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E-Sourcing is Dead, Long Live Intelligent Sourcing Systems

03/14/2018 By

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People familiar with e-sourcing often lament its lack of adoption and how others don’t understand the value it drives. This is missing the point: There’s a reason why adoption of e-sourcing is lower than expected and why sourcing managers often try to avoid e-sourcing. The main problem is that people see it as a crude implement, a sledgehammer that harms supplier relationships when they needed a surgical knife to be more precise and nuanced in their negotiations.

Inflexible auction-like mechanisms or single-shot bid events with all-or-nothing outcomes come with huge risks for both suppliers and buying organizations. Compensating for that can lead to RFX bloat when “Risk Management Theatre” unfolds with dozens or hundreds of open-ended questions being posed to supposedly reduce risks.

Category managers know that crude e-sourcing techniques can lead to nightmarish change management issues, which is one of the key reasons they need to be cautious about any sourcing technology that doesn’t allow for flexibility, scenario analysis, incumbency switching analysis and other insights that mitigate such risks.

Sourcing optimization is one approach that has an engine to allow sourcing teams gather richer contingent offers that are often critical for suppliers. Unfortunately, this is not without it’s drawbacks.

This superior technology costs more and requires more effort to master. However, it does build a model in the background that permits nuanced communications and is powerful enough to capture almost any process you may need. It also allows you to do things you’d never be able to do in face to face negotiations or Excel-based data gathering exercises, because you’d be quickly overwhelmed by options to consider without an engine to search all of the combinations imaginable.

If E-Sourcing is Dead, Who is the New King?

Comparing basic e-sourcing and sourcing optimization is quite like comparing a bicycle and a car, but sourcing optimization also lacked adoption. The most obvious causes here were that:

  1. The learning curve was steeper
  2. The software costs more up front, so it’s easier to buy a cheaper e-sourcing solution

What objectors to e-sourcing rightfully pushed back on is solved by sourcing optimization, but using a solution that is either too complex or expensive for them to get their hands on doesn’t make sense either. There isn’t an appetite among middle-ranked sourcing officers to learn advanced systems.

However, a ray of light is dawning now that may just transform the landscape forever.

The Future is Here, Just not Evenly Distributed

Artificial intelligence is breaking new ground in many applications. From radiology to driving, AI is mastering what were previously considered complex tasks best tackled by humans. Configuring, building and operating optimization-backed sourcing events is one such example.

The solution is automation of best practice: Intelligent systems are AI-driven systems that automatically know how to configure bid events given demand data. Self-detection of categories, bid mechanism recommender systems, automated category reporting and controls all deliver on optimized sourcing events automatically. The future is here, just not evenly distributed.

Learn more at Keelvar’s Atlanta Seminar on April 10: Keelvar World Tour 2018.

Alan Holland is the CEO of Keelvar and is a former Lecturer in Artificial Intelligence at University College Cork, Ireland. 

Keelvar is a modern optimization-backed strategic sourcing software solution for enterprises. Global brands such as Siemens, M&S and McKesson trust Keelvar to deliver maximal value through intelligent and collaborative bid processes.  

Keelvar emerged from Europe’s largest artificial intelligence research laboratory and is the category-defining leader of sourcing robotics, a new and sophisticated solution for intelligent automation of sourcing. With headquarters in Ireland and offices in Dallas, Berlin and Rio de Janeiro, it has 24/7 global support. Keelvar is Gaelic for intelligent and the company’s mission is to deliver intelligent systems for best-practice sourcing.

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