Making the Complex, Simple

How to get better results by incorporating “Big Data” in your Strategic Sourcing efforts.

Monday, February 29, 2016
BY: Henrik Balslev, SVP of Operations

As a strategic sourcing professional, you have to manage many different kinds of spend and each type has different characteristics, complexity, stakeholders and requirements. In order to effectively deliver the results expected, you need to be able to employ different approaches. While a traditional RFQ might work for simpler categories, there will be some that have heavier requirements in collecting, organizing and evaluating the “Big Data” you need to make good decisions.

Enter Complex Sourcing

What: Complex sourcing is any sourcing project where the amount of data to be collected, organized and analyzed is significantly greater than in a typical project and not easily managed via your traditional processes. This could be due to a large number of bidding line items, attributes, stakeholders or bidders. In addition, geographic complexity, commercial models (e.g. tiered discounting) and specification complexity can all play a role in making a project “complex”. SpendMatters does an excellent job of articulating what makes a project complex in their paper here.

Rather than relying on cumbersome spreadsheets with multiple tabs, macros and owners, put your eSourcing platform to work.

Why: Leveraging your strategic sourcing platform for complex bidding projects provides four primary benefits:

  1. Simpler evaluation – complex sourcing platforms provide a myriad of options for looking at the data you’ve received and organizing it to make decision-making easier than in Excel. This also allows you to better prepare for the analysis before all the results arrive. One of Scanmarket’s customers, a global service provider, made one generic Car Leasing analysis file which could be utilized in more than 15 countries.
  2. Simpler process and compliance management – Increasing the number of participants (internal and external) necessitates an automated system for sharing information, monitoring responses, deadline reminders, and version control. This means you can spend less time chasing down responses and more time driving value. A Nordic food producer conducts RFPs on behalf of multiple local production sites and invites all local stakeholders to the RFP to ensure full visibility and transparency as well as a global view of the event.
  3. Avoid human error from suppliers and stakeholders – As you increase the complexity of the information that you are requesting from all participants, so increases the chance that mistakes will be made. By using your strategic sourcing platform and the response constraints, you can ensure that you’re receiving the data you need, where it needs to be. A European manufacturer uses the complex RFP to ensure automatic lock of the bidding structure, and automatic quality check of the data uploaded to the RFP, eliminating bidder errors.
  4. Savings opportunities – Frequently, complex categories have not been frequently sourced precisely because they are “hard”. As you know, any category that has not been sourced in some time will likely have significant savings opportunities if done correctly.
     

Where: There are a host of categories that lend themselves to technology-enabled, data-heavy complex sourcing. Some examples include:

  • Logistics and transportation
  • Direct materials
  • Car Leasing
  • PPE and Safety Equipment

Who: While we often preach the value in broadening the use of eSourcing beyond the strategic sourcing team and out “into the business”, complex sourcing projects are generally best kept under the auspices of the strategic sourcing team. Without a doubt, you’ll need someone from the spend owner team involved since you’re be collecting a lot of very specific information and, importantly, asking your suppliers to put more effort into the project than in a typical sourcing exercise. The spend owner is best positioned to provide the required category expertise and manage the suppliers involved. Lastly, you want to make sure that all the effort doesn’t go for naught and having a spend owner deeply involved increases your chances of post-bid adoption. 

How: The keys to success in complex sourcing are:

  • A strong platform – collecting, organizing and analyzing the large quantities of data inherent in complex sourcing requires a technology platform that can handle it
  • Planning and organization – do your homework first. It will pay off in the end with better results
  • External expertise where needed – see below for some caveats, but definitely take advantage of the many strong resources out there. Don’t go it alone
  • Organizational support for the project – you need both stakeholder and executive support for an effort this large. Make sure you have it, as well as the resources and time you need to do it right

While we are, not surprisingly, partial to the Scanmarket approach, there is no shortage of providers who can help you develop and implement a complex bidding program (Is it time to look at new vendors in 2016?). In general, look for the provider who has the right balance of ease-of-use, functionality and expert support for your organization. However, be very wary of two common traps:

  • A functionality arms race – Get the functionality you need without overwhelming your users. Some providers will try to sell you on a solution having the largest number of bells and whistles. This is common sales tactic in the software industry as some providers try to differentiate themselves. Avoid this at all costs as an overly complex system will reduce adoption, results and user satisfaction
  • Open-ended consulting SOWs – Remember that providers with large consulting practices have a very strong motivation to keep all those consultants busy. That means that they will be tempted to pitch you a full “program” when all you really need is some expert guidance and support in the early stages

Big Data is a term that gets tossed around a lot in our industry these days.

You can use it to your advantage, but only if you do it the right way. If you would like to discuss how complex sourcing can be implemented at your organization, contact your Scanmarket account manager or reach us at www.scanmarket.com.

Scanmarket

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