No Advanced Sourcing at Oracle

I was recently asked what I thought about Oracle’s Advanced Procurement Solution, and its optimization offering (new in version 12.0) in particular. The short answer is that it doesn’t make the cut in my book. The core sourcing cycle consists of spend analysis, RFx, auction / bid collection, decision optimization, and contracting. In order to be considered an advanced sourcing application, in my book, the underlying spend analysis technology, decision optimization technology, and contract management technology must support advanced capabilities. Although Oracle Procurement Contracts might be considered a fair contract management tool, it is certainly not advanced and it is by far the most developed of the offerings.

Oracle’s sourcing optimization product is pretty basic. It only supports three constraints: header, which can be used to constrain the maximum award amount or exclude one or more suppliers by scores, line constraints, which determine which, and how many, suppliers can split a line item award, and to what extent, and supplier which can be used to globally limit the number of suppliers and the award to certain suppliers. Basically, they support basic exclusion, capacity, allocation, and qualitative constraints. Not bad compared to most of the “optimization solutions on the market, but not really advanced sourcing.

Regular readers will note that I have four basic requirements for a true strategic sourcing decision optimization product:

  1. solid mathematical foundations
  2. true cost modeling
  3. four key categories of sophisticated constraints:

      capacity, basic allocation, risk mitigation, and qualitative

  4. sophisticated what-if capability

Since it uses ILog CPlex, it meets the solid mathematical foundations (provided that the underlying model is a true representation, and not a heuristic simplification), it has basic what-if capability, it mostly meets the minimum constraint requirements, but definitely falls short on true cost modeling. In order to allow for true cost modeling, a decision support must support tiered bids (or discounts that can model the tiered bids), flexible discounts, separate cost components (or at least flexible adjustments), and fixed costs. To the best of my knowledge, although Oracle’s tool does offer some volume discounts, it does not support multi-level tiered bids, flexible discounts, separate cost components (and at least freight should be supported), or fixed costs. In the constraint department, they do support basic capacity, allocation, risk mitigation, and qualitative constraints, but they are all tied to an item or an entire order. Qualitative constraints should be definable at the supplier, item, or location level, a concept the tool doesn’t yet support to the best of my knowledge, risk mitigation should be definable across item, group, or order, and only item and order appear to be supported, and capacity, allocation, and exclusion should be equally as flexible. Plus, the Oracle tool doesn’t have any constraints beyond these absolute basic constraints.