Daily Archives: February 1, 2011

If You Don’t Understand Your Energy Risk …

… those hard-earned “savings” could disappear overnight if:

  • oil surpasses $100 a barrel again
    (which many economists and futurists think it will do by the end of the year)
  • carbon taxes are imposed
    (which are unlikely to be postponed much further)
  • energy grids hit capacity
    (and the organization is forced to get its own power plants up and running quickly)

And if that isn’t scary enough, there’s a 69% chance that your organization does not understand it’s energy risk, according to a recent survey by Treasury and Risk (as quoted in a recent Technology Review article on Navigating Your Energy Risk). It’s about time your organization calculates its carbon footprint. Unless the risk is known, the organization will be unable to mitigate it when energy prices rise rapidly or carbon taxes are introduced in one of its locales of operation.

High Definition Sourcing – BravoSolution’s Next Generation Sourcing Paradigm

In last week’s post on Next Generation Sourcing, we discussed the need for a modern Supply Management Organization to either take its Sourcing to the next level or suffer decreasing returns. We then said that the starting point for most organizations was the acquisition, and utilization, of a modern e-Sourcing (2.0, if you will) platform that will enable an average Supply Management organization to “knock it up a notch” (even without the aid of a spice weasel).

One solution that can be used to take a Supply Management organization’s e-Sourcing to the next level is the new version of BravoSolution‘s Collaborative Sourcing suite, which was first reviewed here on Sourcing Innovation last year when it collaboratively optimized its way onto the doctor‘s short list (and again in a post that described how its analysis and supplier performance management enabled contract compliance). BravoSolution was one of the provider’s that didn’t stand still last year (which was a quiet year from a market perspective).

BravoSolution has realized for a while now that Supply Management cannot meet the strategic objectives of the business if:

  • the requirements of stakeholders across the business are not met,
  • key stakeholders and suppliers are not actively engaged, and
  • non-price factors aren’t considered in the decision.

That’s why they built their RFX and Auction platform to easily capture price and non-price factors and their collaborative strategic sourcing decision optimization engine to handle scenarios that have rules and filters that can be just as easily defined on non-price factors as price factors. (For example, “At least 10% of supply must come from WMOB”, “waste must not exceed 2%, or “providers must use hybrid vehicles or biodiesel”.)

Moreover, they also realize that a generic one-size-fits-all RFX is not appropriate for many categories, especially those that are complex or that require the collection of a considerable amount of price and non-price data. They have learned that trying to force-fit “expressive” proposal requests into a simple “spreadsheet-based” RFX solution doesn’t always work. Buyers need more than the ability to define RFIs and price tables, they also need the ability do define workflows. It’s not always as simple as “fill out this questionnaire” and “fill out this price table”, especially when quality, capability, or capacity is an issue.

Consider a transportation bid for North America and Europe. If North America has nine regions and Europe has four, there are thirty-six regional pairings in North America and six in Europe. Depending on the division, there could be over fifty different state/province pairings within each regional pairing. Within each state/province pairing, there could be over a hundred lanes from a starting city/town to an ending city/town. All in all, there could be tens of thousands of lanes. Not all carriers will be able to service North America and Europe. Some North American Carriers will only be able to service Canada, the US, or Mexico. Some US Carriers will only do a region. A regional carrier may not do all lanes. If a carrier only does a few hundred lanes within a handful of regions in Canada or the US, you don’t want to ask them about every lane in Mexico and Europe as well.

In order to be truly useful to the buyer, the RFX not only needs to be workflow driven, but driven by supplier responses. If a supplier does not provide the service, they should not be asked about it. Not only does a supplier not want to click “No” or enter “0” or “NA” for every individual lane the supplier does not service, but the buyer doesn’t want to be overloaded with meaningless data. A screen full of “No”s or “NA”s doesn’t convey any useful information. Furthermore, if a supplier indicates they provide a service, such as Hazardous Material Transport, the buyer might need to collect additional details such as certifications and standards followed. But the supplier shouldn’t be asked about something they can’t deliver.

Not only does BravoSolution allow the buying organization to define their own RFX workflows, but they allow the buying organization to create their own category-specific RFX workflows (which can be thought of as dynamic templates) for specific categories or to select one of their pre-packaged ready-made category-specific RFX tools that are ready to go for common categories like transportation and packaging. Not only do these category specific RFX workflows allow a buying organization to quickly collect complex category-specific dynamic pricing and related information, but it allows for quicker analysis as only relevant information is collected. And the events go faster, since a supplier only has to provide details on what they plan to provide or service. Furthermore, for categories like transportation or packaging where pricing is often defined by mile or volume, the supplier can provide generic pricing (formulas) and then override the pricing on specific lanes or box sizes that they are optimized for. When a supplier can provide a response in a few hours online, and doesn’t need to spend a few days offline slaving over a spreadsheet, they are much more responsive.

But BravoSolution didn’t stop with a better RFX (that can pull data in from their SPM platform or last year’s projects and push data out to their auction and collaborative optimization platform, which is the level of integration required in the foundations of a “Next Generation” e-Sourcing platform), they also tackled the biggest problem in many of the first generation e-Sourcing platforms. But that’s the subject of tomorrow’s post.