Trade Extensions – boldly going “Beyond Sourcing”

I caught up recently with Garry Mansell, CEO of Trade Extensions, the only globally leading procurement software firm based in a Norfolk market town. As regular readers will know, Trade Extensions are one of a handful of leaders in what we called “market informed sourcing” (MIS) software – also known as optimisation, advanced sourcing, expressive bidding....

Swaffham - Norfolk's Silicon Valley?

In the two papers we wrote last year (available here and here, free on registration to practitioners) we outline why we feel this process is potentially transformative for procurement – it questions the whole premise behind much of what we call “category management”, for a start.  If you haven’t read the papers and you are at all interested in being ahead of the mob in procurement terms, you might want to do so.

Anyway, Mansell reports that Trade Extension businesses is strong, with revenues up over 20% year on year, and growth in Asia “starting to take off” – and that is highly organic, rather than due to a big push by the firm.  But the most interesting part of the discussion was a couple of case studies from the firm, which reflects the fact that their growth is coming from both their “traditional” auction, sourcing and MIS areas and some exciting new areas.

The power of the optimisation “engine” that sits at the heart of the Trade Extensions product is its ability to interrogate huge amounts of data, and come up very quickly with answers to “what if” questions posed by the user. Usually, that power is applied to a complex sourcing problem. For instance, a task such as - “give me the optimal solution where I have large numbers of suppliers, products, delivery points, discount options, dependencies...”  It has been used heavily for complex distribution tenders for instance.

But now, Trade Extensions are getting into areas that they’re calling “Beyond Sourcing”. The two examples Mansell gave were very different, but both impressive and novel. What grabbed my attention was that, as well as being interesting in themselves, they seem to indicate a visionary way forward for procurement (in some market sectors at least). These ideas could indeed take the profession into a strategic and value adding role in areas such as asset utilization and risk management – and that appears to be much preferable to the  “unit cost reduction” cul-de-sac that procurement often finds itself in, and that we’ve talked about before.

Anyway, we’re just going to outline the cases now, but we’ll come back to them at greater length shortly. In the first, an MIS exercise came up with an optimal sourcing solution – let’s say an analysis of multiple suppliers of direct materials providing goods to multiple factories. But Trade Extensions and the client then considered  risk management scenarios. So what if... all supply from Asia was halted? What if an earthquake struck Mexico? The platform (software) can then re-calculate the solution, obviously taking out the affected suppliers, and present a new answer – with the additional cost identified.

That’s pretty neat, but what makes it even better is combining this, as Trade Extensions have now done, with a mapping capability, so you can physically see on a map the supply chain “routes”, the effect of the risk event and the resulting supply patterns.   That gives a unique (in my experience) and really insightful visual representation of a supply issue.

Example two is perhaps even more impressive. For a major spend category, one large client has developed a detailed picture of every supplier – and some potential suppliers – of this product. That picture includes capacity, equipment inventories, cost structures, working patterns, efficiency assessments. They also have the same picture for their own internal manufacturing facilities.

The MIS / optimisation platform then drives an analysis that goes way beyond simply current supply options. It considers allocation of business, but also investment decisions – the customer can suggest certain investments to suppliers, with the offer of future business. It can also include internal investment options  and informs insource / outsource decisions, or which new suppliers should be approved or developed.

All in all, these examples take procurement into a much broader arena encompassing risk management, supply chain, manufacturing and operations issues, rather than simply negotiating a price or a contract.

And that’s the most exciting aspect of these initiatives. They’re moving the procurement goalposts  away from the simplistic “savings” discussion, into playing a central role in strategic risk management, or in major strategic investment and production planning decisions. We hear a lot about procurement “having a seat at the top table” – this seems to be just the type of involvement that starts justifying that seat!

 

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