Spend Matters Papers: Sourcing Optimisation – Extracting Value from Complexity

So here’s a plan - through August we’re going to highlight all the research papers, briefings and so on that we’ve produced in the last two and a half years. We’ll  include what we said when we first launched it, and of course the link so you can download – free on registration. Why not use the quiet time in August to brush up on some procurement thinking? And none of them have particularly dated, I can honestly say.

Today we have Sourcing Optimisation – Extracting Value from Complexity, sponsored by Trade Extensions.  Here’s what we said when we launched it back in May 2011.

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We’ve mentioned on several occasions advanced sourcing processes and technology – just the other day, we commented that we now have probably the four leading providers of this technology globally amongst our sponsors – BravoSolution, Emptoris, CombineNet and Trade Extensions.

That’s pure coincidence, but it has obviously made me look carefully over the last few months at what this technology has to offer. And I can honestly say – and nothing to do with selfish sponsorship objectives – I’ve come to the view that, so far, most of us in the procurement professions have not grasped quite how fundamental an opportunity this technology presents.  I’ll be expanding on that in two papers this summer, the first one available today.

Maybe because the origins of sourcing optimisation are pretty academic (the founders of Trade Extensions being Maths professors from Sweden for instance), it has been seen as a niche process by many organisations, only applicable in rare cases.  Now, while it is true that we’re never going to use optimisation for every contracting event, looking at it in that way misses the key point.

What point? Simply that it introduces an approach and a methodology that is fundamentally different from how most procurement processes have typically worked.  And – in the right situation – it is much more powerful than ‘traditional’ processes, and is likely to lead to major benefits for the organisations using it.

At the heart of the change in approach is the ability the technology gives us to obtain from the market itself key information around market dynamics, true costs of doing business and economic factors, rather than having to ‘second guess’ the market as we develop our category strategies. The power of the technology then enables us to analyse those responses and develop a sourcing approach that will optimised our value within the constraints that we wish to set (for instance, we may not want 50 different suppliers even if that is the lowest cost option).

So, “Sourcing Optimisation – Extracting Value from Complexity,” is available for download (free of charge) NOW .   It gives some background to optimisation, explains what benefits it can bring, and outlines how it differs from traditional procurement. We’re going to give a couple of further tasters to the Paper over the next few days here as well.

You need to register here to be able to download the pdf, free of charge . It only takes about 1 minute to register, then you will also be able to download all our future papers with a simple login, plus all the Spend Matters US research and best practice papers (that’s another story, but there is loads of really useful and interesting material there).

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