Daily Archives: September 5, 2014

Why Don’t We Hear Anything About Market Informed Sourcing?

Because the acronym is a MIS!

While I agree that we need more discussion around Sourcing Optimization, I don’t think calling it Market Informed Sourcing is going to help any just because people are afraid of the “O” word. Even though good optimization is “market informed” and uses up-to-date market data, people don’t really understand what “market informed” really is. When people hear informed, they tend to not only think of fact but opinion, and optimization is all about fact, not fiction.

In a recent 3-part series (Part I, Part II, and Part III) by Alan Geelson over on Spend Matters UK, of Keelvar, a company which SI reviewed in its recent post on Strange Name. Uncommon Results, he notes that while there is no consensus on the name that best describes the approach — Market Informed Sourcing (MIS) Sourcing Optimization, or Collaborative Sourcing, the view at the heart of these propositions, namely, that suppliers should be afforded the opportunity to have greater flexibility as to how they engage with buyers, is an important one. And optimization is what enables this.

Furthermore, it also enables all parties to play to their strengths without discriminating against any one group. Suppliers can submit “sealed bid” bids bundling and packaging lots together as they see fit, offering price breaks and rebates for certain volume purchases. And buyers can weight the advantages and disadvantages of aggregating spend with less suppliers, finding the right balance between economies of scale and risk mitigation should one supply source go down.

However, sourcing optimization still has not enjoyed mass adoption. Some reasons for this, as noted by Alan, include:

  • lack of process, technology, and key benefit understanding,
  • cost, which is believed to be prohibitive, and
  • perception of complexity.

In other words, as SI pointed out in its recent post on how, When It Comes to Optimization, You Need Every Insight You Can Get!, it all comes down to

  • misinterpretation and misinformation,
  • cost, and
  • fear.

Even though it should all come down to, as Alan points out,

  • finding savings without “squeezing” suppliers,
  • gaining greater control over outcomes with business constraints,
  • while keeping acquisition cost and operating costs down.

Maybe some day the truth will be known and accepted, but, until then we have to keep spreading the truth.