across the Internet itself. It’s going to be open, and it’s going to be able to allow companies to ledger their interactions with each other. They are going to be able, in an immutable way, to track who owns which asset, where the assets are, and be able to then use that as an audit capability.

That's all very important to businesses, and until now the Internet itself has not really had a structure for business. It's been open, the Wild West. This structure for business is going to help with what I call trusted commerce because in the end businesses establish relationships because they want to do business with each other, not based on what technology they have.

Another key fact about Blockchain is that it’s going to reduce friction in global B2B. I always like to say if you just accelerated B2B payments by a few days globally, you would open up Gross Domestic Product (GDP), and economies would start growing dramatically. This friction around assets has a direct tie to how slowly money moves around the globe, and the overall cost and friction from that.

So how big could it go? Well, I think that we are going to innovate together with Everledger and other partners using the Hyperledger framework. We are going to add every buyer and seller on the Ariba Network onto the chain. They are just going to get it as part of our platform.

Then we are going to begin ledgering all the transactions that they think make sense between themselves. We are going to release a couple of key functions, such as smart contracts, so their contract business rules can be applicable in the flow of commerce -- at the time commerce is happening, not locked up in some contract, or in some drawer or Portable Document Format (PDF) file. We are going to start with those things.

I don't know what applications we are going to build beyond that, but that's the excitement of it. I think the fact that we don't know is the big play.

Gardner: From a business person’s perspective, they don’t probably care too much that it’s Blockchain that’s enabling this, just like a lot of people didn't care 20 years ago that it was the Internet that was allowing them to shop online or send emails to anybody anywhere. What is it that we would tease out of this, rather than what the technology is, what's the business benefit that people should be thinking about?

Fox: Everybody wants digital trust, right? Leanne, why don’t you share some of the things you guys have been exploring?

Making the opaque transparent

Kemp: In the diamond industry, there is fraud related to document tampering. Typically paper certificates exist across the backbone, so it’s very easy to be able to transpose those into a PDF and make appropriate changes for self-gain.

Double-financing of the pipeline is a very real problem; invoicing, of course accounts receivable, they have the ability to have banks finance those invoices two, three, four times.

We have issues with round-tripping of diamonds through countries, where transfer pricing isn't declared correctly, along with the avoidance of tax and duties.

All of these issues are the dark side of the market. But, now we have the ability to bring transparency around any object, particularly in diamonds -- the one commodity that’s yet to have true financial products wrapped around it. Now, what do I mean by that? It doesn’t have a futures market yet. It doesn’t have exchange traded funds (ETFs), but the performance of diamonds has outperformed gold, platinum and palladium.

This platform shift is like going from the 
World Wide Web to the 
World Wide Ledger.

Now, what does this mean? It means we can bring transparency to the once opaque, have the ability to know if an object has gone through an ethical chain, and then realize the true value of that asset. This process allows us to start and think about how new financial products can be formed around these assets.

We are hugely interested in rising asset classes beyond just the commodity section of the market. This platform shift is like going from the World Wide Web to the World Wide Ledger. Joe was absolutely correct when he mentioned that the Internet hasn't been woven for transactional trust -- but we have the ability to do this now.

So from a business perspective, you can begin to really innovate on top of this exponential set of technology stacks. A lot of companies quote Everledger as a Blockchain company. I have to correct them and I say that we are an emerging technology company. We use the very best of Blockchain and smart contracts, machine vision, sensorial data points, for us to be able to form the identity of objects.

Now, why is that important? Most financial services companies have really been focused on Know Your Customer (KYC), but we believe that it's Know Your Object (KYO) that really creates an entirely new context around it.

Now, that transformation and the relationship of the object have already started to move. When you think about Internet of Things (IoT), mobile phones, and autonomous cars -- these are largely devices to the fabric of the web. But are they connected to the fabric of the transactions and the identity around those objects?

Insurance companies have begun to understand this. My work in the last 10 years has been deeply involved in insurance. As you begin to build and understand the chain of trust and the chain of risk, then tectonic plate shifts in financial services begin to unfold.

Apps and assets, on and off the chain

Fox: It’s not just about the chain, it's about the apps we build on top, and it's really about what is the value to the buyer and the seller as we build those apps on top.

To Leanne’s point, it’s first going to be about the object. The funny thing is we have struggled to be able to, in a digital way, provide visibility and control of an object and this is going to fix that. In the end, B2B, which is where SAP Ariba is, is about somebody getting something and paying for it. And that physical asset that they are getting is being paid for with another asset. They are just two different forms. By digitizing both and keeping that in a ledger that really cannot be altered -- it will be the truth, but it's open to everyone, buyers and sellers.

Businesses will have to invent ways to control how frictionless this is going to be. I will give you a perfect example. In the past if I told you I could do an international payment of $1 million to somebody in two minutes, you would have told me I was crazy. With Blockchain, one corporation can pay another corporation $1 million in two minutes, internationally. And on the chain companies like Everledger can build capabilities that do the currency translation on the fly, as it’s passing through, and that doesn’t dis-remediate the banks because how did the $1 million get onto the chain in the first place? Someone put it on the chain through a bank. The bank is backing that digital version. How does it get off the chain so you can actually do something with it? It goes through another bank. It’s actually going to make the banks more important. Again, Blockchain is only as good as the external trust that it inherits.

I really think we have to focus on getting the chain out there and really building these applications on top.

Gardner: It’s very exciting, and has certainly opened my eyes to more opportunity and potential. We will be talking about this quite a bit more, I’m sure. But I’m afraid we will have to leave it here today. We’ve been talking about the major opportunity from bringing Blockchain technology to B2B procurement and supply chain management.

And we've learned how Blockchain’s unique capabilities can provide comprehensive visibility across global supply chains for far simpler verification of authenticity, security, and ultimately control.

So, a huge thanks to our guests, Joe Fox, Senior Vice President for Business Development and Strategy at SAP Ariba, and Leanne Kemp, Founder and CEO of Everledger.

And a thanks as well to our audience for joining this special podcast, coming to you from the 2017 SAP Ariba LIVE conference in Las Vegas. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect Digital Business Insights Discussions. Thanks again for listening, and please come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on the major opportunity from bringing Blockchain technology to business-to-business procurement and supply chain management. Copyright Interarbor Solutions, LLC, 2005-2017. All rights reserved.

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Diversity Spend: When Doing Good Leads to Doing Well

Transcript of a discussion on how companies are improving supplier diversity and the new tools that make attaining inclusive supply chains easier than ever.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast, coming to you from the 2017 SAP Ariba LIVE conference in Las Vegas.

I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host the week of March 20 as we explore the latest in collaborative commerce, and learn how innovative companies are leveraging the network economy.

Our next digital business insights panel discussion focuses on the latest path to gaining improved diversity across inclusive supply chains. We’ll examine why companies are seeking to improve supplier diversity, the business and societal benefits, and the new tools and technologies that are making attaining inclusive suppliers easier than ever.

To learn more about the increasingly data-driven path to identifying and achieving the workforce that meets all requirements, please join me in welcoming our guests, Rod Robinson, Founder and CEO of ConnXus. Welcome, Rod.

Rod Robinson: Thank you, Dana. Great to be here.

Gardner: We’re also here with Jon Stevens, Global Senior Vice President of B2B Commerce and Payments at SAP Ariba. Welcome, Jon.

Jon Stevens: Thank you, I look forward to it.

Gardner: And we’re here with Quentin McCorvey, Sr., President of M and R Distribution Services. Welcome, Quentin.

Quentin McCorvey, Sr.: Thank you, Dana.

Gardner: Jon, why is it important to seek diversity in procurement and across supply chains? What are the reasons for doing this?

Stevens: It’s a very good question. It's for few reasons. Number one, there is a global war for talent, and when you can get a diverse point of view, when you can include multiple different perspectives, that usually helps drive several other benefits, one of which could even be innovation.

We often see companies investing deeply inside their supply chain, working with a diverse set of suppliers, and they are gaining huge rewards from an innovation standpoint. When you look at the leading companies that leverage their suppliers to help drive new product innovation, it usually comes from these areas.

We also see companies more focused on longer-term relationships with their suppliers. Having a diverse perspective -- and having a set of diverse suppliers -- helps with those longer-term relationships, as both companies continue to grow in the process.

Gardner: Rod, what are you seeing in the marketplace as the major trends and drivers that have more businesses seeking more inclusivity and diversity in their suppliers?

Diversity benefits business

Robinson: As a former chief procurement officer (CPO), the one thing that I can definitely say that I have witnessed is that more diverse and inclusive supply chains are more innovative and deliver high value.

I recently wrote a blog where I highlighted some statistics that I think every procurement professional should know: One is that 99.9% of all US firms are in a small business category. Women- and minority-owned businesses represent more than 50% of the total, which is responsible for employing around 140 million people.

Robinson

This represents a significant portion of the workforce. As we all know, small businesses really are the economic engine of the economy – small businesses are responsible for 65% of net new jobs.

At the end of the day, women and minorities represent more than 50% of all businesses, but they only represent about 6% of the total revenue generated.

The only thing that I would add is that diversity is vitally important as an economic driver for our economy.

Gardner: Rod points out a rich new wellspring of skills, talent and energy coming up organically from the small to medium-sized businesses. On the other hand, major national and international brands are demanding more inclusivity and diversity from their suppliers. If you are in the middle of that supply chain, is this something that should interest you?

Targeting talent worldwide

Stevens: You are spot-on. We definitely see our leading customers looking across that landscape, whether they are a large- or medium-sized company. The war for talent is only going to increase. Companies will need to seek even more diverse sources of talent. They are really going to have to stretch themselves to look outside the walls of their country to find talent, whereas other companies may not be doing so. So you're going to see rising diversity programs.

Stevens

We have several customers in emerging parts of the world; let's take South Africa for example. I spend a lot of time in South Africa, and one of our customers there, Nedbank, invests a lot of time and a lot of money in the growth and development of the small businesses. In South Africa, the statistics that Rod talked about are even greater as far as the portion of small companies. So we are seeing that trend grow even faster outside of the US, and it's definitely going to continue.

Gardner: Rod, you mentioned that there are statistics, studies and research out there that indicate that this isn't just a requirement, it's really good business. I think McKinsey came out with a study, too, that found the top quarter of those companies seeking and gaining gender, racial and ethnic diversity were more likely to have a better financial return. So this isn't just the right thing to do, but it's also apparently demonstrated as being good business, too. Do you have any other insights into why the business case for this is so strong? 

Diversity delivers innovation

Robinson: Speaking from first-hand experience, having been responsible for procurement and supplier diversity within a large company, there were many drivers. We had federal contracts that required us to commit to a certain level of engagement (and spending) with diverse suppliers.  We had to report on those stats and report our progress on a monthly and/or quarterly basis. It was interesting that while we were required by these contractual mandates -- not only from the government but also customers like Procter and Gamble, Macy's, and others -- we started to realize that this is really creating more competition within categories that we were taking to market. It was bringing value to the organizations.

We had situations where we were subcontracting to diverse suppliers that were providing us with access to markets that we didn't even realize that we were missing. So again, to Jon's point, it's more than just checking a box. We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

The whole concept of supplier diversity started with the US government back in the late ’60s and early ’70s. That was the catalyst, but companies realized that it was delivering significant value to the organization, and it's helped to introduce new, innovative companies across the supply chain.

At ConnXus, our big break came when McDonald's gave us an opportunity five years ago. They took a chance on us when we were a start-up company of four.  We are now a company of 25. Obviously, revenues have grown significantly and we've been able to attract partners like SAP Ariba. That's the way it should work. You always want to look for opportunities to identify new, innovative suppliers to introduce into a supply chain; otherwise we get stagnant.

Small but mighty

Stevens: I'll add to what Rod said. This is just the sort of feedback we hear from our customers, the fact that a lot of the companies that are in this inclusive space are small -- and we think that's a big advantage.

Speed, quickness and flexibility are something you often see from diverse suppliers, or certainly smaller businesses, so a company that can have that in its portfolio has better responsiveness to their customer needs, versus a supply chain with very large processes or large organizations where it takes a while to respond to market needs. The quick in today's world will be far more successful, and having a diverse set of suppliers allows you to respond incredibly quickly. There is obviously a financial benefit in doing so.

Gardner: A big item of conversation here at SAP Ariba LIVE is how to reduce risk across your supply chain. Just like any economic activity, if you have a diversified portfolio, with different sizes of companies, different geographic locations, and different workforce components -- that can be a real advantage.

Now that we've established that there is a strong business case and rationale for seeking diversity, why do procurement professionals have trouble finding that diversity? Let's go to Quentin. What's holding back procurement professionals from finding the companies that they want?

McCorvey

McCorvey: Probably the biggest challenge is that the whole trend of supply chain optimization, of driving cost out of the supply chain, seems to be at odds with being inclusive, responsive, and in bringing in your own diverse suppliers. A company may have had 20 to 30 suppliers of a product, and then they look to drive that down with to just one or two suppliers. They negotiate contract prices for three-year contracts. That tends to weed out some of the smaller, more diverse organizations for several reasons.

For example, Rod talked about McDonald’s taking a chance on him. Well, they took a chance on him being a four-person organization; if he had to [grow first] he never would have had the opportunity.

For a company that requires a product in the market for every location nationally -- as opposed to regionally -- at a certain price, that tends to challenge a lot of the inclusion or the diversity in the supply chain.

Gardner: Right. Some companies have rules in place that don't provide the flexibility to attract a richer supplier environment. What is being done from your perspective at SAP Ariba, Jon, to go after such a calcification of rules that leads to somewhat limited thinking in terms of where they can find choices?

Power through partnerships

Stevens: That short-term thinking that Quentin talked about is absolutely one of the big barriers, and that generally comes down to metrics. What are they trying to measure? What are they trying to accomplish?

The more thought-leading companies are able to look past something in the first year or two, and focus on not just driving cost out, as Quentin talked about, but discovering what else their suppliers can help with, whether it’s something from a regulatory standpoint or something from a product and innovation perspective.

Certainly, one challenge is that short-term thinking, the other is access to information. We see far too many procurement organizations that just aren't thinking on a broader scale, whether it's a diverse scale or a global scale. What SAP Ariba is now bringing to the table with our solutions is being able to include information about where to find diverse suppliers, where to search and locate suppliers, and we do that through many partnerships.

We have a solution in South Africa called Tradeworld, which addresses this very topic for that market. We have a solution called SAP Ariba Spot Buy, which allows us to bring diverse suppliers automatically into a catalog for procurement organizations to leverage. And at SAP Ariba LIVE 2017 we announced that we are partnering with Rod and his firm, ConnXus, to expand the diversity marketplace by linking the ConnXus database and the SAP Ariba Network, which opens the door to more opportunities for all of our customers.

Robinson: If I could add to Jon’s point, one thing I also look forward to as a part of our partnership with SAP Ariba is thought leadership. There are opportunities for us to share best practices. We know companies who are doing it really well, we know the companies that maybe struggling with it, but within our joint customer portfolios, we will be able to share some of those best practices.

For example, there may be situations where a company is doing a big maintenance, repair and operations (MRO) bid and you have some large players involved, such as W.W. Grainger. There may be opportunities to introduce Grainger to smaller suppliers that maybe provide fewer stock keeping units (SKUs) that they can leverage strategically across their accounts. I have been involved in a number of initiatives like that. Those are the types of insights that we will be able to bring to the table, and that really excites me about this partnership.

Gardner: Those insights, that data, and the ability to leverage a business network to automate and facilitate that all at scale is key. From what we are hearing here at SAP Ariba LIVE, leveraging that business network is essential. Rod, tell us aboutConnXus? What’s being announced here?

Seek and ye shall find in the connected cloud

Robinson: ConnXus is a next-generation procurement platform that specializes in making corporate supply chains more inclusive, transparent, and compliant. As I mentioned, we serve several global companies, many of which we share relationships with SAP Ariba.  Our cloud-based platform makes it easy for companies to track, monitor, and report against their supplier diversity objectives.

One of the major features is our supplier database, which provides real-time searchable access to nearly two million vetted women-, minority- and veteran-owned businesses across hundreds of categories. We integrate with the SAP Ariba Network. That makes it simple for companies to identify vetted, diverse suppliers. They can also search on various criteria including certifications, category, and geography. We have local, national and global capabilities.  SAP Ariba already is in a number of markets that we are looking to penetrate.

Gardner: I was really impressed when I looked at the ConnXus database, how rich and detailed it is, and not just ownership of companies but also the composition of those companies, where those people are located. So you would actually know where your inclusive supply chain is going to be, where the rubber hits the road on that, so to speak.

Jon, tell us about the news here on March 21, 2017, a marriage between SAP Ariba and ConnXus.

Stevens: The SAP Ariba Network has a community of over 2.5 million companies, and it’s companies like M and R Distribution Services that we have been able to help grow and foster over time, using some of the solutions I talked about and Ariba Discovery.

Adding to the information that Rod just talked about, we are greatly expanding that. We have the world’s largest, most global business network and now we have the world’s most diverse business network, due to the partnership with ConnXus being able to provide that information through various processes.

The partnership with ConnXus will allow us to provide a lot more education, a lot more awareness.

Fortune 2000 companies are looking all the time through requests for proposal (RFPs), through sourcing events, and analyzing supplier performance on the SAP Ariba Network. The partnership with ConnXus will allow us to provide a lot more education, a lot more awareness to them.

For the suppliers that are on our network and those who will be joining us as a part of being in ConnXus, we expect to drive a lot more business.

Gardner: If I am a purchasing agent or a procurement officer and I want to improve my supplier inclusion program, how would something like, say, SAP Ariba Spot Buy using the ConnXus database, benefit me?

Stevens: As you decide to search for a category, we will return to you several things, one of which is now the diverse supplier list that ConnXus has. One of the things we are going to be doing with SAP Ariba Spot Buy is to have a section that highlights the diversity category so that it’s front and center for a purchasing agent to use and to take advantage of.

Gardner: Clearly there is strong value and benefit here if you are a procurement officer to get involved with the ConnXus database and Ariba Network. Quentin, at M and R Distribution Services, tell us from the perspective of a small supplier like yourself, what you're hearing about Ariba and ConnXus that interests you?

Be fruitful and multiply business opportunities 

McCorvey: You referenced a marriage between SAP Ariba and ConnXus, and part of a marriage is to be fruitful and multiply. So I want them to be fruitful so I can multiply my business opportunities. What that does for a company like ours is, we are looking for opportunities. It’s tougher for me to compete as a small business against a Grainger, or against a Fastenal, or against other larger companies like that.

So when I am going after opportunities like that, it’s going to be tough for me to win those large-scale RFPs. But if there is a target spot opportunity that I am looking for or within a region, it’s something that I can begin to do if a company is looking for someone like me.

We’ve talked a lot about corporations and the benefit of corporations, but there is also a consumer benefit, too, because we are in an age where the consumer is socially responsible and really wants to have a company that they are either investing in or they’re buying products from and they look for inclusion in their supply chains.

Folks are looking at that when they are make their investment and consumer decisions. Every company has an extremely diverse consumer base, so why should they not have a diverse supplier base? When companies look at that business ethic and corporate social responsibility as a driving tool for their organization, I want them to be able to find me among the Fortune top 20 companies. The relationship that ConnXus and SAP Ariba are driving really catalyzes these opportunities for me.

Gardner: Rod, if a company like M and R Distribution Services is not yet in your database and they want to be, how might they get going on that process and become vetted and be available to a global environment like the Ariba Network?

Robinson: It’s really simple. One of the things that we have striven to provide is a fantastic, simple user experience. It takes about six minutes to complete the initial supplier profile. Any supplier can complete a profile at no cost.

Many suppliers actually get into our database because of the services that we already provide to large enterprise customers. So if you are a McDonald's supplier, for example, you are already going to be in our database because we scrub their vendor data on an annual basis. I think Quentin is already in because he happens to be a vendor of one of our customers, or of multiple customers.

There is a vetting process where we integrate with other third-parties to pull in data, and then you become discoverable by all of the buyers on our platform.

Gardner: Before we close out, let’s look to the future. Jon, when we think about getting this rich data, putting it in the hands of the people who can use it, we also are putting it in the hands of the machines that can use it, right?

So when we think about bots and artificial intelligence (AI) trends, what are some of your predictions for how the future will come about when it comes to procurement and inclusive supply chains?

The future is now

Stevens: You talked about trends. One is certainly around transparency and visibility; another one is around predictive analytics and intelligence. We believe that a third is around partnerships like this to drive more collaboration.

But predictive analytics, that’s not a future thing, that's something we do today and some of the leading procurement companies are figuring out how to take advantage of it. So, for example, when a machine breaks down, you are not waiting for it. Instead, the machine is telling our systems, “Hey, wait a minute, I've got a problem.”

Not only that, but they are producing for the buyer the intelligence that they need to order something. We already know who the suppliers are, we already know what potentially should be done, and we are providing these decisions to procurement organizations.

The future, it’s here, you see it in our personal lives, on our phones, when you get recommendations in the morning, on the news, and everything else. It’s here today through some of our solutions.

We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

And this trend around diversity, it’s also here. You mentioned SAP Ariba Spot Buy and we also have some of these other solutions like SAP Ariba Discovery where a procurement person is starting to create a sourcing event. We have the ability in our solutions to automatically recommend suppliers and based off of the goals that that procurement organization has, we can pre-populate and recommend the diverse MRO suppliers that you might want to consider for your program.

You’re seeing that today through the Ariba Network and through things like Guided Buying, where we are helping facilitate many of those steps for procurement organizations. So it's really fun and the future in many respects is here right now.

Value-driven supply chains

Robinson: I envision a future in procurement of being able to make informed decisions on supplier selection. Procurement professionals are in a great position to change the world, and the CPO of the future; they are going to be Millennials. They want more control, and they want more transparency, and, to Quentin’s point, they want to buy from organizations that share their same values.

Our partnership with SAP Ariba will create this environment where we can move closer to fulfilling this vision of whenever you have a specification that you’ve put into the system, you’ll be pushed supplier options, and you can actually configure your criteria such that you create this optimal supplier mix – whether diversity is important to you, green/environmental issues are important you, if ethical practices are important to you. All of this can be built-in and weighted within your selection. You will create an optimal supplier portfolio that balances all of the things that are important to you and your organization.

McCorvey: Why I am excited? This conversation has come full circle for me. I started off taking about supply optimizations and some of the challenges that they pose for businesses like me. We know that people do business most often with people they know, like and appreciate. What I want to do is turn a digital connection into a digital handshake and use predictive analytics and the connections between Jon and Rod that propose an opportunity for folks to know me, for me to grow as a new organization, and for me to be in the forefront of their minds. That is a challenge that this kind of supply chain optimization helps to overcome.

I’m really happy for where this is going to go in the future. In the end, there are going to be a lot of organizations both large and small that are going to benefit from this partnership. I look forward to the great things that are going to come from it, for not only both organizations -- but for people like me across the country.

Gardner: I’m afraid we will have to leave it there. We have been talking about the latest path to gaining improved diversity across inclusive supply chains. And we’ve learned how improved supplier diversity along with business and societal benefits can be achieved easier than ever thanks to new tools and technologies.

So a big thanks to our guests, Rod Robinson, Founder and CEO of ConnXus;

Jon Stevens, Global Senior Vice President of B2B Commerce and Payments at SAP Ariba, and Quentin McCorvey, Sr., President of M and R Distribution Services.

A big thank you as well to our audience for joining this latest BriefingsDirect discussion coming to you from the 2017 SAP Ariba Live conference in Las Vegas. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect digital business insights discussions. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how companies are improving supplier diversity and the new tools that make attaining inclusive supply chains easier than ever. Copyright Interarbor Solutions, LLC, 2005-2017. All rights reserved.

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