Category Archives: Auctions

MarketMaker4: The Mid-Market’s Market Making Mezzanine

Some of you might say the e-Sourcing space is too crowded. And that certainly was the case in the mid-zeroes — platforms here, platforms there, platforms platforms everywhere. But then came the acquisition frenzy where mid-sized players swallowed smaller players and start-ups before getting swallowed up in turn by the dominant players who, in the last couple of years, themselves were swallowed up by the massive enterprise software providers. As a result, there is an opportunity, especially in the NA (North American) market for a couple of new players – provided, of course, that such players bring new and innovative solutions to the table (that address the needs of a considerable market segment).

As a result, even though the EU (European Union) vendors are starting to enter the sourcing market in a big(ger) way in NA, there is still an opportunity for someone new if they go about it the right way. So, despite the fact that many thought the market almost dead at the end of the zeroes, it was not completely crazy that a small team of e-Sourcing market veterans, including Mr. Alan Buxton who was the CTO of of Trading Partners back in their heyday, decided in 2011 to start a brand new e-Sourcing software start-up and build a new solution from scratch.

Two years later, MarketMaker4 is a strong offering for the mid-market that needs a new, modern, e-Sourcing solution. In particular, those mid-market companies that are late to the e-Sourcing game, those that are still relying on third parties to manage their sourcing events and are ready to bring those events in house, those that are trying to use ERP sourcing solutions, and those stuck on platforms that, due to acquisition, are stuck in integration limbo and haven’t been upgraded in a while.

So what is MarketMaker4? It’s a four-part sourcing solution that consists of:

  1. A modern e-Negotiation platform
    with a best of breed e-Auction and RFX solution
  2. with a built in supplier discovery engine
    built on the entire D&B database which is augmented with your own supplier database
  3. and market data indices that span commodities and currencies
    that let a buyer know current prices, historical trends, and relative market conditions (when the data is available)
  4. that is augmented with real-time product and sourcing support 24/7/365
    through online chat that connects all of the global support representatives around the world that are currently online.

The MarketMaker4 founders, who were involved in the space for over a decade and who worked for both software providers and services providers learned the following:

  1. While some companies will start with services to get going, these companies will eventually decide that pay per drink is expensive and look for software.
  2. The companies switching from services to software will typically select a best-of-breed software provider with little or no services or support beyond the product. As a result, due to limited sourcing and product knowledge on the in-house buying team, the product typically gets under-utilized and the company fails to achieve the ROI they expected.
  3. When the license expires, the company will typically revert back to a pay-per-drink, but limited to high-value categories, or put its faith in a good e-Procurement system, that will reduce maverick buying and, hopefully, with limited RFX capability, lead to better buying habits.
  4. But even if the company moves to a modern e-Procurement system, the company will typically have little insight into current prices or suppliers that they aren’t already buying from.

As a result, the team decided what was really needed for these types of companies was:

  • An e-Sourcing solution that was easy to use by the average buyer,
  • augmented with real-time support and guidance as new buyers get up to speed,
  • integrated with market index and currency index data (that could be linked into cost models), displayed in easy to understand graphical representations, that the buyer could use to understand current prices and likely trends, and
  • extended with a huge database of potential suppliers.

And that’s what they built. And in each component, they added some innovation to the mix.

  • The e-Auction product, which consumerizes the enterprise capability, is one of the most powerful on the market, with one of the most sophisticated, but yet easy to understand at a glance, interfaces out there.
  • While chat-based, they chose to build a support solution that connects all of their services and support personnel around the world who are currently available rather than use a call-center model. (And as they were just acquired by Xchanging, one of the big players in the Procurement market who are leaving MarketMaker4 as a stand-alone product and company, they now have a large network of support personnel around the world who speak multiple languages and can support their customers in their native language.)
  • Their market index solution is linked into the RFX/Auction module so that the buyer can see current component / raw material prices if there is a market index and can see current currency values as well as trends over the last year for every currency a supplier might bid in.
  • And they were the first e-Sourcing platform to integrate with D&B for the purposes of supplier discovery. Up until they did, most integrations were for risk data or data enrichment. As a result of their partnership and early efforts, they have one of the more powerful integrations and in addition to being able to search on name, location, etc. they can also filter on a variety of dimensions, including risk, size, diversity, etc. that even D&B can not filter on through their API.

MarketMaker4’s e-Auction product and supplier discovery products in particular are quite innovative, and SI will dive into them in more detail in the new year.

iValua: Proving Their Mettle with Source to Settle, Part II

Yesterday, in Part I, we noted that when we last covered iValua in 2010, they were one of the few providers tackling end-to-end sourcing and procurement in a single suite of integrated modules built on one common platform. We noted in Tackling End-to-End Sourcing and Procurement, Part I that this French company had capabilities that, at least to some degree, addressed each of the core phases of the basic sourcing-and-procurement cycle except decision optimization and tax reclamation. Since then, they have added advanced tax tracking capability, and a boatload of other features that include SIM/SPM, Risk Management, Project Management, Enhanced Analytics, and Extensive UI customization. Today, we will continue our coverage of the platform, which includes a module for Supplier Management, that we covered in Part I; Sourcing, Contract Management, and Catalog Management, that we’ll cover today; and Procurement, Invoice Management, Expense Management, Reporting, and Administration that will be covered in the remainder of the series.

Sourcing

Sourcing consists of sourcing project creation, schedule and workflow creation, RFX, and e-Auctions. As noted above, there is no decision optimization, but that is literally all that is missing in their sourcing module.

Project creation in iValua is very powerful as you can not only define the project, but set up the end-to-end workflow, define a schedule, assign team members, and track every step. A project has an identity which captures basic project information, associated documents, a sequence of tasks or actions that will fulfill the project, an assigned team, a schedule, and a forum where team members can collaborate and discuss issues. The tasks and actions supported are quite extensive – and include all of the standard source-to-settle steps such as requirements gathering, supplier selection, RFX preparation, response tracking, proposal evaluation, response analysis, award, and contract. From each task, the users can jump off to the appropriate module in the iValua suite to complete the task. The workflow engine is quite fine-grained.

Contract Management

Contract Management is the creation and management of contract templates, contracts, and signature transactions for e-signing. The gem here is iValua’s online drag-and-drop contract creation capability (with complete audit trail functionality) that works in the browser and fully integrates with Microsoft Word. The view, which has the section index on the left, the section texts on the right (each in their own editable box), and Word-compatible editing options on the top, makes it really easy to construct a contract. The tabs allow for quick access of the header, the team involved in the process, deadline (and auto-renewal) dates, exhibits, main clauses, items and services, negotiated terms, the associated contract scorecard, and the current status of the contract with respect to the defined lifecycle.

Catalog Management

Catalog Management is the process of importing catalogs, creating and managing catalog items, and managing services procurement. Catalog management works as you would expect, and the hidden gem in here is the extensive services procurement management capability, including timesheet capability. The services procurement module allowed for the creation of services profiles (like templates for services requisitions), price structures, and requisitions — which could be fee-based or timesheet-based. The platform has extensive support for services requisitions, and the unique requirements for services requisitions, that require proposed delivery details, schedules, proposed team members, rates, payment schedules, and insurance requirements. It’s not quite as extensive as the capabilities in the Contingent Workforce Management platforms (like FieldGlass) or Agency Lifecycle Management platforms (like DecideWare), but is more than sufficient for the majority of services-based sourcing projects that a typical Supply Management organization will need to address. It is definitely the 80% solution.

We’ll cover the remaining parts of the platform in the remainder of this series. Come back tomorrow!

It’s 24/7 for Robbie and the Coupa Factory, Part III

In Part I we announced that Coupa has been coding up a storm since we last checked in on them last summer (in Robbie and the Coupa Factory), completing Release 9 with major enhancements in expense management, invoice management, and catalog management; the android app; and the first version of their new sourcing module as well as some major improvements to their cart that will show up in release 10 later this quarter. In Part II, we discussed the major improvements in Release 9 around expense management, invoicing, and catalog management. Today we will discuss the new e-Sourcing module and how it makes Coupa one of the first providers to offer an integrated end-to-end e-Sourcing and e-Procurement solution.

The new Sourcing Module is e-Sourcing 1.0. RFPs, RFQs, RFIs, basic reverse e-Auctions, and basic e-Sourcing project management form the foundations of the new suite, which, to be honest, is not much more than you’d find in any e-Sourcing suite on the market, including the free WhyAbe solution available from SourceOne, but that’s not the point. The point is that the inclusion of this module in the Coupa platform makes Coupa, as far as SI can tell, the first Supply Management provider based in North America with an integrated end-to-end Sourcing and Procurement platform. SI has been saying for years that It’s Sourcing AND Procurement and that the only way to truly revolutionize Supply Management is to have one integrated end-to-end platform, and with Coupa’s current offering, with the exception of Decision Optimization (which is only critical for high(er)-dollar (complex) spend in an average organization just starting their e-Sourcing journey), the platform has the foundations of the remaining four stages of e-Sourcing and nine stages of e-Procurement. Some applications, like Spend Analysis, Contract Management, and Tax Reclamation have a ways to go (as tax codes outside North America can get quite complex), but the point is that there is a foundation that allows the entire process to be e-Managed. End-to-end projects can be created that follow the process from cradle (the initial RFI) to grave (when the final order is shipped, received, invoiced, reconciled, paid, and added to the Spend Under Management database for analysis).

Moreover, the entire process can be made available to every user of the platform. While complex sourcing events need to be driven by senior buyers, there is no reason that simple events for simple commodities or services needed by only one department can’t be driven by a senior person in that department, under the supervision of the appropriate Manager or Director. Why should Supply Management oversee every single sourcing event for temporary labour for a system implementation? If there are approved suppliers, approved budgets, and known requirements, there is no reason that a domain expert can’t drive the project with the help of Supply Management, if required. And if the spend for these one-time projects exceeds a threshold, which will be easily detected if budgets are exceeded or reports show significant spend in a given category, then the category can be the next Supply Management sourcing opportunity.

The sourcing module is as easy to use as the rest of the platform, and sourcing events can be created just as quickly as requisitions can be created. RFXs can have as little or as much content as is required; one or more questionnaires can be attached to get information about finances, supplier capabilities, insurance, Corporate Social Responsibility, etc.; an e-Auction can be triggered from an RFX (and initial bids imported); an award can be pushed into the contract management system and the catalog populated; requisitions can be created against the budget associated with the contract and the catalog items; purchase orders can be created on requisition approval; good receipts can be accepted and tracked against requisitions; invoices can be automatically correlated with the purchase orders; and payment approvals can be automatically submitted to your e-Payment system. It’s end-to-end automation of the tactical process, freeing you up for the strategic work.

It’s a great step in the right direction. While Coupa‘s e-Sourcing suite is still at least two versions behind what is being offered by the large e-Sourcing suppliers, it’s the perfect solution for a mid-size organization that doesn’t have a sourcing solution or a current Coupa customer that doesn’t have a widely used sourcing platform due to cost or personnel restrictions. It’s a step in the right direction, and one that is sure to keep the big sourcing providers on their toes, as the big sourcing providers will have to keep innovating to keep two steps ahead of this fast-moving SaaS company.

Bravo to CPO Agenda for Pointing Out That Charging Suppliers to Bid is a Really Bad Idea!

As I’ve told everyone who has ever asked, charging suppliers to bid is a really bad idea. Not only does it generate ill-will, but as this recent article over on the CPO Agenda that gave “tips for understanding why charging suppliers to tender is a bad idea” noted, it could even be illegal. But let’s take the tips one-by-one because it seems that this practice, which started rearing its ugly head at the start of the recession, is still trying to push through.

  • It is Counter-Productive
    It reduces the expressions of interest from time-wasters and quality suppliers alike. This is what goes through the head of a serious bidder with a quality product: “I know my product is quality, and so do my happy customers, so why should I pay $1,000 just for the opportunity to submit a bid? I’m not even guaranteed my product will be evaluated. I’m going to bid on these four other RFxs instead.” So, what you’ll end up with is a set of suppliers who are desparate for your business. But why are they desperate? Maybe their sales team can’t sell worth a damn, or, maybe (and the doctor leans this way) their products just aren’t as good as their competitors, or if they are, they are not able to produce them as cost effectively. Do you really want inferior products or unnecessary premiums for quality?
  • Suppliers with No-Pay-To-Play Policies are Out
    Not only will you likely knock out most of the quality suppliers in your potential supply base who, while quite willing to bear the costs of providing you with product samples, etc, are not willing to pay just to bid, but you will definitely knock out any supplier with a no-pay-to-play policy that prohibits them from bidding on any contract that requires a bid fee. These could be the best suppliers in the world.
  • There’s no Rationale for it
    The logic is that it takes time to collect, verify, and analyze a bid, and while this is true, with modern e-RFx / e-Auction software, you can collect, verify the completeness of, and compare a bid to a benchmark in less than a second. You will likely only need to analyze the Top 5, accoring to your weighted metric, in detail at the end of the day. And, since you can now buy unlimited use of these systems for less than what a single project used to cost, it doesn’t cost any more to collect fifteen bids than five bids.
  • It is Unethical
    There is way too much opportunity for corruption or the perception of favouritism. (In simple terms, you are sending this message: We value suppliers who bribe us for our business.) Plus, there is always a chance that this restriction could be illegal, in breach of fair competitive practices, or public procurement law. Oops! Can you say “class action lawsuit”?
  • It Says Your Company Is An Ass
    Okay, so the original article said it sends a strong message to the supply base you need to connect with that you are actually uncooperative and uninterested in building a relationship that will benefit both parties, but this sums it up nicely. Unless your organization has a monopoly, and can get away with being a self-centered smug corporate ass, just don’t do it.

Will Your e-Auction Be A Success? Or Will You End Up in Court?

 

As an April Fool’s joke, SupplyManagement.com ran a piece about how a ‘court battle looms over e-auction “error”‘ which discussed a fictional case in the UK High Court as a result of legal proceedings initiated by a Chinese business in an attempt to hold a supplier to a price submitted in an e-auction. According to the article, one independent consultant William Sommers (represented by the UK law firm Jester & Prank), said he was participating in an e-auction for project management services while working at home where he left his iPad alone for a few moments to answer the door. He claims that during that time his daughter grabbed the iPad (because she loves a bit of Angry Birds) and must have pressed something to place a bid on his behalf as he returned to the iPad to find a bid he couldn’t change. As a result, to honour the bid he would have had to offer his services for “almost nothing” for a three-month project and argues that the supplier, Hohhot Axle Industries, is being unreasonable in trying to hold him to an offer that was a “genuine mistake”.

While this article was a prank, the issue it discusses is all too real. As pointed out in this recent piece on ‘a genuine bargain or a genuine mistake’, (poorly designed) e-auction software makes it very easy for buyers to submit incorrect bids and, even worse, correct bids that the supplier might decide, after the heat of the auction is over, that it does not want to honour. What do you do when its time to sign the contract, after you’ve informed all of the other suppliers that they lost and won’t be getting your business, and the supplier tries to back out? Especially if you need the goods or services quickly?

Chances are you panic and pay more because not only were the other bids higher, but when you desperately have to scramble to find product quickly, suppliers will know they have the upper hand and won’t be as competitive as when they (believed) they had to compete for your business. You’re taking a loss. But can you recover it in court?

As the above article indicates, if one party makes an error that the other party should know is a genuine error, the offer, even if it is an implied contract, can be rendered void by the courts. In fact, if the court believes that the details or circumstances of the offer from one party are such that the other party should know that a genuine error has been made, or the council for the party can argue that the other party should have known that a genuine error has been made, that is enough to void an offer.

So what can you do to prevent this from happening? Take lots of precautions.

  1. Describe the auction process in detail.
    Describe end-to-end how the event is going to play out from the initial invitation, through the pre-event data collection and supplier qualification, to the actual auction and the final contract award. There should be no unknowns in the supplier’s mind.
  2. Define the rules and force a bidder to accept the rules.
    Describe the rules for participation, the process for bidding, and the terms and conditions associated with the contract award up-front and force the supplier to accept all of the rules, processes, and terms and conditions before they can participate in the event.
  3. Create a secure account for each individual authorized to use the system and force them to accept full responsibility for the account.
    Force each representative to assert that this is their account, they take full responsibility for it, no one else will be allowed to use it, and they take full responsibility for all offers made through the account.
  4. Use software with controls and make sure you use the controls.
    Not only should you force confirmations on bids to prevent “genuine mistakes”, but you should also put limits on how much lower a bid can be with respect to the current lowest bid (to minimize errors as a bid should not drop from 10,000 to 100, which would indicate either a decimal point error or a misunderstanding as to lot size) as well as an absolute floor that defines the minimum acceptable bid (as you should not accept a bid that you know is lower than the theoretical lowest cost based on your cost model and the maximum efficiency that is achievable).

While this may not be enough to guarantee that 100% of bids will have to be honoured, as you cannot always predict the results of a court case if an argument were to go to court, it certainly puts the odds in your favour and minimizes the chances of a supplier making a bid that the supplier would be uncomfortable in honouring (especially since you’d have a stronger case if it went to court).