Easier-to-Use Sourcing Optimization Can Put the Power in the Hands of Everyone, Scout RFP Says

Sourcing optimization holds a lot of promise for crunching the vast amount of data that procurement organizations increasingly face — as well as cutting costs, saving time and guiding buyers and suppliers to better decisions. But to date, the tools used for optimization have been too complex for most professionals to easily examine and understand the wide range of sourcing events presented.

That’s starting to change as procurement technology modernizes and customer-experience expectations rise. Also, negotiations are becoming more dynamic, meaning sourcing can ultimately change the tone of pricing conversations by using a data-driven, analytic approach to negotiations. However, integrating the information can be inefficient and error-prone.

So users need a sophisticated modeling tool, one that sheds the old pain points like being so complex that it requires a mathematician to run it. Today’s users expect to have a modern sourcing optimization tool that will be so approachable that it can be used by anyone in procurement or sourcing to encourage exploration.

To understand how the barriers to using sourcing optimization are dropping and to see the wider adoption of dynamic negotiation and sourcing optimization tools, we asked Scout RFP Co-Founder and President Stan Garber to shed some light on the latest developments.

“Today, we can optimize the entire sourcing process with a click of a button. We’re going from the days of manual Excel modeling and email juggling to a collaborative application that is as simple to use as an iPhone,” Garber said for this Q&A about the future of the procurement and sourcing technology.

Spend Matters: Sourcing optimization is known to be a difficult, complex tool that has been used in niche categories, like logistics. How is Scout trying to expand the accessibility as well as make it collaborative and more user-friendly?

Stan Garber: The reason negotiation and optimization technology isn’t widely used is because it’s complex and requires a large amount of data juggling. In order to expand the use of dynamic negotiations and optimization, Scout is focusing on simplifying the process by delivering an automated tool that users actually look forward to working in. At Scout, we obsess over the customer. Before we even built our sourcing and supplier engagement platform, we interviewed hundreds of sourcing and procurement professionals to understand their unique processes and how we could construct a tool as intuitive as possible for them.

In the past, the only way to generate a sourcing scenario was to understand how to accurately model and hand code a series of constraints for your expensive optimization engine, then wait patiently while it ran. This solution was only available to a limited number of analysts and highly skilled professionals in a few choice categories. The remainder of the sourcing and procurement profession had to take supplier bids, massage them so they fit into Excel, then manually manipulate scenarios until we felt OK with the results. It was copy, paste, tweak, repeat until we ran out of steam. In addition, any error in the copy and pasted data was nearly impossible to locate and fix. Today, users can easily automate this entire process with just the click of a button.

If we can simplify dynamic negotiations and optimization and bring it down to just a few clicks, then the automated system can present the user with measured results and help them understand the best scenarios that are optimized around a few quick constraints. This quick step instantly multiplies the power of automation. Sourcing professionals can quickly see optimized bids that expose various savings scenarios, and, because of this, professionals are more likely to apply this process as it only takes a few extra clicks to drive analytical, measured results.

Lastly, one of the biggest headaches with dynamic negotiations and optimization is the traditionally steep learning curve. Sourcing professionals who have never had an opportunity to use constraint-based optimization, find going from zero to one or two constraints is incredibly difficult. By simplifying and automating the solution, the tool becomes more accessible and mainstream.

What are some additional challenges associated with dynamic negotiations and optimization?

The biggest challenge associated with dynamic negotiations and optimization is the barrier to entry of knowing what to do. If a sourcing professional has never done linear optimization — and, really, who has — it’s a relatively complex math problem that you have to visualize and model correctly in order to produce accurate results. The more complicated your model, the more effort and, ultimately, the difficulty of understanding the complexities of what you are doing, because it’s tough. Now imagine that unless you’re running the exact same set of constraints across all projects, the model has been built from scratch every time. If you’re buying laptops and computer systems today but uniforms and supplies tomorrow, the dimensions would change, and you would have to start over.

The question heard most often is, “How do I get started?”

If you don’t have clear guidance or the ability to just dive in yourself, it is difficult to understand what constraints truly make sense for your business and the unique project that you are optimizing. Most importantly, how do you know what really affects the business? How sensitive is your model to a particular constraint?

If dynamic negotiations and optimization are time-consuming or make it difficult to update constraints, then it’s also harder to just test scenarios to see what the best options for the business are.

Ideally sourcing should be able to easily run 30 to 40 different scenarios, tweak them and see what happens. If this task is automated, then teams are more likely to analyze and benefit from the power of optimization. Conversely, if it takes 30 minutes per model to update a scenario, and you have to wait for it to run, you discourage true exploration for the best business outcome.

If you can get past the challenges, what benefits does dynamic negotiations and optimization have for procurement professionals?

It’s all about finding the greatest business impact. If you optimize correctly, you increase your savings, expand the value from your suppliers and provide your business stakeholders ultimate success. What is even better is that the complete process saves significant time on the overall decision-making process of getting to the best possible option.

Therefore, professionals are going to be willing to try out and present multiple scenario options to stakeholders and easily collaborate on an outcome that provides the best result for the business and the supplier. There’s also a higher probability that the sourcing team can more easily optimize around potential volume discounts from suppliers or rebates based on the total amount of projected spend across all spend with them.

In the future, what does the ideal tool look like?

Sourcing optimization tools traditionally depended on the unique needs of the business and particular industry, but today’s ideal dynamic negotiations and optimization tool is able to look at factors beyond a single price sheet and understand how additional factors that are equally important interact. For example, when looking at a single supplier across an e-sourcing platform, are they generally awarded if they’re the lowest cost supplier? Does this low-cost supplier perform well for the business?

Ideal dynamic negotiations and optimization tools are able to provide this information back to the professional, the business stakeholder and the supplier so they understand what factors contributed to the final decision. Above all, today’s new tools modernize and simplify the data review process. Instead of the traditional amount of time spent creating one scenario, professionals can quickly and easily generate a bunch of scenarios and deliver the one that makes the biggest business impact.

Where is Scout in the process of finding that balance between the traditional approaches to dynamic negotiations and optimization and the launch of a new collaborative optimization tool that’s easier to learn, adopt and use on a daily basis?

Scout has recently launched Scout Dynamic Negotiations & Analytics that has greatly simplified the optimization and supplier review process. The traditional approaches may remain for those who understand the math, know what to do with data, and want to spend time with a hand-crafted model, but as history has shown, automation always prevails.

Scout has seen what the power of accessibility does for our customers. We want sourcing professionals to be able to just dive into a scenario, even if they’ve never tried it before and instantly see the business impact. Rather than dumbing it down, the idea is to make it far easier to do powerful, complex modeling and utilize the results. This business impact is what really pushes innovative technology like Scout and solutions like Dynamic Negotiations and Analytics forward.

Is there anything else that we need to know about Scout’s effort to improve optimization?

We want to democratize sourcing so that it is accessible. We’ve seen far too many analysis tools and value generation systems that work for only a handful of people as they are too complex for most. At Scout, simplicity is central to with the idea of obsessing over the customer. We want our users’ return on effort to be absolutely worth every minute spent in our platform.

Which is why we launched the Scout Dynamic Negotiations & Analytics solution — to enable deeper and multifaceted supplier negotiation and selection. Like all other aspects of the Scout platform, this new module is designed to align intuitively with existing optimization and negotiation processes. Dynamic Negotiations & Analytics empowers users with the analytic data they need to dynamically negotiate with suppliers and achieve even greater business outcomes within their supply base as well as greater impact for their stakeholders.

At Scout, we’re always innovating to improve accessibility and flexibility for sourcing teams. If anyone wants to learn more, I would recommend checking out Scout Dynamic Negotiations & Analytics, seeing it in action or contacting me, Stan Garber, directly.

This Brand Studio article was written for Scout RFP, not as Spend Matters editorial or analyst content.

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First Voice

  1. Jason Busch:

    Please, please help sourcing optimization “cross the chasm” … it is so powerful, but so few use it.

    – Jason

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