The Doc's Perspective on Emptoris' Optimization

This morning, I'd like to welcome Dr. Michael Lamoureux to Spend Matters. Michael is editor of the blog Sourcing Innovation and is probably more knowledgeable about optimization technology than anyone else I’ve met in the sourcing world. Because I'm not an optimization expert -- and never will be -- I've asked him to provide his perspectives on Emptoris' optimization capabilities. This is a topic that I've been trying to get to the bottom of for some time (especially as Emptoris compares to CombineNet). Please direct questions on this post directly to Michael: thedoctor [at] sourcinginnovation [dot] com or via the comments feature.

As you all know from Jason's recent post on how Emptoris [is] Making Some Noise Ahead of Sapphire, Emptoris recently came out with a pre-Sapphire announcement touting a number of enhancements to its supply management suite and services, which included "advanced analytical capabilities" as part of their Advanced Sourcing Service. Ever since it came out, I've been trying to find out precisely what these advanced capabilities are, since Emptoris has a habit of over-selling its solution, especially where optimization is concerned. (I've already discussed in detail both in [the comments on] this blog and over on Sourcing Innovation on how MindFlow was in many ways far superior to the Emptoris solution back when Emptoris was claiming to be the best even though MindFlow had a better sourcing model and CombineNet had significantly more power.)

I haven't had much luck. But before I continue I should note the following:

(a) I was the individual behind the original MindFlow model; hence the caveat of in many ways with respect to the MindFlow solution's superiority (as the Emptoris model was smaller, it was, by the nature of optimization, faster and easier to use)
(b) I have consulted, and continue to consult, on other optimization products since then, including competing ones
(c) CombineNet and other companies still choose to brief and discuss their solutions with me (even if only at a high level) due to deep and broad knowledge I have obtained from (a) and (b)
(d) Emptoris has chosen not to brief me since my one contact with them about their spend analysis solution last year, even though I have tried to contact them a couple times (and was even in Boston earlier this year)

Here's what I did find in my search for information on their optimization capabilities:

1. In their Press Release, they promote:

- Advanced Analytics Capabilities that rapidly analyze and optimize 100's of thousands of bids, millions of bid attributes, and 100's of business constraints

2. On their Advanced Functions and Optimization Workshop Course Offerings page, they hint:

- Bid Field Formulas
- Supplier Pricing, Non-Pricing Criteria, and Corporate Purchasing Policies

3. On the Emptoris Product Offering page, they state:

- You can evaluate real-time sourcing trade-offs
- You can incorporate advanced supplier pricing schedules, including bundled pricing, unit volume discounts, and business volume discounts
- Determine the total cost impact of non-price factors
- Give suppliers the flexibility to discount bids with flexible pricing schedules

4. On Emptoris Sourcing Best Value page, they advertise:

- Flexible Cost Modeling, with respect to item mix and lots, volume commitment, consumption patterns, payment terms, contract length, quality, delivery locations, and supplier pricing
- Expressive Supplier Bidding that allows suppliers to bundle items, provide unit volume discounts, offer business volume discounts, suggest substitutions, and express their capabilities subject to flexible negotiation elements such as payment term and quality
- Supplier Performance Ratings can be incorporated

5. Over on Computerworld, Emptoris has provided a slightly more detailed description of their Global Strategic Sourcing Solution. It has the following tidbits:

- Buyers evaluate these factors in combination with non-price factors such as supplier performance ratings and business constraints using optimization-based decision-support tools that let them make the right business decisions
- With flexible cost modeling, Emptoris Sourcing software adapts easily to meet the unique cost, performance, and risk drivers
- Purchasing policies can easily be built into the analysis taking into account factors such as time phasing of demand and delivery options

All-in-all, not very useful. However, an exhaustive web-search does turn up:

- Combined Network Design and Multiperiod Pricing: Modeling, Solution Techniques, and Computation in the Operations Research Journal last year, which has Emptoris' Olga Raskina as a co-author, and which focuses on solving multi-period capacity expansion of optical networks, which tells us that one of their optimization experts has a good understanding of multiperiod models, and this is required to properly implement discount schedules.
- 7 Technologies You'll Be Hearing About This Year from ThomasNet.com Industrial Market Trends in 2004 that has a quote from Kevin Potts that says "One of our clients found that, for an additional $25,000, they could place $2.8 million worth of business with two suppliers instead of six as they had originally planned, which would be less expensive in the long run" which indicates they likely have a (risk mitigation) constraint that limits the number of suppliers that can be selected in a potential award.
- Analysis within e-Sourcing Events indicates that Emptoris is the only company that is offering the more advanced form of feedback information with alternative scenario suggestions but that the time between rounds is on the order of a day, and the auction typically concludes after two to three rounds.

In other words, looking beyond Emptoris' own descriptions of their application is even less insightful.

In summary, we know they (most likely) have:

- basic limit and allocation constraints
- unit and volume discounts
- qualitative constraints
- bundle/lot support
- a good understanding of how to get the most out of what ILog's CPlex has to offer

But they had this two years ago before they bought MindFlow, whose solution contained many elements they should have incorporated instead of burying, since it supported advanced allocation constraints, tiered quotes, native substitution, ship to locations (which is not the same as lot functionality, as native support for ship tos allows for bundles/lots by ship to), etc.

And with the exception of discounts, which could be painfully worked around by creating multiple what if scenarios where one has the discounted prices and one does not in the unitary discount case, I seem to recall them having the rest of this functionality back in 2003.

Which leaves me to wonder how, with the exception of the new form interface, feedback mechanisms, formula entry (for those who don't want to use excel to calculate their costs), and other user interface and usability enhancements, just how their solution has "advanced" from an optimization modeling perspective. Maybe it hasn't really advanced that much at all. It's hard to say. All I really know is that their marketing is extremely similar to CombineNet's. And they've almost copied verbatim CombineNet's positioning, as already discussed in CombineNotes. Obviously, the solution you choose in the end is yours. But even as Emptoris would agree, caveat emptor.

Spend Matters would like to thank Dr. Michael Lamoureux for offering his perspectives.

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