Spend Matters welcomes a guest post from Ashish Mohan Jha of Zycus.
According to historical records, the first ancient Olympic Games can be traced back to 776 BC. They were dedicated to the Olympian gods and were staged on the ancient plains of Olympia. If today’s sourcing managers observe closely, they will be able to find a lot of commonalities between the Olympics and Reverse Auctions. Wonder why? Here are some lessons borrowed from the Olympics that will also serve you well in a sourcing event.
A revered “brand of choice”-- Is your organization the "customer of choice" for the suppliers? Do they wait for the next term tenders and RFPs? Being a customer of choice isn’t easy; it requires the sourcing team to build the brand over the years. But this goodwill does help in getting a good number and a good quality of participation to start with.
Deciding where to “host” your event-- The Olympics have a very grueling process for selecting the host country, involving great complexity and granularity of rules. Procurement can draw a very interesting inference from this. For most global companies, an appropriate sourcing technology is often a requirement to enable better and efficient sourcing. While there are many e-sourcing vendors in the market who would like to partner with your company, it's important that procurement carries out a detailed vendor evaluation and maps the results with the company's sourcing needs in order to select the correct e-sourcing technology provider.
Building up the excitement-- To put it lightly, there’s always a sense of excitement during the Olympic Games. Be it playing on human emotions through P&G's "Thank You, Mom" ad campaign, or luring the viewers with McDonald's "Win When USA Wins Gold" contest, one just can't ignore the Olympics or not know that it’s taking place.
With so much riding on the suppliers, it's very important for procurement to package and promote its sourcing project well, in fact, so well that the suppliers just can't resist being a part of it. Do you pay special attention to inviting the suppliers well in advance and building up the suspense in the run-up to your big sourcing event? One could add something to the effect of ‘What’s in it for the supplier’ instead of the usual focus on total cost reduction that procurement seeks from its vendors.
Setting up pre-qualification criteria-- Sourcing teams should specify the prerequisites like scale, size, location, competencies, certifications, policy adherences, etc. Companies can put it up on their website or a common portal, so that suppliers have easy access to the pre-qualifying criteria. This helps clarify expectations and avoids application overload from suppliers who do not meet the organization’s standards. This helps the sourcing team save time and effort.
Ability to handle huge numbers-- Every Olympic Game hosts over 13,000 athletes competing in 33 different sports and nearly 400 events. Sourcing for business is a numbers game in itself. What scale can your sourcing process handle? Today, companies source from around the globe in search of low manufacturing and/or labor costs. To find the one supplier that is ideal for your organization, procurement has to evaluate them on many parameters. Evaluating hundreds of suppliers for thousands of line items without using technology is an uphill task. The point to consider is whether your team and your platform have the infrastructure to successfully handle large numbers.
Keeping score by the minute-- It is important for bids to be reviewed collectively and revised for additional rounds of scoring by both internal stakeholders of the company and the participating suppliers. Procurement executives can use sourcing technology, which provides facility for complex online bidding options with multiple pricing and non-pricing parameters involved. Apart from this, would you like your suppliers to also know where they stand? Then you could give them a heads-up after each round. This might aid healthy competition and your suppliers may modify their bids in your favor.
Aim for uncontroversial results-- With the ever-expanding supplier base, instances of fraud and corruption in the procurement cycle are increasing. From procurement to distribution, employees and external parties - such as suppliers, distributors and competitors - all have opportunities to engage in unethical practices, like biased scoring and kickback schemes. CPOs should watch out for red flags to identify poor or non-existent record keeping, unjustified favors by suppliers. Know your team and their motivations well, establish the right work culture, and monitor regularly. E-RFP can be a game changer in this scenario because it maintains transparency in the RFP process.
Making the winner feel special-- The sweet taste of victory. The Olympics are known for their illustrious award ceremonies. Obviously, being awarded is always a special feeling. The Olympics winner is chosen after a grueling competition with athletes from around the world. Sourcing events are no different. They have multiple suppliers from various locations fighting it out on various parameters defined by the company in order to win the coveted contract. Once you know your winner, don't forget to tell him in person how great they were during the entire sourcing event and which qualities helped them bag the contract. Organizations can also have rewards programs to recognize the efforts of the supplier, or design a supplier development program to help them improve their process by giving them the right platform and necessary knowledge.
Inspired beyond the win-- Citius Altius Fortius has inspired generations to sportsmanship. The motto ("Faster, Higher, Stronger") was proposed by Pierre de Coubertin to inspire the athletes to embrace the Olympic spirit and perform to the best of their abilities. Procurement executives, too, can include an admirable motto of, say, "Quality, Reliability, Sustainability" in all their sourcing activities. This will make participating vendors align their processes with goals and services of other departments. Without them working in harmony with your company’s philosophy, you wouldn’t be able to use the supplier relationship to the maximum in securing best prices and diverse product offerings. When a supplier works with you towards your common objectives, they can help you in strategic decisions and competencies.
Avoid ugly surprises-- The Olympics has had its fair share of scandals on account of illegal use of steroids. Similarly, there are certain things that are a complete no-no for any organization looking for suppliers. This includes dealing with a supplier who uses child labor, or sources from a conflict zone, or sells products banned by the government... the list goes on. Many occasions call for physical inspection of the supplier’s factories to ensure they're not operating outside of legal limits. Technology can be a savior when it comes to collecting various compliance certificates and affidavits from multiple suppliers and keeping tabs on who hasn't submitted the documents.
And the winning streak continues… but should it?-- The primary aim of most athletes competing in the Olympic Games is to win a medal, and when we see a streak of continuous successes, it’s a clear sign of that medal winner being ahead of even the best in the pack. Take for example the American swimmer Michael Phelps, who has the most Olympic gold medals and the most medals in total. Likewise, there might be usual winners in your RFP process. While there is no harm in that per se, you need to make sure there aren't any favorites that your team is habitually biased to choose over others, as that may make the chosen vendor complacent and overconfident.
If sourcing is the playground, have you made sure that the sourcing process is well defined and well prepared to handle the suppliers and award the contract to the right player? With the supplier base gone global, costs running high and consumers demanding more, sourcing is getting strategic and more value-driven rather than being operational or tactical.