Admit it. You don’t. You have no clue. You’re still struggling with the basics of model building, data collection, constraint definition, scenario comparison, and, most importantly, when you should use optimization (always, but not necessarily to make the award decision). It’s math, it’s hard, you weren’t trained, and you’re already struggling to keep up with the increasing demands placed upon your Supply Management organization by the C-Suite, stakeholders, and suppliers.
But you should. Costs, including labour and energy, are rising across the board. Inflation is about to make its way back with a vengeance. Markets are uncertain and in some places unstable. It’s getting to the point where all optimization on a category optimized in the last three years is going to do is limit cost increases to inflation. Unless the model is expanded, the category is redefined, or an innovative approach is taken — there will be no more savings to be found.
As a result, you have to take your optimization to the next level. You have to go from T-CAP (Cost of Acquisition and Production/Utilization/Distribution) to true TCO (Total Cost of Ownership) as you work your way to TVM (Total Value Management). You have to learn how to take your modelling and analysis skills to the next level. And you have to be innovative in your application of optimization.
And what does that innovation look like? To find out, download Sourcing Innovation’s new Illumination white-paper on Optimization, What Comes Next (registration required). Sponsored by Trade Extensions, this white paper presents six ways you can merge big data, analysis, and optimization to take strategic sourcing decision optimization (SSDO) to the next level and find savings and cost avoidance opportunities you would never have imagined even a year ago.
The reality is that even if you’re Hackett Group top 8%, regularly applying SSDO to high-dollar and/or strategic categories, and building nine, and even ten, figure sourcing events on optimization, you’ve barely mastered the basics of optimization 2.0. Since the doctor regularly interacts (and sometimes works) with five of the seven providers of SSDO technology (and the two e-CHAOS hold-outs have not upgraded their platforms substantially in years), including the true market leaders, he knows the extent of the projects they have supported and knows that even the most advanced organizations are just scratching the surface of optimization 2.0. But these providers are now taking their products to the next level and have started releasing the foundations of 3.0 capability, with lots more to come over the next few years. The organizations that adopt, and master, these 3.0 capabilities first will be decades ahead of their peers in supply mastery. Decades.
So, if you want to be one of this decade’s Supply Management leaders, download Sourcing Innovation’s new white-paper on Optimization, What Comes Next (registration required) and start preparing for the future of optimization today. It will be worth your while and when you start applying these techniques, you won’t be disappointed.