Supply Chain Tech & ProcureTech in 2023 — still hot? Hell, yes! 🔥 (2/2)
A perspective on tomorrow’s billion-dollar standalone categories in Supply Chain and ProcureTech land
This article is split into two parts and will touch upon these topics:
- Part ❶: Why I think that 2023 provides a super opportunity-rich context for founders: the shift from operational to strategic procurement & the unbundling of incumbent product suites
- Part ❷: What I believe will be tomorrow’s standalone, bn-$ ProcureTech categories — and my take on notable contenders for category leadership within those segments
You are now reading Part ❷ — skip to Part 1 right here
After discussing the context on why I believe that SC- & ProcureTech are — and will remain — exciting fields for founders and investors to spend their time in, here is my current take on which fields I believe to be specifically interesting in the current market environment 🤩
That said, I hope that this post is of relevance to you if you are…
- a founder who has started (or is thinking to start) a business in SC Tech or ProcureTech. I’,m always excited to ping pong ideas on business models and products — so feel free to reach out anytime to discuss further!
- an investor developing your own thesis on the broader SC Tech & ProcureTech space
- an industry professional who is looking for high-level orientation on software solutions & vendors (also see here — I’ll open source the underlying and most updated database to these market maps once I have done a little clean up!😇)
What are tomorrow’s “standalone categories” — who’s fighting to win in these bn-$ markets? 🏆
As Procurement & SC management today are on top of business leader’s minds and the incumbent market is ripe for a major overhaul, I believe that we are in the midst of a perfect storm that might result in the formation of several standalone & rapidly growing SC- & ProcureTech subsegments.
That said, let me try & take a shot at sketching out my working thesis of what I believe will be those future categories; some of which have existed as software suite sub-modules, yet today present underlying market opportunities large enough to form standalone categories themselves. And some of which are emerging based on more recent developments, and might thus not even be baked into the suite products of Coupa, Ariba, Jaggaer & Co. Pls reach out if you think I might’ve missed certain categories and/or pot. future leaders within them — always thankful for feedback on the below!👇🏼
Note: This is not a “new version” of the my Market Map, which is intended to display a broad picture of the European ProcureTech landscape along the value chain. It’s much rather a different perspective on the SC- & ProcureTech landscape, charting relevant business categories and the most promising companies within that have reached a certain scale. Finally: Let me know if anything is missing and/or if you want to add to my perspective!!
To provide more context, I’ll post a high-level summary of each category — and add a few thoughts on why I believe that it’ll gain relevance.
Contract, Vendor & Spend Management 👨🏻💼
- Summary: Effective buyers require contractual or vendor-specific context to intelligently (re-)negotiate contracts, to manage to spend or assess performance and pricing — and a collaborative interface with legal & compliance for seamless execution.
- Relevance: Incumbent suites fall short in various ways, such as granular visibility into contract portfolios/data, in terms of UI/UX, or with regards to automation capabilities. The supply chain crisis triggers a wave of new contract requirements, plenty of new vendor onboarding & a renewed focus on contract discipline.
Elastic SC capacity 📊
- Summary: Supply chain managers are challenged to orchestrate increasingly complex fulfillment, logistics & distribution networks and thus require flexibility in terms of capacity planning, trade finance, and corresponding vendor access — as well as streamlined information availability along the value chain, from first to last mile.
- Relevance: Volatility in supply, demand & market prices — as well as the ongoing shift towards “Prime-like” speed & omnichannel distribution — have exposed the hidden cost of static supply chains. While existing suite products barely offer basic functionality, many businesses have identified supply chain flexibility as a source of competitive advantage.
Treasury & Payments 🏦
- Summary: Treasury & payment ops involve managing the entire cycle of money movement, from initiation and approvals to reconciliation, reporting, and cash forecasting. Given that spending on suppliers — the job of procurement — accounts for more than half of a typical company’s total budget: procurement, treasury & payments are deeply intertwined.
- Relevance: B2B payments are still heavily reliant on manual (ACH) bank-to-bank transfers & checks, which are not embedded into the buying journey — in stark contrast to what we are used to in the consumer world. A Harris Poll survey revealed that 1/3 (!) of B2B payments are still fully manual and require workarounds across multiple bank accounts and systems, such as portals, ERPs, etc. As buyers shift to eCheck, virtual cards, and value-added ACH to streamline operations and simplify AP/AR reconciliation, a study by Bain Capital estimates B2B, digitally embedded payments to nearly quadruple from $0.7 trillion to $2.6 trillion from 21' to 26'. This shift will have an impact on the often outdated system landscape employed by procurement & finance departments. Needless to add that cash is king in today’s market environment — which is why Treasury optimization is naturally top of mind for most CEOs. Recent events, such as the #SVB bank run have dramatically exposed the necessity of decentralized cash management, adding further complexity to the picture.
SC Risk & Sustainability 🔥🌳
- Summary: Risk management is another core objective for Procurement professionals to guarantee resilience along the SC. This involves proactive identification and remediation of SC risks such as labor unrest, natural disaster, or geopolitical threats as well as supplier-specific risks such as regulatory compliance, financial health, or cybersecurity. Additionally, ESG compliance and the reduction of scope 3 emissions have become another vital domain over the last few years.
- Relevance: As recent crises resulted in unexpected supply fallouts and billion-dollar losses, the domain of SC risk management has been pushed into the limelight like few others. What’s more, consumer awareness towards sustainability has spilled over to the business world, tasking Procurement with the objective of scope 3 reductions & ESG vendor compliance. Due to the rapid yet recent rise in relevancy, incumbent solutions have little to offer in these fields.
Strategic sourcing, Tactical & Tail Spend 💸
- Summary: Unsurprisingly, procurement is responsible to run the processes around “buying stuff”. This usually starts with an internal alignment on what to buy — commonly referred to as “intake & approvals” or “purchase requisitioning” — and is then followed by various ways of execution, such as running tenders with existing or new suppliers (which might need to be “discovered” first). Depending on the € value and strategic relevance of a “purchase”, procurement departments prioritize speed and process efficiency (lower value/relevance items) or optimized € spend/terms of a deal (higher value/relevance items).
- Relevance: As markets have become increasingly volatile and unpredictable, longer-term contracts & large tenders are facing headwinds — which results in tailwinds for more flexible shorter-term contracts and spot buying. This requires faster decision cycles and corresponding tooling such as “autonomous sourcing” which enables buyers to rapidly execute transactions & tenders when market conditions appear favorable. What’s more, as capital markets are demanding efficiency, (e.g. cost savings) the typically under-managed domains of tactical and tail spending are increasingly being discovered as sources for savings & process improvements. Our investments in Lhotse and Keelvar are based on this thesis.
Vertical buying marketplaces 🤝
- Summary: Certain “buying categories”, such as chemicals, freight, metals, specialized parts, and building or packaging materials — to name just a few, involve inherently complex product or service taxonomies, a highly specialized sales & buy-side and a massive underlying transaction volume (e.g. market size). Vertical buying marketplaces do not simply connect supply and demand, but support the workflow before, during, and after the transaction, becoming the de facto operating system for at least one side of the market, which often happens to be — guess what: the procurement side.
- Relevance: Vertical buying solutions inevitably offer a deeper value promise in terms of supplier access, product taxonomy, transaction workflows, you name it — compared with what general-purpose, incumbent solutions can possibly offer, let alone: offer today. As the role of procurement is shifting towards more strategic tasks, highly effective vertical buying solutions are employed as means to free up capacity & improve results.
I guess, there are many more exciting areas to look at within the SC- & ProcureTech space — the above selection reflects my personal and constantly evolving view only. I’m much looking forward to hearing your thoughts on this. And in case you are (getting) involved with building something new ProcureTechy: Holla at me! 👋
