Catching Up with Elemica, Starting with Sourcing (Part 2)

See the first post in this series as well.

Even though Elemica offers a range of collaborative supply chain and procurement technologies, its sourcing solutions focus on services-driven approaches rather than technology. As Elemica describe its approach, the firm aims for "high touch" service with an "efficient back office." This is a recipe that several other firms have modeled themselves on over the years, starting with FreeMarkets and AT Kearney Procurement Solutions. Yet today, it's largely undifferentiated from a category expertise and savings model perspective. Elemica, like many other sourcing services firms, appears to sell and win business as much based on its client relationships as its ability to differentiate in a sourcing bake-off situation.

Their sourcing process takes a standard five step sourcing approach that any CPO, Sourcing VP or former management consultant would feel at home with. Starting with a spend analysis (Elemica calls it a spend profile), they then progress to a market scan/commodity profile, bid execution, contract negotiations and finally, post sourcing support. From a pricing standpoint, Elemica will often start on a per-event basis with newer accounts, but then move to what they describe as a "mid-to-high" six-figure relationship over a multi-year contract term. Pricing is based in part on geographies involved (Elemica has sourcing operations in the US, Europe, China, Korea and Japan).

Even though Elemica uses the Ariba Sourcing platform as their core technology in a shared services manner across clients for run-of-the-mill sourcing events, they created their own application for transportation bid sourcing owing to "limitations of the Ariba product's data gathering and optimization" capabilities. Elemica's transportation bid sourcing enables multiple modes (e.g., ocean, truckload, LTL and specialized equipment designed for the energy and process industries). In addition to standard, highly complex quarterly or yearly thousand plus line RFQs, Elemica also enables spot bidding for near-term requirements.

The transportation arena feels like the one place where Elemica differentiates more on domain expertise than its regular sourcing practice (which it positions like any other sourcing services firm rather than putting vertical and category expertise at the forefront of how it describes its unique capabilities). Elemica delivers the basics that specialist competitors are also capable of in the optimization area including self-service capabilities for data upload and analysis, the ability to support large events that basic optimization packages cannot and global support (in Elemica's case, including full translation into nine languages and multi-currency bidding). Yet by offering capabilities for lane information management (which includes a repository of lane data including carriers, rates, ratings, volume and equipment requirements), bidding even management at the lane level and post-bid analysis (including constraint modeling and optimization) designed for the chemical and process industry, Elemica begins to differentiate itself from non-vertically focused logistics sourcing providers.

Still, Elemica's overall volume significantly trails CombineNet, BravoSolution, Emptoris, Trade Extensions and other optimization specialists. In the middle of 2010, Elemica shared that they had implemented 30 transportation bidding events in the most recent six months, spread across 19,143 lanes, 824 carriers, 400K+ bids processed, representing a total of $750 million in spend and a high $140 million (18.7%) savings. While these savings numbers are high, Spend Matters is aware of single transportation bids by other providers with larger overall volume. Still, you can't discount the importance of vertical expertise in certain types of transportation markets.

Jason Busch

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