Will Combinatorial Auctions Power Public Sector Strategic Sourcing?
This post originally appeared on Public Spend Forum.
When I was in the UK last week, I had the chance to catch up with Trade Extensions’ Garry Mansell. Garry has been in the sourcing business going back to his days at Mars Confectionary, but in the past two decades, he’s focused primarily on the more advanced sourcing approaches that he helped to pioneer in the logistics markets at Freight Traders, which was once a division of Mars. These advanced approaches to strategic sourcing enable suppliers to submit different bids in a competitive environment, with flexibility as to the bundling of line items, quantities, volume rebates, min/max order size, etc.
Then buying organizations can run award scenarios based on adding single or multiple constraints to create an award approach based both on price and non-price factors (e.g., minimum 20% of spend going to diverse suppliers, at least two alternate suppliers awarded for each SKU or lane, no more than 50% of suppliers with facilities in the same region, etc.). These combinatorial approaches to bidding and award analysis can bring huge benefits over traditional sourcing approaches by creating outcomes from negotiations in which both buyers and suppliers feel that they achieved the best match between ability to deliver against “perfect” award requirements.
Yet types sourcing problems are hard to solve given all the computations involved (and really, an infinite number of variables a procurement organization can introduce on the constraint side). Which explains why there are very few vendors who are truly good at this today. Garry’s firm, Trade Extensions, CombineNet (SciQuest) and BravoSolution are the providers we recommend at Spend Matters the most in this area. Iasta and Emptoris/IBM also have capabilities as well in this area.
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