Category Archives: Market Intelligence

Trade Extensions is Redefining Sourcing, Part II

In part I, we noted that Trade Extensions are redefining sourcing with their TESS 6 sourcing platform, unveiled at their recent user conference (which has already been discussed by the public defender over on Spend Matters UK), and indicated that what they were soon to release was significantly beyond first generation, second generation, even modern (third generation) optimization backed sourcing platforms, even though we didn’t precisely say what that was yet.

We outlined first generation platforms, and what the glaring issues and omissions were; second generation platforms, and noted how the rigid workflows limited not only flexibility but capability; and optimization-backed sourcing platforms, which, while much more flexible and capable and powerful, are also much harder to use for the average user. And we noted that in today’s post, we’d give a little more background on what’s missing.

First of all, especially in first and second generation platforms, usability is missing. The more the user wants to do, the less they are able to accomplish. Workflows are rigid, features are limited, and the optimization model is often fixed. And in third generation platforms, even though the flexibility is there and the optimization model is fluid, the reality is that the more the user wants to do, the more math they need to know, the more formulas they need to write, and the more difficult it is to build the cost models and scenarios.

Secondly, the more involved the process, the harder it is to determine the appropriate workflow. Since the most powerful platform is data centric with few controls, it’s just as easy to create a workflow that results in the core data being overwritten and destroyed or a workflow that results in an incomplete model as it is to design the right model under the right workflow that results in the right model and right scenario. Sometimes only the experienced can figure it out and get it right.

Third, most platforms centred around optimization have little or disassociated analytics support, when analytics and optimization need to go hand-in-hand in advanced sourcing. Even though Trade Extensions, like many leading platforms, has some analytics and reporting support, like many leading platforms, they are not currently best in breed in analytics. Optimization success requires appropriate cost models on accurate data in categories where there exists additional value to be captured. Without good analytics, the best categories may not be identified (and inappropriate categories may be rigorously pursued, wasting valuable time and resources to identify little or no additional value), the cost models may not capture all the relevant components at the appropriate level of detail to maximize the opportunity, and bad data can slip in and invalidate the entire result. Plus, forget about cleansing, mapping, and enriching without strenuous effort. (Considering this is the case in even most standard-faire analytics platforms, which claim to be best of breed, what can one really expect in a sourcing suite where analytics is just a component?)

Fourth, repeating events or creating similar events is typically quite cumbersome. Many platforms allow “copy”, but then a buyer has to go in and delete all the inappropriate scenarios, old suppliers, invalid starting bid data, etc. Some allow templates to be created, but these typically only capture the basic RFX questionnaires and cost models, and significant work is required to set up the timelines (which change little in phase duration), supplier pool, scenarios of interest, current constraints, etc. Trade Extensions allows templating, copying, initiation from fact sheets, and any combination thereof and is better than most, but there is always room for improvement and streamlining.

Fifth, visualization is limited, especially in first and second generation platforms. Most platforms limit visualization to standardized reports with graphics options limited to line charts, bar charts, and pie charts – which are not at all appropriate to visualizing global sourcing requirements and award scenarios. This is one area where Trade Extensions really shines, with Google Maps integration and the ability to plot global supply chains and proposed awards, but their dashboard reports are only average, and new 3-D charts are hitting the market.

Sixth, most platforms have limited support for different types of users and collaborators. While the lead buyer should be the one that builds and runs the event and identifies the award that is most likely the best, stakeholders need to weigh in on initial supplier identification, RFX response scoring, model design, constraints, scenario analysis, and contract proposals. Some collaborators can score, other collaborators can comment, and some users will need to create their own views, reports, and even scenarios. Depending on the affiliation of the user (organization or consultancy helping on the sourcing project) and their role, their access needs to be defined appropriately. Most platforms only have the concept of an admin or a buyer or a reviewer, and these are applied on a platform, and not an event, or task, basis. Again, Trade Extensions does quite well here, but anything to simplify user management for the buyer is a plus.

And so on. But these missing or incomplete requirements are key to advanced sourcing success.

For sourcing to advance, and the full power of advanced sourcing to be realized, a platform has to address these issues (and more) and do so in a way that enables buyers of all levels of experience and capability to take advantage of the platform and realize savings for their organization at an equal level. But this will only be possible in a platform that changes the way sourcing is supported, and that is why TESS 6 is redefining sourcing — so that, to at least a reasonable degree, it can overcome all of these limitations (and more). And do so in a way that makes advanced sourcing a natural exercise for every category — not just the high dollar, strategic or complex.

So just how is TESS 6 going to accomplish all of this?

We’ll finally get to that in Part III.

Trade Extensions is Redefining Sourcing, Part I

At their recent User Conference in Stockholm, recently covered by the public defender over on Spend Matters UK, Trade Extensions unveiled the upcoming version of their optimization-backed sourcing platform. With it, Trade Extensions are redefining the sourcing platform.

In first generation sourcing platforms, you have stand-alone Spend Analysis, RFX, e-Auction, Decision Optimization, Contract Management and, maybe, Supplier Information Management (SIM) modules where each module feeds into the next in a well-defined linear order: Spend Analysis into RFX. RFX into e-Auction, Decision Optimization, Contract Management, and/or SIM. e-Auction into Decision Optimization and/or Contract Management. Decision Optimization into Contract Management. Contract Management into SIM.

In second generation sourcing platforms, which permeate the market today, these modules are better integrated and data is more fluid. Data can flow back and forth between all of the modules. However, flows are still well defined. Data can flow from any module into any other, but only using well defined, scripted, workflows. You can’t break a process, or enhance a process, with capability from another module. For example, you analyze the spend data, and issue an RFX. You can analyze the costs that come back, and when you do, you can pump additional data into the optimization module. But as it’s not common to output multiple scenario awards into spend analysis, slice and dice for cost variances, and understand how the cost models and bids affect the global supply chain, there’s no easy way to push them into the spend analysis module. As a result, a user typically has to save the scenarios in .csv or Excel format and then import them into spend analysis.

In an optimization-backed sourcing platform, like TESS, that is properly defined all data is centralized in a data store and can easily be accessed by the RFX, Auction, Analytics, Optimization, and Contract Management modules. Because the system works off of common centralized data (known as fact sheets in TESS), cost models, and scenarios and not predefined, rigid, workflows, the user can approach the sourcing event the way they want to approach the sourcing event. They can create RFIs, send them out, get data back, create cost models, send them out for completion, analyze them, optimize them, go back to suppliers for cost concession or innovation requests, jump straight to negotiation and award if they get an innovative proposal, realize that a supplier can only satisfy 75%, cut the contract, and then push the unsatisfied demand back to the RFX for a subsequent round for a secondary supplier and so on. It’s extremely flexible. But it takes a skilled user to understand how to manipulate a tool that requires an advanced understanding of models, scenarios, workflow composition, and analysis. In fact, considering the user may not only have to design the workflows, but also the fact sheets, formulas, constraint definitions, and sourcing process, the skill level required to maximize the value potential of a sourcing is often more programmatic than an average user can handle. It essentially takes a skilled software developer to maximize what the platform can deliver.

And even though Trade Extensions, with their leading, state-of-the-art, optimization-backed sourcing platform has dozens upon dozens of clients making very extensive use of their platform and getting industry leading returns, they have also realized that the best results are from the most capable users and that there is always an opportunity to do better still. And not ones to settle for anything but the best there can be (even though they have the most powerful optimization-backed sourcing platform there is), they decided to figure out how to do better still. However, realizing that they were optimization experts and not design experts, they took a step back to figure out what was needed. After much consultation, soul searching, experimentation, user canvassing, and testing, they came up with an approach that will allow not just the pros, but the beginners, to use the platform with the same ease and achieve the same results, no programming skills, or training, required. And, even though they are already industry leading, that’s how they are redefining sourcing.

So what in particular is Trade Extensions doing?

We’ll get to that. But first, a little background on what’s missing (in Part II).

Just What Is A Next Generation Supplier Network?

Just about every vendor with a supplier network these days that is doing any development at all is claiming to have a next generation supplier network, but just what is a next generation supplier network?

To answer this, we first need to define what was a first generation supplier network. But this is easier said then done.

According to the procurement dynamo, in his post on how marketplaces transformed into next generation supplier networks that was posted earlier this year, last generation supplier networks were marketplaces. And that’s more less accurate.

By definition, a marketplace is where suppliers can list their wares, buyers can search and review wares of interest, and contact the supplier to place an order. And that’s pretty much what first generation networks, which weren’t that much more powerful than craigslist or e-Bay, could do.

But that doesn’t a network make. Once these “marketplaces” began to allow buyers and sellers to transmit electronic documents, manage their offerings on a public and private basis (for current customers), and securely collaborate they became networks. And this is all many networks do.

So what is a next generation supplier network? According to the procurement dynamo, first and foremost a supplier network is a collaboration framework where both parties exchange business information in order to perform better together. And the doctor agrees. But any secure messaging portal fits this description, so we need to elaborate.

Secondly, a next generation supplier network is one that allows for seamless e-document exchange in EDI, XML, and other standard, accepted, and (government and regulatory body) approved e-format between buyer and supplier supply management systems. It must provide an open API for integration into these systems because if a buyer or supplier has to log in to send or receive a document, it’s first generation.

Thirdly, a next generation supplier network is one that allows suppliers to manage public and private catalogs, with multiple price tiers on the private side, to allow potential customers to find and browse their ways, and current customers to buy, buy, buy. Similarly, it allows buyers to announce tenders, define their typical needs, and be discovered by suppliers they might miss in their searches.

And fourthly, and this is the biggie, a next generation supplier network must support the development of custom apps that allow a supplier to access a supplier portal or capability on a buyer’s platform (to do VMI, for example) or a buyer to access a buyer portal or capability on the supplier’s (sales) platform to access shipment and status information or query factory stock levels. It must not only be the “glue” that allows people to connect, but processes and platforms to connect as well. We’re not really seeing much of this yet, but this will truly distinguish a next generation platform from a current generation one.

How Do We Accelerate the Adoption of Optimization and Analytics? Part II

In Part I, we began by noting that every organization that adopts Strategic Sourcing saves time, money, and reputation but that any organization that adopts Advanced Sourcing processes and platforms saves more. A lot more. Only advanced sourcing, based on analytics and optimization, saves an organization an average of 10%+ year after year after year, even when traditional sourcing methods fail.

We also noted that even though a tremendous saving opportunity exists, the adoption of modern analytics platforms and optimization-backed sourcing platforms is still minimal, even though modern platforms, unlike their predecessors, are easy to use (and can be used by even the most junior of buyers), suitable for all purchases, and ten times as affordable as they used to be (which means that the ROI they can deliver can be up to 100X their cost). This caused us to ask why they still aren’t being adopted.

We noted that leading minds, including the prophet, have speculated that the reason(s) may include perceived complexity, lack of visualization, lack of integration, lack of guidance, and lack of collaboration, but pointed out that modern systems addressed all of this and this means that the commonly perceived reasons for lack of adoption aren’t the real reason.

So what’s the real reason? Well, as far as the doctor can tell, either people aren’t getting the message, don’t believe the message, or still inherently fear the platform despite the message. The sad fact is all of these are true to some extent.

People aren’t getting the message.

First of all, there are only six providers that offer strategic-sourcing decision optimization (SSDO), but most of these providers still offer SSDO as a stand-alone module, with only two platforms being optimization backed sourcing platform (that makes the optimization and analytics capability available across the platform, where it can be used to score and compare RFX responses and select auction winners in real time against complex cost models laden with constraints). There is only so much education, and marketing, two providers can do.

In comparison, there are dozens of sourcing platform providers that don’t offer optimization, and don’t profit by focussing on the optimization (or even the analytics) message, and, as such, don’t preach those messages. But that’s not the problem. The providers that are threatened by optimization tend to promote the myths and do everything they can to discredit these providers.

People don’t believe the message.

Many first generation providers greatly over-promised and under-delivered with respect to their optimization platforms and, as the saying goes, once bitten twice shy. When your organization spent high six, or sometimes seven, figures and got a solution only the vendor could use, and only successfully on the categories they understood, your return was limited as you were only able to get big savings on a few categories, and could only revisit those categories every few years. As a result, given that these providers promised better usability, flexibility, and ease of use for years, and never delivered, many people don’t believe that modern platforms are years ahead and useable by even junior buyers.

People fear the message.

And different people fear it for different reasons, but they generally fall into two camps. The camp that fears they can’t handle it, or the camp that fears the organization can’t handle the results it will deliver.

They can’t handle it.

They fear that they will have to be highly technical, capable of understanding advanced models, and, most importantly, have a solid command of advanced mathematics. When you consider that, with declining education, only a small percentage of American adults are “proficient” at math (as the US ranked 21st out of of 23 first world countries in numeracy in an OECD survey in 2013), and optimization is based on some of the most complex math there is, the fear is understandable, even though its unfounded as modern platforms hide the complex math and all users have to do is make sure all of the costs, constraints, and associated data elements are entered.

The organization can’t handle the results.

Many fear that if the solutions deliver and they identify savings of 10% or more on a category they are supposed to be experts in, their competency will be called into question and the whole existence of the Procurement organization as it now stands reviewed, because if they were good at their jobs, why were they overspending by so much. This is a valid fear if the executives are idiots, but a smart executive should realize that no human can analyze millions of scenarios in a few hours; that while costs rise in some categories, they fall in others; and that when entire categories can be put out to bid at once, economies of scale in both production and transportation materialize and their interplay can achieve savings that would not otherwise be realizable.

So what do you we do?

Attack the bullshit.

First of all, since the education isn’t working, let’s counter the false claims made by the providers without optimization-backed sourcing platforms. Demonstrate that their claims are baseless. Even though the laggards will be swayed, the leaders and followers will come around.

Make it personal.

Stop selling and start enabling. Thanks to the lies, damn lies, and false promises of early vendors, the buyers that were burned no longer believe vendors. Providers, even direct competitors, of these platforms have to create communities where their customers can engage with their peers and discuss the truths of the platforms they have adopted, warts and all. A dedicated buyer will gladly look past a few warts if it means better job performance (and a bigger bonus) at the end of the day.

Educate the C-Suite.

Help potential buyers educate the C-Suite that the system will deliver better results ONLY in the hand of a true professional, that a significant part of the savings come from the economies of scale and new supply chain models enabled by the software, that optimization can only save so much when applied tactically to the status quo (or, more importantly, like an auction will only generate savings once if not properly applied). Make sure they understand that the current situation is not the result of poor performance by the buyer, but the organization providing the buyer with poor tools.

Any differing thoughts?

How Do We Accelerate the Adoption of Optimization and Analytics? Part I

Every organization that adopts Strategic Sourcing saves time, money, and reputation (that would result from poor sourcing that typically results from tactical buying), but any organization that adopts Advanced Sourcing processes and platforms saves more. A lot more. Only advanced sourcing, based on analytics and optimization, saves an organization an average of 10%+ year after year after year, even when traditional sourcing methods fail.

But despite this, the adoption of modern analytics platforms and optimization-backed sourcing platforms is still minimal, and considering second generation platforms have been in existence for about ten years, and third generation platforms have been hitting the scene for the last couple of years (which can do more than first generation systems ever imagined) that can now be used by even the most junior buyer. There’s no reason that these systems are not in every leading Supply Management organization and every organization that wants to be a leading Supply Management organization.

Why aren’t these systems, which can deliver an ROI not only many times their cost but many times that of every other system, not being adopted?

Well, there are still the rampant myths that they are hard to use, require a PhD, and are only applicable for complex strategic categories, but anyone who does even a bit of research will realize that these myths only had (a shred of) validity with respect to first generation systems. There is also the belief that they are unaffordable (as first generation systems required high six figures, if not seven figures), but again research will illustrate that powerful systems are available in the five figure range and best in class systems, which support the organization end to end, can be obtained on an enterprise basis in the low six figures (and often deliver eight figures of value year after year, a 100X return). But what’s the real reason, and how do we overcome it?

If we want to really accelerate adoption, we have to figure out the critical roadblock. Last year, the prophet, in his post on “brainstorming how to accelerate the adoption of sourcing optimization” suggested the answer resided in:

  • simplifying the non-power user experience,
  • providing dynamic global/geo analysis from a visibility and risk perspective,
  • including greater API-based connectivity to back-end systems,
  • providing decision guidance as to the best models to use and scenarios to run, and
  • allowing for the sharing of models, scenarios, and best practice guidance between users

suggesting that the real reasons were

  • perceived complexity,
  • lack of visualization beyond cost tables,
  • lack of integration,
  • lack of guidance, and
  • lack of collaboration.

But, just like the myths, these reasons don’t apply to modern optimization-backed platforms, which make it easy to import and export data (for file-based integration, which is all that is needed); visualize data on a map and against constraints and identified risks; share models and scenarios; use pre-packaged cost and constraint templates (which is guidance); and walk a user through the advanced sourcing process using a wizard.

So what’s the problem? Why isn’t the adoption being accelerated? We’ll address this in Part II.