Market Informed Sourcing – Increasing Adoption Continues

Our hot topic this month is focused on the latest tools and technology around eSourcing. As we said here, there are two notable trends that at first sight appear to be pulling in opposite directions. However, we will argue that they are in fact completely complementary.

The first is the continuing growth of what we have called “market informed sourcing” (MIS) and others call advanced sourcing, optimisation, expressive bidding or various other terms. We came up with the “market-informed sourcing” phrase for good reason – it seemed to capture better the essence of this approach than any of the other terms. Finding out how the market best thinks it can meet the needs of the buying organisation, rather than imposing a solution on the market, is at the core of its power.

As we have explained in a couple of papers (which you can download here and here, free on registration) this process changes fundamentally many of the principles of conventional sourcing and category management. Instead of the buyer narrowing down the options and putting out a fairly precise definition of the solution to the market, the idea is to express the requirement in a detailed but non-prescriptive manner, then allow suppliers to offer whatever alternatives they want to.

So that might include only bidding for part of the requirement (on a geographic or seasonal basis perhaps), or conditional offers (“I will offer you this price if we win both x and y”), or combinations of different elements of the supply chain (“we can manufacture and distribute this for you”). All the options can them be compared, constraints introduced and analysed, in order to find the best supply solution.

The growth in the market for software to support this process has been strong in recent years. Solution providers with capability include Trade Extensions, CombineNet and Keelvar (all pretty much specialists in the field), and BravoSolution, Iasta and IBM Emptoris (all offering MIS as part of their wider offering). Keelvar are young, still small, but growing; CombineNet were one of the pioneers but appear to have lost some profile in Europe since their acquisition 18 months ago by SciQuest; Trade Extensions has had a couple of very good years with high growth; Iasta, Bravo and Emptoris all have some good clients but perhaps don’t lead on their capability in this area so much when they are in sales mode.

One interesting point here is how discreet many of the users of MIS tend to be. You don’t see many conference presentations on the subject, and there is a reticence (as we have found) in terms of clients being prepared to feature in case studies. That is simply because this process is delivering real competitive advantage. One of the first presentations I saw on the topic, some years ago, was from an excellent CPO who explained how shocked he had been when MIS delivered 20% savings on the first exercise he ran, on a category that he was convinced his firm had managed very well for some years.

So if you have complex categories and requirements (read our papers to get a more detailed sense of the sort of areas we’re talking about), then do take a look at this. Don’t get left behind by your competitors who may already be on board with this particular eSourcing opportunity.


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