Market Informed Sourcing – Spend Matters Top Papers

In the run up to Christmas and my passing over the Spend Matters UK/Europe reins, we’re going to feature some of the briefing papers I’ve written over the last eight years. We’ll leave those published in 2018 – we will run thought those again in the first week of January to get you back into work mode and thinking about serious matters again.

So, in no particular order, we’ll have a dozen or so of the 80 (yes, 80) papers we’ve featured here. And today let’s go with two we wrote in quick succession around the topic of optimisation, advance sourcing or market informed sourcing – which was our invented terminology, and I still think that is the best way of describing this super-clever software. Both were written way back in 2011, the first for Trade Extensions (since acquired by Coupa, of course), and this was the very first paper we published on this site!  Then that was followed quickly by a paper for BravoSolution, also acquired now by Jaggaer. Here you go …

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Maybe because the origins of sourcing optimisation are pretty academic (the founders of Trade Extensions being Maths professors from Sweden for instance), it has been seen as a niche process by many organisations, only applicable in rare cases.  Now, while it is true that we’re never going to use optimisation for every contracting event, looking at it in that way misses the key point.

What point? Simply that it introduces an approach and a methodology that is fundamentally different from how most procurement processes have typically worked.  And – in the right situation – it is much more powerful than ‘traditional’ processes, and is likely to lead to major benefits for the organisations using it.

At the heart of the change in approach is the ability the technology gives us to obtain from the market itself key information around market dynamics, true costs of doing business and economic factors, rather than having to ‘second guess’ the market as we develop our category strategies. The power of the technology then enables us to analyse those responses and develop a sourcing approach that will optimised our value within the constraints that we wish to set (for instance, we may not want 50 different suppliers even if that is the lowest cost option).

So, “Sourcing Optimisation – Extracting Value from Complexity,” is available for download (free of charge) NOW.   It gives some background to optimisation, explains what benefits it can bring, and outlines how it differs from traditional procurement, and you can  download the pdf here, free of charge .

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Now, we have another White Paper which is being launched this week, free to download, sponsored by our friends at BravoSolution. It's called " Market-Informed Sourcing: A game-changer for Procurement".

In it, we take those discussions on further. In particular, we’re putting our head on the block by suggesting that the opportunities opened up by the latest technology actually change how procurement needs to look at one of our most fundamental processes and methodologies - that of Category Management.

We’re not suggesting that “category management is dead” although we did consider that as a headline grabbing title! We might still be tempted to go for the tabloid type approach. That’s not really what we’re saying, but we believe that for many categories, we need a fundamentally different approach to the strategic procurement process. The platforms available now will enable this and will deliver significantly better value than current approaches.

We’re also making a bold suggestion. One of the reasons that uptake of this technology has been slower than it should be is, we feel, confusion about the terminology.  “Optimisation” sounds a bit mathematical and obtuse.  And every provider has a different term, and while this may help them distinguish their offerings, it leads to confusion in practitioners’ eyes.  So, from now on, including in this paper, we’re going to be calling this process and family of technology solutions “market-informed sourcing” – or MIS for short.

That seems, after some considerable thought, the most appropriate description.  (We’ll explain why next week).  Category Management has always had the benefit of a simple, fairly snappy title that everybody (consultants, practitioners etc) uses and understands. We think that having the same commonality for this process will help to drive adoption and use.

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