Category Archives: Auctions

Are We About to Enter the Age of Permissive Analytics?

Right now most of the leading analytics vendors are rolling out or considering the roll out of prescriptive analytics, which goes one step beyond predictive analytics and assigns meaning to those analytics in the form of actionable insights the organization could take in order to take advantage of the likely situation suggested by the predictive analytics.

But this won’t be the end. Once a few vendors have decent predictive analytics solutions, one vendor is going to try and get an edge and start rolling out the next generation analytics, and, in particular, permissive analytics. What are permissive analytics, you ask? Before we define them, let’s take a step back.

In the beginning, there were descriptive analytics. Solutions analyzed your spend and / or metrics and gave you clear insight into your performance.

Then there are predictive analytics. Solutions analyzed your spend and / or metrics and used time-period, statistical, or other algorithms to predict likely future spend and / or metrics based on current and historical spend / metrics and present the likely outcomes to you in order to help you make better decisions.

Predictive analytics was great as long as you knew how to interpret the data, what the available actions were, and which actions were most likely to achieve the best business outcomes given the likely future trend on the spend and / or metrics. But if you didn’t know how to interpret the data, what your options were, or how to choose the best one that was most in line with the business objectives.

The answer was, of course, prescriptive analytics, which combined the predictive analytics with expert knowledge that not only prescribed a course of action but indicated why the course of action was prescribed. For example, if the system detected rising demand within the organization and predicted rising cost due to increasing market demand, the recommendation would be to negotiate for, and lock-in supply as soon as possible using either an (optimization-backed) RFX, auction, or negotiation with incumbents, depending upon which option was best suited to the current situation.

But what if the system detected that organizational demand was falling, but market demand was falling faster, there would be a surplus of supply, and the best course of action was an immediate auction with pre-approved suppliers (which were more than sufficient to create competition and satisfy demand)? And what if the auction could be automatically configured, suppliers automatically invited, ceilings automatically set, and the auction automatically launched? What if nothing needed to be done except approve, sit back, watch, and auto-award to the lowest bidder? Why would the buyer need to do anything at all? Why shouldn’t the system just go?

If the system was set up with rules that defined behaviours that the buyer allowed the system to take automatically, then the system could auto-source on behalf of the buyer and the buying organization. The permissive analytics would not only allow the system to automate non strategic sourcing and procurement activities, but do so using leading prescriptive analytics combined with rules defined by the buying organization and the buyer. And if prescriptive analytics included a machine learning engine at the core, the system could learn buyer preferences for automated vs. manual vs. semi-automated and even suggest permissive rules (that could, for example, allow the category to be resourced annually as long as the right conditions held).

In other words, the next generation of analytics vendors are going to add machine learning, flexible and dynamic rule definition, and automation to their prescriptive analytics and the integrated sourcing platforms and take automated buying and supply chain management to the next level.

But will it be the right level? Hard to say. The odds are they’ll make significantly fewer bad choices than the average sourcing professional (as the odds will increase to 98% over time), but, unlike experienced and wise sourcing professionals, won’t detect when an event happens in left-field that totally changes the dynamics and makes a former best-practice sourcing strategy mute. They’ll detect and navigate individual black swan attacks but will have no hope of detecting a coordinated black swan volley. However, if the organization also employs risk management solutions with real time event monitoring and alerts, ties the risk management system to the automation, and forces user review of higher spend / higher risk categories put through automation, it might just work.

Time will tell.

Serex – Searing SRM into the CRM World

Serex was founded 23 years ago to help clients select, implement, deploy and effectively use CRM and marketing automation systems, something it still does to this day. However, a few years ago, during a routine meeting, a client asked if it had any systems to support buying because while it had its CRM and order management under control, and working like a fine-tuned oiled machine (their words, not Serex or SI’s), it’s Procurement organization was unable to keep up, and it was having to hire more and more buyers on a regular basis. Serex’s first response was, appropriately, why not use a social media platform to collect bids, and more specifically use a reverse auction and let the suppliers come to it? The answer Serex got was not the answer they expected — the organization had tried over a dozen auction platforms and not a single one met its need. Not one. (Sounds surprising, but when you consider the limitations of first generation auction platforms, it’s really not. And when you consider that marketing from these first generation platforms dominate the marketing airwaves, it would not be a surprise if only first generation platforms were tested.)

So Serex said that if they really wanted a useable solution that worked, they would build one, under an appropriate agreement. First of all, the solution would be designed under the guidance of the CPO, who had a lot of cross-vertical industry experience at Global 3000 companies. Secondly, the buying team would engage in regular review sessions, assist in UI design, and begin to use the beta as soon as it was ready. Third, the company would commit up front to use, so that the system would be developed by buyers, for buyers, and be used from buyers day one. And while new, and basic in some respects, it is obviously an auction platform designed by buyers for buyers that is used by buyers and works. (Serex’s first customer saved over 6 Million in its first year. And since launch, its first few clients have achieved similar success to its first customer.)

But the real proof that the solution is useable, even it is still a point-based procurement solution, is that all of the ten plus companies it is in negotiations with following it’s inaugural ISM event are all Fortune 500 companies, many of which already have big sourcing and procurement implementations with auctions (like Ariba, Zycus, and Emptoris). This only goes to show that while the e-Auction market is crowded, there is always room for a useable solution that does exactly what a buyer needs it to do in an easy and obvious manner. So while the platform has miles to go, the miles it has crossed make it well suited for a certain market. Which market? For now, in SI’s view, the mid-size market with a need for an easy best-of-breed solution.

The platform is essentially an e-Auction solution built to enable buyers to quickly set up and run auctions through quick bidder search and selection, quick product search and selection, quicker selection of which suppliers can bid on which products, and default auction parameters (which can easily be overridden). Complete product specs can be defined or uploaded as attachments if needed. Suppliers can send detailed messages during the auction to request or offer alternate delivery dates or substitutions for quicker delivery, and a buyer can update the auction specs as needed. In addition, all auctions are saved and new auctions can be created as copies of old auctions, and then updated as needed, allowing repeat auctions to be setup in just minutes (which is valuable if a product sells better than expected and an auction needs to be repeated on short notice to meet demand). (The auction platform has a built in attachment viewer that displays standard web formats.)

The platform also has a product manager sub-component that allows a complete product database that can be maintained and uploaded into the auction platform using a standard flat file format with attachments. In addition, a complete bidder database can be uploaded and maintained into the auction platform with all relevant supplier information.

Serex is not an extensive e-Procurement platform, but it’s one that fledgling organizations need when they want to being their strategic sourcing journey.

For a much deeper dive, check out the doctor and the prophet‘s in-depth dive over on Spend Matters Pro [membership required]. (Part I, Part II, and Part III.)

On the Tenth day of X-Mas (2016)


On the tenth day of X-Mas
my blogger gave to me:
Standard Sourcing Posts
Direct Sourcing Posts
Risk Management Posts
Sustainable Posts
e-Procurement Posts
some SRM Posts
some CLM Posts
some Best Practice Posts
some Trend Bashing Posts
and some ranting on stupidity …

Yesterday we focused in on direct sourcing because most platforms, designed for indirect, weren’t up to snuff for direct sourcing and that needed to be pointed out before we launched into a more general discussion and review of (the best posts on) traditional strategic sourcing.

We’re going to start to explain it’s importance by pointing out that If One Wants to Avoid Cost, Then One Should Avoid Cost At All Costs! This is something most organizations don’t do.

When you realize this and go to market for a proper platform (upon which you can find much advice in the archives), remember that
SI Has Been Telling You Solution Provider RFX Templates SUCK for Years!
Solution Provider RFX Templates SUCK! What Do You Do?
So, Do You Throw Provider RFX Templates Out with the Packaging?

This is true whether they are templates to acquire a solution or acquire the products and services that you need to function as a business.

Then, when you get that platform, remember that
If You Are Going to Create RFPs, Avoid RFP Hell!

After all, you already have to contend with
Eight Reasons Best-in-Class Suppliers are Ignoring Your RFP
why give them more reasons to?

But don’t just switch your events over to e-Auctions, because it’s
Time to Remove e-Auctions from the Strategic Sourcing Toolkit.

There is a host of reasons for doing so. One reason is that
Bidding Flexibility is Important to e-Auction Success
but most e-Auction platforms don’t give you bidding flexibility.

Instead, what you get are
The Entanglements of e-Auctions.

In other words, before you put your faith in e-Auctions, ask yourself:
e-Auctions — Savings Machine or Inflation Nightmare?

Come back tomorrow for the eleventh day of X-Mas.

ScoutRFP – Spreading their Silicon Sunlight from the Western Shore

When we last covered
ScoutRFP back in 2014, they were hoping to help laggard Procurement organizations leave the dark ages (Part I and Part II) and enter the modern age. Launching with nothing more than an easy RFP solution (which was a 15 year old solution at the time), ScoutRFP has taken off like a rocket in those organizations that needed an easy, lightweight, solution for everyday events with a price tag they could afford.

The RFP solution was, and still is, 100% SaaS and designed to work with minimal inputs. It guided the user through a minimal workflow to create the RFX, select the suppliers, evaluate the responses, and make a decision. It was very flexible, allowing the user to create the RFX to the level of detail they wanted, or keep it high level (and cut and paste the instructions and questions from Word). And it gave the organization visibility into, and some control of, spend. The CPO could define a hierarchy and see what everyone was doing, the directors could see what their teams were doing, and the buyers would see their events — and all the reports could roll up as well. It was simple, but it hit the suite spot of low complexity and low price for organizations trying to crawl out of the unlit Procurement dungeons.

It was such a hit that, based on this capability and reception alone, ScoutRFP was able to secure $2.75M of funding in 2015 (from NEA, Zapis Capital, and Google Ventures) to extend the platform and raise an additional $9M of funding this summer in a series A funding round. And move west (to San Francisco).

Since then, ScoutRFP has added basic e-Auction capability, project management and savings tracking, Supplier Information Management, and an improved Supplier Portal.

The platform now has the ability to track all requested, current, and upcoming sourcing events and their associated status; categorize the events using any desired organizational categorization scheme; quickly initiate new events (RFX or Auction) from the pipeline; and even auto-include re-sourcing events when contracts are set to expire. Requested events can come from any organizational stakeholder with budget or spending authority, and all spend can be placed under (minimal) management.

In addition to this new project management capability, the savings tracking capability can sum up all savings for a period of interest, in real-time, based upon (negotiated) price differentials and (expected/purchased) volumes, or savings numbers (to date) provided by appropriate Procurement or AP reps. The data is tracked in a drillable fashion and a manager can quickly see how the totals compare across categories, departments, and employees. This allows the manager to ensure that high-value categories get sourced first and that buyers who aren’t delivering value get training (or replaced).

The SIM functionality is basic. It allows the organization to track all supplier information of interest, tag the suppliers with key-phrases of interest (for quick selection by category capability, geography, performance, etc.), and build lists for quick selection in sourcing events. There’s no scorecarding or performance monitoring, but it can be used as a supplier master and it’s easy to get data in as supplier data can be loaded from existing platforms, and updated data can be pushed back out to existing platforms, using the API. And the platform makes it easy to track supplier activity — events they participated in, questions they asked, bids they made, and so on.

In the current version of the platform, suppliers can have their own portal where all of the bids they have been invited to by all of their customers are accessible through a single log in, or, if the supplier prefers [or customer(s) demand(s)], they can have a separate portal for each customer. The suppliers also have the same collaboration features available to the buyers and can invite their peers to collaborate on bids and survey responses.

The system is shaping up nicely and for an in-depth dive on ScoutRFP, and the platform, including its strenghts and weaknesses, see the recent Pro series [membership required] over on Spend Matters (Part I, Part II, and Part III) [membership required] by the doctor and the prophet.

Serex – Bringing Auctions Back to Procurement

At this point in time, you’d think reverse auctions would be old news in Procurement, seeing that FreeMarkets was running reverse auctions twenty years ago and the doctor has repeatedly bashed their use in strategic sourcing (because they are not strategic), but they’re not.

There are two reasons for this.

1. They have an important role to play in tactical Procurement.

and

2. Companies new to strategic sourcing are still convinced by first generation solution providers with great marketing teams that they are still the greatest thing since the spreadsheet and that the historical savings opportunities are still there.

And while the doctor would like to think that the majority of buyers of these solutions fall in group 1, the reality is that the majority of buyers fall in group 2, and, once acquired, will treat every strategic sourcing event as a nail and use the auction tool as a hammer. So if that is the case, then the buying organization better get the best damn auction tool out there (since they will still need the auction for the tactical procurement nails when they figure out there is a better way to do strategic sourcing, and will actually need the auction tool more).

And these organizations will need a useable solution. The reality is that while just about every suite and point-based sourcing and procurement vendor offers an auction tool, not all of these are good auction tools against modern standards. Many first generation tools have no way to bulk select suppliers, bulk select products, bulk upload starting bids, import historical data, bulk upload attachments, etc. — ease of use capabilities you would think that would be standard. In fact, for the most part, only the newer reverse auction tools from smaller best of breed vendors targetting the mid-market tend to have the usability one would expect.

Usability and efficiency capabilities in an auction tool is key. I’ve heard countless stories about big organizations taking 1 to 3 weeks to set up a large global auction for large bill or materials or global category in a first generation tool when that same auction could be set up in a modern tool in 1 to 3 hours.

And this is where Serex comes in. Serex is an interesting entrant in the e-Procurement space. Originally founded 23 years ago to help clients select, implement, deploy and effectively use CRM and marketing automation systems, something it still does to this day, a few years ago, after a routine meeting with a client that asked if it had systems to support buying, it decided to enter the e-Procurement space when it found out that its client had tried, and passed on, over a dozen auction and sourcing platforms because not one met its need. (Serex was shocked at this as it knew there were a lot of solutions and assumed some were good, but figured it one Global 3000 couldn’t find a useable solution, then there must be other companies in this group that couldn’t find a useable solution either.)

So, after securing beta customer support (and a commitment for monthly guidance from the CPO with over two-decades of cross industry experience in large mid-size and Global 3000′s as well as weekly buyer availability), they began development of a new auction solution that would be developed by buyers, for buyers, and used by buyers. (And it is. Serex’s first customer saved 6M in year one and since full launch this year, its first few clients have logged over 14M in savings. And this is one reason why all of its prospects are large mid-size and Global 3000 organizations, despite the fact that the solution best fits the mid-market, which they have traditionally served on the CRM side.)

The reverse auction solution was designed to enable buyers to quickly set up and run auctions through quick bidder search and selection, quick product search and selection, quicker selection of which suppliers can bid on which products, and default auction parameters (which can easily be overridden). Complete product specs can be defined or uploaded as attachments if needed. Suppliers can send detailed messages during the auction to request or offer alternate delivery dates or substitutions for quicker delivery, and a buyer can update the auction specs as needed. In addition, all auctions are saved and new auctions can be created as copies of old auctions, and then updated as needed, allowing repeat auctions to be setup in just minutes (which is valuable if a product sells better than expected and an auction needs to be repeated on short notice to meet demand). (The auction platform has a built in attachment viewer that displays standard web formats.)

And that’s the solution. With the exception of a product manager sub-component and a bidder management sub-component, there isn’t even an RFX, which is probably the biggest short-coming of this new e-Negotiation tool — because sometimes you just want a simple tool to collect bids and make a decision. This is the biggest weakness of the tool. But Serex built it in a little over a year, and can easily build it out considerably in the next year. SI expects that in two years it will more or less compete on par with the other best-of-breed e-Negotiation mini-sourcing suites aimed at the mid-market along with adding capabilities that will cause larger organizations to adopt it onside their first generation Source to Pay platforms that they are locked into (but which are not useable enough to use on the majority of procured categories).