In Parts I and II we noted that that when it comes to e-Sourcing success, you need four main capabilities, or (true) success could elude you. Specifically, you need:

1. A Process
2. An e-Sourcing Platform
3. Actionable Intelligence
4. A Sourcing Sensei

The process is easy. In Parts I and II, SI outlined a generic lucky eight-step sourcing process, which is the basic underpinnings of just about every good sourcing process you are going to come across from a services, software, or solution vendor.

The platform is essentially an ubiquitous commodity these days — especially from an e-Negotiation (e-RFx, e-Auction, and e-Contract Management) perspective where you have dozens of options. (Just remember that not all spend analysis packages are equal. Some aren’t much more than pre-packaged reports and others are just visibility tools, since they allow you to see all your data, but don’t allow you to change the underlying cube and, thus, have limited analytics capabilities.)

Actionable intelligence, at least on a category basis, while not always embedded in the platform, isn’t too hard to obtain in most categories, as there are a number of vendors that package up market indices, trends, and market insight reports that can be easily consumed and applied.

However, finding a true Sourcing Sensei could be harder than finding the bronze coated needle in the industrial farmer’s haystack, and even if you manage to find that Sourcing Sensei, luring her to your organization can be a more significant challenge still. You might be forced to settle for some category-based expert consulting from your local niche sourcing specialty firm. There’s certainly nothing wrong with this approach, as this will allow you to draw from the best-of-the-best in each category and possibly save even more on some key categories than you could with an in-house Sensei who will generally only be an expert in a few categories, but this approach doesn’t necessarily help you with process implementation, and, more importantly, doesn’t help your team use the tools at their disposal to the full extent of their capability (as the category consultants are category experts, not solution experts on your platform).

In other words, you need more than a sourcing-platform and market-intelligence subscription — you need guidance on how to best use the platform and intelligence at your disposal in your (e-)sourcing projects. You need what MarketMaker4 calls Market Making.

Founded by veteran e-Sourcing professionals, formerly of e-Sourcing pioneers that include Trade Extensions, The Ops Cube, AT Kearney Management Consultants, and Archway Consulting who realized in their former roles that one of the biggest needs of an e-Sourcing team was project assistance, especially when it came to proper utilization of an e-Sourcing suite and the integration of market intelligence for category analysis and new vendor identification, they decided that a sourcing platform, even if market intelligence was built in, wasn’t enough. That’s why they built an on-demand SaaS solution platform that not only built in market intelligence and company intelligence, but 24/5 project support from an experienced sourcing professional who is an expert in the platform and who is always a quick chat or call away. (And they mean quick. Customers are guaranteed a response to a chat request by a live person in one minute, every support person has a direct line that can be requested at any time, and the user can switch from chat to phone support at any time^*1 during the chat.) In addition, as these are real sourcing professionals who work for MM4 (and not a third party or outsourced call center), these support people have full access to the MM4 suite ^*2 and can even perform certain tasks for you if you get stuck.

MarketMaker4, which started this decade (in 2010) promises a completely next-generation e-Sourcing system, and that is what they deliver. In our next post we’ll dive deeper into the 4 distinct parts of their solution platform from which their moniker is drawn.

^* Unless, of course, the support person is already on a call, in which case you’re next!
^*2 MarketMaker4 is only offered as SaaS.

In part II.1, we addressed the first four steps of our eight-step generic sourcing cycle and noted that we definitely know what we need to do and how to get started. However, we have yet to address the burning question as to whether or not we know what we need to do to get (each step of) the process right and achieve success. But before we can address that question, we have to first discuss the last four steps of the process (in bold):

• Spend Analysis
• Project Selection
• Strategy Development
• Supplier Identification
• Bid Collection
• Bid Analysis and Supplier Selection(s)
• Contract Negotiation and Award
• Post-Award Contract Management

Bid Collection is mainly collecting the supplier quotes and RFX responses for analysis. It can be done through an (e-)RFX tool, auction tool, or even spreadsheets. Whatever suits the strategy and floats the analysts’ boat.

Bid Analysis is simply analyzing the responses with respect to the project requirements and organizational strategy. Once all the suppliers who cannot meet the organization’s needs are weeded out and a short(er)-list of those suppliers who can meet the cost, time to value, and alignment threshold, all of the bids are put through, depending on the strategy and the tools at hand, a weighted cost or optimization analysis and a final ranking is generated. Then, depending on the strategy (sole vs. dual source, lowest TCO by category etc.), the top supplier or suppliers are selected and the project proceeds to the next phase.

Negotiation is the age old art of trying to get more for less. You want to pay less, your preferred supplier wants more, and you go back and forth until you cut a deal or walk away from the table (in which case you return to the previous step, identify the next supplier on the list, and start the process all over again). (Remember to haggle properly or risk insulting the supplier.) When the negotiation succeeds, a contract is awarded and the procurement part of the sourcing-procurement cycle begins.

Post-Award Contract Management is where Procurement takes over. This is where you implement an easy-to-use organization wide e-Procurement system that everyone can use to place their goods and services requisitions and orders and that will tell them if something is inventory, if there is a product or service under contract that meets their need, and, if neither, if there are preferred suppliers or buying policies that must be adhered to for a fast approval or refund on your expense report. You implement a no-refund policy outside of the system without senior manager approval (one level above your boss), a no-PO no-pay policy across all suppliers, make it many times easier to use the system than to bypass it, and implement end-to-end automated invoice management with m-way matching . Then your spend is under management, your policies are followed, and off-contract purchases and expedited shipments are only made when there is a real need due to an emergency or unexpected surge in demand (against your forecast) and its more profitable to pay more than stock-out.

So yes, we, more-or-less, know how to do it — and we know that when we properly apply spend analysis and spend optimization techniques, we can expect year-over-year double-digit savings. But do we really know what we need to do it right and achieve success every time? Here the answer isn’t as crystal clear. In each phase, we know what we need — good, clean, fine-grained mapped data that we can cube, drill, and enrich until we find the savings opportunity in spend analysis, alignment measures for product selection, market intelligence for strategy development and supplier identification, etc. But what does good, clean, fine-grained mapped data look like, what capabilities must the spend analysis / visibility / reporting tool have, and, most importantly, how do we use the tool and read the reports? How do we determine which of our opportunities is most aligned to our current goals with an acceptable TTV and estimated savings? Where is the market intelligence we need, how do we access it, and how do we integrate it with our data to do a full analysis for project selection and supplier identification? Etc.

For an average organization getting started on the path, just knowing the process and having an e-Sourcing suite is not enough. The organization also needs actionable intelligence to help make the key decisions in each stage, and, in most cases, even if there was up-front training, help using the tool to use just the right functionality to extract the information required to generate actionable intelligence, because no training is complete and no one retains everything the first time through.

So how can the average organization successfully start an e-Sourcing journey? One way is to hire a seasoned pro who is knowledgeable in your key category markets and who has been through the journey before to act as your Sourcing Sensei. But given the high demand for such a sensei, as there are so few, this isn’t an option for everyone. So, if you can’t find, or afford to lure, such a sensei what can you do? Stay tuned!

In part I, we noted that most sourcing cycles are the same, and they all generally consist of the following eight steps:

• Spend Analysis
• Project Selection
• Strategy Development
• Supplier Identification
• Bid Collection
• Bid Analysis and Supplier Selection(s)
• Contract Negotiation and Award
• Post-Award Contract Management

We then noted that at a high level, we know what to do. But then we asked do we really know how to do it? And more importantly do we know what we need to do it right and achieve success? Let’s start with the first question. Do we really know how? For the most part, the answer is yes. Let’s take these topics one by one.

The process of proper Spend Analysis is well understood. You start by identifying the data sources, defining the raw data of interest in each data source, and creating a common schema to map all of the data to. Then you start the lather, rinse, repeat process of classify, map, cube until you have enough data to start an analysis, and, once you have identified the categories to drill into, enough data to accurately do the analysis. Then you start the analyze, asses, report cycle until you have narrowed down your top X opportunities. (For more details on this process, download the free Spend Visibility: An Implementation Guide e-book by Lamoureux & Gunther).

Project selection is fairly straight forward too, it’s simply evaluating the top opportunities identified in the spend analysis phase with respect to alignment with the organizational goals and TTV (time to value). The top Y that best balance identified savings, time to value, and organizational alignment are chosen and (e-)Sourcing projects are initiated.

Once a project is selected, the strategy needs to be identified. Will it be a single or multi-round sealed bid with a final negotiation with the chosen supplier? Will it be a masked or open auction? Or a single best-bid followed by a Total Cost of Ownership Decision Optimization to select the winning supplier(s) for negotiation. Of course, the best savings opportunity and best method will be dependent on current market conditions. If costs have risen sharply since the last contract was cut, the top spend category may not be a good opportunity. If demand is near, at, or exceeds supply, an auction is not likely to get good results. So you analyze the market and opportunity and select a course of action accordingly.

Supplier identification is simply identifying those suppliers who (likely) have products or services that can meet your needs. You can use analyst lists, conference lists, colleague lists, blog lists, and even open directories. You can then cut down to a shortlist after an initial RFI which asks some direct, but easy, questions. (For some good insights on what to ask, start with the SI series on Best Practice Technology Vendor Selection for True Multi-Nationals [Parts I, II, III, IV, V] and Seeking Spherical Supply Solutions? Succeed in the EU! [I, II, III], and if you have access, the archived webinars on the NLPA association site on Making Sense of e- in Sourcing and Procurement: What Solution Do You Really Need? and Acquiring e-Sourcing and e-Procurement Technology: What Questions Should You Really Ask>?)

So we definitely know what we need to do and how to get started. But do we really know what we need to do it right and achieve success? Come back tomorrow as we discuss the last four steps of the process so we can (attempt to) answer the latter question.

When it comes to (e-)Sourcing, every services, software, and full solution vendor has their own process. For example,

On the services front,

DRM Procurement Services proposes:

1. Assess
2. Analyze
3. Strategize
4. Tender
5. Negotiate
6. Implement
7. Complete

Kuvaq composes:

1. Category Profiling
2. Strategy Selection
3. Supplier Identification
4. e-Sourcing Implementation (RFx, Auction, etc.)
5. Supplier Selection and Negotiation
6. Supplier Integration
7. Supply Market Benchmarking

and State of Flux exposes:

1. Project Definition
2. Market Investigation
3. Strategy Development
4. Marketplace Testing
5. Negotiation
6. Contract Implementation
7. Supply Chain Development

On the vendor front,

Moai has promoted a nine-step sourcing process that goes like this:

1. Spend Analysis
2. Strategy Development
3. Supplier Identification
4. RFX Creation and Distribution
5. Negotiation
6. Supplier Award
7. Contract Negotiation
8. Contract Management
9. Contract Fulfillment

Quantris has presented an eight-step sourcing process with a split:

1. Data Collection
2. Analysis/Evaluation
3. Develop Strategy
   — Go / No Go —
4. Vendor Identification
5. Bid Solicitation
6. Negotiation
7. Vendor Selection
8. Implementation

and Iasta developed a seven step sourcing cycle with a parity bit:

1. Spend Analysis
2. Project Data Collection
3. e-RFx and Supplier Management
4. Bid Collection & Negotiation
5. Decision Optimization
6. Award & Contract
7. Post-bid Management

(A Google Image Search^*1 will find them all.)

As you can see, they are all essentially the same, more or less, and all include the following eight^*2 steps, in approximately the following order:

• Spend Analysis
• Project Selection
• Strategy Development
• Supplier Identification
• Bid Collection
• Bid Analysis and Supplier Selection(s)
• Contract Negotiation and Award
• Post-Award Contract Management

So, at a high level, we know what to do. But do we really know how? And more importantly do we know what we need to do it right and achieve success?

To be continued …

^*1 When in doubt, Google that Sh!t.
^*2 To make for a lucky sourcing cycle!