18 Feb Transcepta eliminates supplier network fees
They announced their move last week and explained that they will now offer the Transcepta Network free of charge to suppliers regardless of size, volume, or type of transaction. This approach, they claim, contrasts with other networks who, in their words, “continue to place hurdles to adoption in front of suppliers, requiring suppliers to pay fees, use time consuming manual portals, and participate in data mapping projects that require IT resources”. It’s important to note that Transcepta are not increasing costs to buying organizations.
Transcepta began testing the “free supplier” model in 2010 and they claim that customers enthusiastically embraced the change. “Making the Transcepta Network free to suppliers enabled customers to connect, transact, and collaborate electronically with virtually all their suppliers and at lower overall cost.” they claim.
Their 3 drivers for change are (in their words):
1. Offering free network membership to all suppliers drives adoption.
Results showed when network fees were eliminated, customers enjoyed supplier adoption rates significantly greater than when fees were charged.
2. Network fees negatively impact implementation costs.
When suppliers were charged network fees, they often balked at enrolling in the network and those suppliers that did sign up “charged back” their fees to the customer in many cases. This means that customers who allow their networks to impose fees on suppliers typically fall short of their projects’ potential for increased productivity and experience higher costs for the goods and services they procure.
3. Network fees cause friction between suppliers and Procurement and Accounts Payable.
During on-boarding, suppliers required to pay network fees resisted the initiative, took longer to enroll, and contacted the customer’s Procurement and Accounts Payable staffs with queries, requiring costly, time-consuming follow-up. However, suppliers overwhelmingly accepted the offer to join the network on the first on-boarding attempt when they received free membership and were enrolled by Transcepta on-boarding specialists.
I think Transcepta have a point and in the coming weeks, we’re going to look under the hood of the Transcepta model to see what really makes it tick.