Daily Archives: November 29, 2009

The Role of Optimization in Strategic Sourcing – A Brief Introduction

As hinted at in Supercalifragilisticexpialidocious this summer, in this series that I will be starting next week, I will be digging into the recent report on the role of optimization in strategic sourcing from CAPS Research. This report, which is the most extensive effort I’ve seen by anyone [other than myself and my efforts here on this blog, in the wiki-paper, in the e-Sourcing Handbook, and the NLP sponsored podcast (part I, part II, and transcript)] to define the role of strategic sourcing decision optimization, provides a great introduction to someone just getting started with this very valuable, but still under-utilized, technology.

That being said, there are some statements in the report that need to be highlighted, some important points that were missing, some statements that were misleading (at least in my view), and some statements that were, frankly, just plain wrong. In this series, which will focus on some of the finer points of this report, I, as an expert in strategic sourcing decision optimization and a practitioner who has (single-handledly, in the first case) designed two of the leading systems on the market this decade, will focus primarily on those statements that need to be stressed, added, clarified, or corrected. The hope is that upon reading the report and this “editorial”, those of you who have not yet tried strategic sourcing decision optimization will understand, at least at a basic level, what decision optimization is, what it does, the value it can bring, and why you should be using it as part of your sourcing process to save an average of 12% above and beyond what you’ll save if you are still relying on e-RFX and (reverse) auctions alone.

Finally, before we begin, while the report thanked Ariba, CombineNet, Emptoris, and Iasta, you should be aware that Trade Extensions and Algorhythm are major players and that, as far as the doctor is concerned, Ariba does not have a true strategic sourcing decision optimization solution that meets the basic requirements outlined in the wiki-paper.

Next, Part I: Optimization in the Strategic Sourcing Process.

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Rinehart and Andraski’s Top 10 Negotiating Mistakes

In order to whet your whistle for Rinehart’s upcoming guest posts on relationship management and negotiation management, here are Rinehart and Andraski’s Top 10 Negotiating Mistakes, which they have compiled during their research (and which they have described in detail in their books available through the CSCMP store).

  • 10. Negotiators who do not want to negotiate – SHOULD NOT.
  • 09. Negotiators who do not have time to negotiate – SHOULD NOT.
  • 08. Negotiators who do NOT prepare for a negotiation do not have enough information to create a successful outcome.
  • 07. Negotiators who share more information than the other party will gain fewer financial benefits within an agreement than the other party (but may gain relationship benefits if the long term financial benefits can be established).
  • 06. Negotiators who do NOT accurately link the importance of the issues and the discussion order may give away critical information to the other party.
  • 05. Negotiators who are NOT willing to risk resources are more likely to lose from the negotiation than more risk prone negotiators.
  • 04. Negotiators who “care” and cannot walk away from the bargaining table will not maximize their outcomes from each negotiation.
  • 03. The negotiator who STARTS the negotiation, FINISHES the negotiation.
  • 02. Negotiators who openly trust the the party, without history, are less likely to create a WIN-WIN outcome.
  • 01. The negotiator who does NOT accurately assess the power / dependence relationship between the parties will NOT gain the desired benefits from the negotiation.

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