The potential of social media and procurement

We have often blogged about the potential benefits of social media - but what exactly are they? The PIU has conducted a number of events on social media, which spoke to a number of procurement professionals from various countries.

Although procurement has yet to fully grasp the opportunities of social media, there are some leaders that are extracting value from early adoption. These will be outlined in an up-coming White Paper where we report back from our most recent Roundtable on the topic in New York. The PIU is currently conducting its annual CPO Survey, which seeks to understand the full use of social media in procurement. (You can take the survey here.)

Firstly, it is important to remember that social media does not only mean Facebook or Twitter. Companies such as Ariba are developing their own platforms which can offer a similar service that are more focused towards business use. In addition, there are new entrants to the market, such as Google+, which extend potential functionality.

As my colleague, Maggie Slowik, has previously noted, the nature of the internet is not necessarily global. Region or local websites can harness a local community better than a network that spans the world. Indeed, most evidence regarding internet usage suggests that it retains a parochial bias, with users tending towards websites based in their own geographies.

At its core, social media is about communication and collaboration. As a vehicle forcollaboration, the informal nature of social media allows for the open discussion of ideas in order to innovate new products and approaches to procurement.

But also, its ability to allow for a two-way flow of information enables an easy channel forcommunication between buyer and seller. By enabling the two sides to coach their discussion in a broader market context allows communication to be easily contextualised within industry trends and developments. Indeed, some have even suggested that social media can be used as a part of SRM.

However, a possible avenue of use for the social media is also within market intelligence. This can provide the organisation with information about recent developments, as well as an impression of how it is perceived as a buyer. Not only can these identify trends, but also as a means for spotting new products as well as information about particular suppliers. In this sense, risk management can be enhanced by using these platforms, especially with their ability to act as early indicators.

For instance where information may be scarce, or obscure, the only available source of information may be micro-blogs. Conversely, in an age of free-flowing information, there may also be an issue of too much data. Where press reporting on certain issues - such as the Japanese tsunami - the relevant fact which affects your supply chain may be crowded out by the general reportage.

More generally, therefore, we can extend social media’s use to potentially include pre-qualification and supplier identification. The ease at which research can be conducted can quickly enable key information to be gathered, as well as a potential means of communication.

Lastly, social media offers businesses another tool for recruitment. It allows you to reach a younger talent pool quicker and neatly evades the need for agency fees. Moreover, it allows for an easier means of feedback to develop a company as an employer of choice. LinkedIn is the most obvious means of online recruitment, but also networking and discussion.

However, given these positive points, it is also worth remembering social media’s limitations. Firstly, most of the currently available platforms are principally public in nature. Although Twitter, as an example, does have a privacy function, there is always the potential that information can be accidentally (or deliberately) broadcast to the general market. However, as previously mentioned, there are more business-oriented offerings which might provide the necessary confidentiality.

Secondly, there is an uncertainty with whom these online discussions are conducted. Even though the potential for fraud or identity theft exists face-to-face, these security concerns are heightened online. Although healthy scepticism can mitigate against most of these threats, this does not weaken social media’s potential to act as a key tool for early engagement with both suppliers and customers alike.