i2 Explores Commodity Sourcing Strategies

I've got to hand it to i2 for investing the time and resources in authoring its own thought leadership magazine, Supply Chain Leader. Even though the gap between issues appears to be quite long -- half a year between the first and second -- the quality of most of the articles is quite good indeed. As an example, I really enjoyed reading their piece on multi-tier sourcing for commodities.

Authored by i2's Manish Govil and Bob Anson, the piece talks about how more companies are taking an active role in getting involved in managing commodity spend and risk at multiple levels within their supply chain. Govil and Anson also discuss how companies are "entering into innovative contracts with suppliers that go beyond the normal unit-price-based negotiations, spot buys or auctions." The techniques they suggest range from the common (e.g., tiered priced based on volume discounts) to the more exotic (e.g., matrix pricing based that takes into account a range of variables such "material type, specification, grade, thickness, width, weight, different treatments" in the ferrous metals area). For a two page article, the detail is solid indeed.

Overall, the piece is an excellent short review of the practical type of commodity risk management and negotiation approaches that manufactures will need to deploy in complex, multi-tier, global environments. I don't think it quite bridges its intended gap between technology and process to promote i2's products, but as a stand alone piece of vendor-authored thought leadership, it's precisely what the global Spend Management doctor ordered. If only other software and service providers would make the same investment as i2!

Along similar lines, few in the market know that i2 has significant capabilities in the Spend Management arena. While not actively marketed, i2 has had, at various points in its history products including eProcurement, catalog management, master data management, strategic sourcing, spend analysis, and multi-tier visibility and sourcing, among other areas. Granted, i2 came very close to disbanding its SRM group following the costly Aspect acquisition debacle. But it still has much to offer to the market for those willing to explore their capabilities, getting past the slim marketing exposure their Spend Management products get in the broader market. I have a feeling that much of what they offer is customized today, but sometimes the "roll your own" configuration toolkit approach can make sense.

Jason Busch

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