You probably have a tail spend problem. In other words, you are spending a lot more money and time managing the “extras” of your business than you realize. Any good procurement professional focuses on managing direct spend. But what about your indirect spend, the “everything else” that your business needs?
Like cleaning supplies for your warehouse. Or the ink & toner for your company’s hundreds of printers. This tail end of your spending can become a real problem. For example, if you’re wasting time managing suppliers that aren’t part of the main focus of your business. Or if you need high dollar items like janitorial and sanitation supplies, but you can’t get the best price.
To combat this issue, many businesses are turning to convenience services like Amazon. The question is, is using Amazon for your everyday business needs an effective solution?
It turns out there are six surprising problems with this model.
The (Big) Problems With Amazon for Business
Problem 1. Cost
Yes, the most basic Amazon Business account plan is free, but for expedited shipping or spend analytics the price tag gets big fast. An enterprise account is currently more than $10,000 a year.
In contrast, you can get exclusive pre-negotiated contracts through a Group Purchasing Organization (GPO) for free.
Problem 2. Supplier Management
Amazon moderates the buyer-supplier relationship. Meaning you will have limited communication options with your new suppliers.
If you’re looking for a consultative experience, Amazon isn’t it. You will also have to be okay with giving up a fair amount of control over your supplier management.
Problem 3. Service Level
Similarly, if you manage high volume, lack of service might be the biggest problem. For instance, keeping items in stock isn’t guaranteed. Amazon is very commercial; they don’t offer procurement services or a personal touch.
This is concerning because in purchasing you need partners who will help you. That will educate you about your options and streamline your procurement process. You need suppliers who are available if you have a problem. That abide by your industry requirements and allow you to customize your agreement.
Seasonal discounts and two-day shipping is great. But ultimately, you need a reliable supplier experience and proven savings outcomes.
Problem 4. Size of Discount
Most people use Amazon because they want to get a good price fast. However, Amazon discounts aren’t always that significant. Their selection of highly discounted items is pretty limited.
Because at the end of the day, Amazon is just a marketplace. They’re not providing direct, discounted contracts.
Problem 5. Price Stability
Another issue is that there’s no price guarantee, deals continually fluctuate. For example, if you leave an item in your Amazon cart for a couple of days, you will soon get a price change notification.
GPOs, on the other hand, provide price stability. For example, UNA’s pre-negotiated agreements guarantee pricing won’t change for as much as three years at a time.
Problem 6. Scalability
Bottom line, for an occasional box of paper or extra set of sticky notes, Amazon works fine. However, when you need thousands of items in multiple categories, they can’t guarantee you’ll get the best price or experience. Amazon was built for B2C, and it’s not designed for large scale.=
The good news is, if you’re looking for secured contract discounts with top providers, you don’t have to pay to get it. UNA helps organizations like yours save an average of 22% on their indirect spend. And because UNA brings volume to our suppliers, they cover our fees. Which means businesses can sign up and use our deeply discounted contracts for free.
Of course, partnering with a GPO won’t be your whole procurement strategy, but it’s an innovative solution that can make a real difference in reducing your unplanned spend.