First generation sourcing platforms, circa 2005, were a miracle cure for the average Sourcing organization that was drowning in data and demands to save, save, save without enough time or resources to tackle even a fraction of the categories that needed to be under management.
First generation Spend Analysis systems helped the Sourcing team identify the largest spend categories and the largest organizational suppliers, which were prime candidates for the first strategic sourcing evens put through the new sourcing platform.
First generation RFX systems helped the Sourcing team capture more data from more suppliers than ever before and not only better qualify potential suppliers but collect more detailed bid breakdowns for analysis.
First generation e-Auction systems helped the Sourcing team put non-strategic high-dollar categories with very little complexity out to bid for quick savings success.
And, most importantly, first generation decision optimization systems allowed the sourcing team to build realistic cost models, capture constraints, and devise realistic award scenarios that identified real savings.
Many organizations that acquired these suites and applied them successfully saw year-after-year returns of 10%+ on the spend brought under management. And a few are even seeing some savings today, but just like the second auction saw little savings and the third auction saw a price increase, the year-over-year return is dropping. Why? Because while these first generation platforms were infinitely more powerful than anything that had come before, they weren’t designed to capture the full extent of complexity in an average category — complexity that has been considerably increased since the early days of sourcing due to increased outsourcing, increased globalization, increased regulation, and a constantly evolving global marketplace.
The following staples of first generation sourcing platforms just don’t cut it anymore.
- Limited Form-Based Data Collection
that don’t allow the full breadth of responses a supplier could provide to be captured
- Built-in Static Reports (with limited 2-D graphing options)
that don’t evolve as organizational needs evolve
- Single User Sourcing Events
that don’t take into account that complex categories require entire teams
- Limited Approximations
that force high order cost approximations and don’t capture true cost definitions
- Fixed Workflows and No Templates
that don’t adapt to organizational needs
If you want to know what is needed in a sourcing platform to handle the full extent of the complexity in today’s categories, download Sourcing Innovation’s recent paper on Complex Sourcing: Are You Ready, sponsored by Trade Extensions, and find out once for all why optimization is the plan and not just something reserved for a handful of strategic events.