Ravacan is a new provider carving a niche in the growing direct materials space

direct materials sourcing chalermchai k/Adobe Stock

To understand why the technology market for direct materials is seeing a rise in young solution providers like Ravacan, it’s important to understand the space and how it compares to the indirect procurement market.

Thanks to several developments over the last decade, indirect procurement organizations have seen a “rising tide” effect in the number of choices and increasing capability of today’s solution providers.

As first-generation indirect procurement solutions moved to the cloud and second-generation entrants gained notoriety, interest in the procurement sector grew — which lead to new funding for startups, providers crossing international borders and incumbents pushing the envelope of what they could do using automation, like RPA, and early attempts at AI, like auto-classification of spend data.

Direct procurement technology, though, is a different story.

While there are choices today for various direct procurement solutions, the pool is much smaller, and the options are less consistently mature (or developing) than their agile indirect peers.

But as technology for indirect procurement becomes more mainstream, the business opportunities of adoption — namely savings generated from these investments — become harder to find. Much of the indirect opportunity involves picking the low-hanging category fruit of poorly managed spend, like tail spend.

Direct materials, however, is still largely run by spreadsheets, email and basic downstream support via ERP/MRP. This means the super-category that constitutes 70% to 80% of a typical business’ spending is still ripe for automation, analysis and improvement via SaaS solutions.

Case in point, the direct materials space has seen recent momentum from younger providers.

Firms like LevaData (AI-assisted direct materials sourcing and analytics) and SourceDay (downstream PO and AP collaboration complemented by supplier performance management analytics) have been racking up customers and funding rounds in North America, fueling renewed interest in the direct space outside of its typical European/DACH sweet spot.

To the list of standalone providers targeting a niche in the direct material procurement space, we can now add Ravacan.

Ravacan: Introduction and Quick Solution Overview

San Francisco-based Ravacan is a true startup — it began in May 2019 and counts its two co-founders and two advisers as the whole company. It focuses on upstream supplier collaboration. Founded by a former global commodity manager with experience in the high tech and automotive industries, Ravacan is initially targeting use cases that direct materials procurement professionals struggle with but aren’t actively addressed.

The provider’s initial foray into the procurement technology arena focuses on managing the quarterly price update process with suppliers. The experience is reminiscent of a Google Sheets or Office 365 approach: Ravacan digitizes the usual vast spreadsheet that contains all of a buyer’s parts, prices, minimum order quantities, lead times and the like, allowing Ravacan to send out requests for updates to all contract manufacturers and receive the proposed changes in a centralized location. This converts a formerly manual, weeks-spanning process into a one-click event that can be reasonably measured in hours and days instead. It also helps avoid the inherent risks for error that merging several smaller spreadsheets back into one can bring.

Making this process fast and error-proof while keeping it simple for all parties involved has been the core focus for Ravacan. Supply production planning is largely driven by the processes and tools that contract manufacturers (CMs), especially those operating in Asia, are comfortable using. Often the Excel templates that OEMs rely on for price updates are first created by their CMs and then customized by the customer for their own needs. To that end, Ravacan built its solution so that it would be familiar to CMs and capable of supporting whatever templates needed to be uploaded into the tool.

The update process is, of course, more interactive than the typical Excel sheet. Users can filter and search via columns, as well as view current status for accept/reject by suppliers for requested information (Ravacan shows a red or green dot next to each amount to indicate status).

Beyond quarterly price updates, Ravacan supports several other use cases:

  • Demand planning. Buyers can project and alter their parts demand via separate views for quantities via program, program allocation per CM location and quantities per CM.
  • Bill of materials collaboration. The tool supports indented BOMs via manual upload and sharing with suppliers. Users can also view a costed BOM where approved prices are rolled up into a flat CBOM. This allows supply managers and CMs to track the top assembly cost and to see the breakdown by part, supplier, destination and date.
  • Supplier information management. Ravacan can house basic supplier information and reference materials needed for collaboration (e.g, design references).
  • Analytics and KPIs. Commonly needed data about suppliers and purchasing personnel (e.g., current spend levels, spend by suppliers, count per commodity, count by category owner) are available and visualized within the tool.

An Interesting Test Case for a Growing Niche

The easiest comparison we can make for Ravacan is to SourceDay, another younger provider that specializes in the direct procurement space. Both vendors have chosen to emphasize the collaboration aspects of purchasing (e.g., quarterly price updates for Ravacan, PO collaboration between ERPs for SourceDay) rather than the nitty-gritty of material sourcing or ordering itself, at least at first.

Ravacan, though, is just getting its feet wet. It currently counts one key customer that is driving the platform’s development, in addition to open calls for testers.

To be sure, the solution’s direction is an ongoing discussion. But in this initial integration we see the following set of positives and areas for improvement:

  • Strengths: Overall the UX approach, especially given how Asian CMs drive the requirements of direct materials procurement for many manufactures, is smart. It takes the familiar environment of Excel and expands its capability to drive efficiency gains while maintaining ease of use. Targeting the specific use case of supplier collaboration for quarterly price updates is also a smart approach, as it gives Ravacan a niche to play in and build out of separate from S2P suites that support direct materials capabilities. Finally, the KPI/dashboarding capability is a nice touch, as is the ability to quickly access reference materials like BOMs.
  • Weaknesses: While Ravacan bills itself as a collaboration platform, the collaboration mechanisms are currently restricted to requests for updates, acknowledgements of price changes and line-item-level commenting — not dispute resolution or discussion mechanisms that are available directly in the platform (e.g., archived messaging, chat). The system also is disconnected from other parts of the technology ecosystem, meaning data input is executed via manual uploads by the client. The lack of integrations to facilitate data interchange between ERP/MRP is a gap worth noting, even if for now Ravacan handles the manual effort. In fairness, minimal ecosystem integration is often the case for young providers, but for direct materials, it is an issue that should be rectified quickly (e.g., Ravacan says an integration with Arena for BOM upload is on the immediate roadmap). Finally, evaluators must note that Ravacan is truly in startup mode: It has one key account and a lot of functionality envisioned but not yet realized.

In sum, Ravacan is just beginning its foray into the direct materials procurement niche, with some interesting potential to realize among North American manufactures that have not yet crossed the technology chasm, like many of their indirect materials peers. Ravacan’s focus is currently on what one could call a niche of a niche — that is, heavily on the problem of managing quarterly price updates with CMs — but we’ll be curious to see how Ravacan fares as interest in dedicated solutions for direct procurement grows.

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