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The top capabilities of Sourcing solutions

06/19/2023 By

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This Spend Matters series takes a look at the state of procurement technologies in the market today and whether they meet user demands. Spend Matters is featuring the top 5 digital capabilities of different procurement technologies and what functionality you can expect from average and top performing solutions, leveraging its SolutionMap dataset.

In this article, our analyst Bertrand Maltaverne looks at Sourcing.

What does a Sourcing solution do?

Sourcing solutions offer supporting content and services for managing market approaches (including category strategy), execution (e.g., RFx management and e-auctions) and portfolio/performance management.

Why buy a Sourcing solution

Sourcing solutions help build a top performing supply base by optimizing pre-contract processes to maximize the value of supplier spending. They automate and improve the strategic and tactical sourcing processes all the way from upfront strategy development to final award decisions. They do this in part by integrating sourcing processes with contracting, supplier management and P2P.

Top 5 Sourcing tech capabilities

What’s the state of different procurement technologies in the market today and do they meet user demands? Spend Matters is featuring the top 5 digital capabilities of different procurement technologies and what functionality you can expect from average and top solutions, leveraging its SolutionMap dataset.

Sourcing Top 5 tech
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Exploring the actual market state of the top 5 capabilities

  1. RFx modeling and creation 

The ability to create sourcing events and configure them based on various organizational, category and process requirements.

Sourcing RFx Modeling and Creation
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The average sourcing solution supports the creation of RFxs from templates, from Excel via uploads, from scratch or from past events. Items can be organized into lots, but there are limited configuration options at the lot level. RFx are configured as a single ‘object.’ Cost breakdown and questionnaires are also limited in terms of configuration and can only collect simple data entries. Sourcing automation is possible but limited to simple tasks like supplier invitations and bid acceptance (but not awards).

Top performing solutions provide more guidance when creating RFx by recommending content (templates to be used, suppliers to be invited, etc.). They do so by using AI/ML to surface content and recommend specific actions, which extends their guidance beyond predefined rule-based workflows. An RFx can be configured in many different ways with settings at the item/question level to ensure that all elements required for decisions are collected. I have seen how such capabilities are used by leading vendors to provide sourcing automation for certain low-stakes goods or services.

  1. Bidding and analysis

The capacity to enable suppliers to bid in the most appropriate way and to allow us to analyze/compare offers in various and detailed ways to ensure the right decision-making process (TCO, ESG, etc.).

Sourcing Bidding and Analysis
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The average solution offers suppliers simple means to enter their bids with basic response validations in the form of drop-downs, format checks for dates and email addresses, simple arithmetic operators, etc. The same applies to the feedback they can receive; it is limited to the ability to export reports to Excel that show the average bid/score and each supplier’s bid/score.

From an evaluation perspective, buyers can only score each response manually and only to individual weighted questions or elements, but they can compare offers in a side-by-side view.

Top performing vendors offer suppliers advanced AI/ML-based capabilities to prefill answers based on historical data and, in the absence of historical data, to give advanced price predictions based on the market and the particulars of the buying organization, supplier or individual. Suppliers can also get detailed feedback on how they perform compared to the competition. They can enter complex bids and price schemes using functions and market data. In addition, they can propose multiple alternatives and even entirely new products or services.

From an evaluation standpoint, these solutions support cross-functional processes where each participant only sees and scores they are supposed to see. Answers from stakeholders can be weighted and analyzed based on various criteria. Analysis and comparison can be on all, or just some, offers from all suppliers (including alternatives).

  1. Category intelligence

The ability to provide outside-in intelligence to enhance the sourcing process to ensure that ‘money’ left on the table is minimized.

Sourcing Category Intelligence
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The average sourcing solution allows customers to collect and cement internal knowledge about categories by enabling users to enter information on categories and category strategies to ensure they are known and applied in sourcing events. In addition, they can build simple category-specific KPIs using the platform analytics ability.

Top-performing vendors go beyond this by providing their customers with outside-in intelligence on markets and categories. This intelligence covers data feeds for forecasts (price trends and history) and highly specific third-party sources for both opportunity identification and risk reduction.

Customers can use that knowledge to build their own category strategies and use external cost data to maintain commodity pricing and trends over time by category and item. I have seen how certain providers leverage their analytics capabilities and data model to support category strategization and also price management (vs. market/community price) processes.

  1. Guided sourcing

The capacity to augment users by providing recommendations in terms of process and/or outcome.

Sourcing Guided Sourcing
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The average solution includes some level of guidance that is mostly based on pre-defined rules. The purpose is to provide user support via rules-driven wizards while ensuring compliance with internal processes and best practices. Pricing guidance is based on differentials between prices in bids and historical/current prices.

Top performing vendors go beyond guidance about how an event should be built (cost model to be used, suppliers to be invited, etc.) and include recommendations about when an event should be launched and what outcome should be expected. The providers I have seen use community intelligence (based upon similar events from other users) and even ML/AI that can analyze supply/demand signals, market events and related cost changes (transportation, duties, etc.) and dynamically adjust pricing and category guidance in real time to identify unique or time-sensitive opportunities.

  1. Project/program management

The ability to support collaboration (tasks, milestones, project/program-based sourcing) before, during and after sourcing events.

Sourcing Project:Program Management
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Sourcing often requires internal and external collaboration. It is especially true for complex goods and services or project/program-based procurement (customer projects, NPI, etc.).

The average sourcing solution supports the definition and management of projects, tasks and milestones at a high level. Tasks and milestones can be defined against projects by simply tagging stuff to a project ID/name, include dependencies and have their status and progress tracked. Sourcing events can be linked to a related project or program.

Top performing providers offer project management features similar to best-of-breed project/program management tools. Customers can create complete project workflows, manage and plan (and, when required, re-allocate) associated resources. They can also drill down into specific projects by using interactive dashboards with customized formula-based KPIs. I have seen how these providers link projects/programs and all related RFx by, for example, pushing relevant details from the program (SOP, EOP, part numbers/description, multi-year program volumes) in sourcing events and feeding back the project/program with the outcome of the individual RFx (status, pricing, etc.).

The vendors considered

Corcentric Platform
K2 Sourcing
Market Dojo
mdf commerce
SAP Ariba
Simfoni eSourcing

How ‘Market State’ is derived from the SolutionMap dataset

These ‘Top 5’ (of 20) critical digital capabilities stem from the Spend Matters TechMatch workbench — derived from 157 requirements scored in the Sourcing Spring 2023 SolutionMap solution benchmark.

The Top 5 capabilities are the highest-weighted critical capabilities that are central to the displayed solution market benchmark. They have been developed by Spend Matters team of analysts and refined by procurement users in tech selection projects using our market-proven SolutionMap benchmarking dataset and associated TechMatch decision-making tool.

Spend Matters® SolutionMap Procurement Technology Intelligence

Spend Matters built a better way to help companies, and their consultants, advance procurement practices via technology. SolutionMap compares technologies on two main factors: technical capability (gathered via a rigorous RFI process) and validated customer ratings. Data is refreshed every six months. Participation for vendors is completely non-commercial.

Spend Matters® SolutionMap Intelligence Process Overview

Spend Matters SolMap Process

Featured vendors undergo a rigorous, RFI-based assessment process incl. functionality counter-scoring, supporting materials review, tech demos, and submission of independent customer references. Expert analysts deeply vet solutions capabilities prior to ranking inclusion. Only relevant industry players who meet the criteria determined by Spend Matters are invited in order to create a complete view and optimal intelligence for its members.

  • To learn more about the Spend Matters methodology, click here.
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  • To compare product strengths and weaknesses, try Spend Matters TechMatch to directly assess the capabilities of digital procurement solutions.
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Top Capabilities