Daily Archives: March 7, 2016

Higher Adoption is Where the True Value of Optimization Lies

Today, Sourcing Innovation (SI) released it’s latest optimization paper, sponsored by Keelvar, on Optimization: Higher Adoption is Where True Value Lies (registration required).

As SI has said repeatedly, optimization is the ultimate sourcing strategy, but optimization is still grossly under-utilized. And this is a crying shame. Because of this, an honest appraisal of its failure to become the de-facto standard approach in all mature Procurement functions is overdue. That’s why, unlike most of SI’s papers to date, this paper looks at the softer side of optimization and starts out by taking a look at why adoption rates are historically low before discussing what is changing in the marketplace and how a radical increase in adoption could be just around the corner. An increase in adoption that is sorely needed if the true value of optimization is to be realized.

So, while previous papers focussed on defining complex sourcing and what comes next, this paper focusses on what is critical to drive adoption: the needs of the average buyer and supplier. It discusses the need for flexibility, speed, and simplicity above feature-bloat and power. The need for user-friendliness over functionality (as only a few categories require the full power of today’s optimization engines). The myths that have been holding you back. And what a modern platform needs to increase adoption not only by Procurement organizations but, more importantly, by users within a Procurement organization. The maximum value is obtained when everyone uses the optimization-backed sourcing platform. Not just a few super-users.

We discuss, for example, how a platform that supports an instant analysis after each RFP is submitted that presents the lowest total cost of ownership taking all costs, capacities, and business constraints into account provides a buyer with considerable value as the buyer can go straight to negotiations, or contracting. These new platforms prevent the buyer from having to waste countless hours on side-by-side comparison reports and off-line analysis to identify the best buy for the organization. This usability allows the platform to be applied to every category, which not only gets more spend under management, but, at the end of the day, pushes more savings straight to the bottom line.

SI strongly recommends that you download Optimization: Higher Adoption is Where True Value Lies (Registration Required) today and then, if you don’t have such a platform, do something about acquiring such a platform.

For example, the vendors who have a true optimization-backed platform will happily demonstrate the power of their platforms on one or more categories you have run in the past. Pick a direct or indirect category (not transportation or packaging, every optimization vendor can do these over-analyzed categories well) where you’ve had issues due to stakeholders not being happy, actual savings being far less than expected, supplier relationships fraying, etc. Then, contact one of the few optimization-powered sourcing solution providers, provide your data, define your constraints, and watch them demonstrate in a matter of minutes how much you could have saved.

But since that won’t be enough, because every CXO says you could always do better in hindsight, kick-off a low-cost paid trial (see SI’s previous post on why paid pilots are the future) on a few jointly-selected current, critical, categories that typically hide large savings opportunities that the organization has never been able to tease out. As the provider helps you run these events on their turn-key SaaS cloud-based offerings, you’ll quickly see the power, the ease, and the real-world results that you can use to build an internal case for acquisition of an unlimited platform license that will quickly be followed by mass adoption. And since it doesn’t cost six (or even seven) figures to get started anymore, there’s no reason not to do it.