BestBasket, an Application for Efficient Indirect Procurement in Small and Mid-size Businesses

The Internet opens up new markets for businesses and can thus allow for a significant improvement in procurement. However, this will only apply if the customers are able to handle this huge market. In this paper we show that finding optimal suppliers in B2B marketing is a complex combinatorial problem and present a solution to it. The BestBasket system of Mercateo.com helps customers to handle the problem and to easily manage their procurement in an optimal way. The system is used by 1100 customers each day and 35% of them accept the optimized supplier-porfolio computed by the system. This makes up an overall relevant market of e 150 billion per year in Germany. 1 Background, Indirect Procurement and Purchasing in SMB Procurement is a central business process for almost all companies today. It includes finding suppliers, negotiating prices, logistics, several other complex business tasks and finally purchasing. Large companies have departments for this task and employ experts who arrange for their best possible purchasing of raw materials, capital goods and maintainance, repair and operation supplies (MRO). For small and mid-size businesses (SMB) such a department would in most cases not pay. The direct procurement (i.e. of raw materials and production goods) is often done by the general management and the overall expenditures of the indirect procurement (i.e. of MRO and capital goods) is far too low to make in-house professional procurement profitable. The potential of savings would be smaller than the cost for the procurement staff. Indirect procurement, in particular the procurement of MRO is a very frequent task in many SMB. New office supplies, furniture, computers and many other things are needed for instance. In order to make this task managable several companies offer catalogues of a wide variety of goods for business customers only. In contrast to catalogues for private purchasers, these suppliers are much more flexible in the shipment conditions. Prices depend on the amount ordered, delivery time, insurance conditions and several other factors. This makes the purchasing of MRO a complicated task. SMBs have to select suppliers for all their needs such that their individual overall objectives are optimized. These objectives can be the overall cost, but also delivery time or other factors. For an ideal portfolio of suppliers, the SMB would often have to split their orders.