New Paper Shows The Benefits of Optimizing Procurement

Global supply chains have been in need of speed and agility for some time, but procurement as an industry hasn't done a whole lot to step up its game. That is, until the COVID-19 pandemic struck and caused a significant rise in the amount of data sourcing organizations had to process in order to make informed purchasing decisions. Ocean rates skyrocketed, sourcing teams' workloads soared, and there was a scramble to switch to more regular bidding in order to meet market fluctuations and find enough capacity to keep goods moving.

The traditional approach to sourcing goods and services—where buying cycles were often measured in years—was clearly no longer adequate. Instead, a new paradigm using enabling esourcing software that could automate processes to allow companies to return to market frequently and adapt to changing conditions has emerged and been adopted by many innovative leaders in the sector.

This new strategy, Dynamic Market Sourcing, supports an organization's ability to go back to market repeatedly, ultimately leading to better outcomes. In an August 2022 white paper published by SupplyChainBrain, Keelvar experts explain the building blocks of dynamic market sourcing, and how its enabling technologies include a flexible workflow engine that can automate processes for divergent needs, paired with an optimizer that can weigh both price and non-price factors when presenting alternative scenarios for ultimate human decision making.

Buying organizations traditionally had the clout," explains Keelvar Founder and CEO Alan Holland. "But  now the shoe was on the other foot. Suppliers had the power to say, even to the largest buying organizations in the world, ‘We’re not giving you a price for a year but only for two months, or even one month.’"

In order to compete for suppliers' business and pursue more limited supplies, buying organizations had to enter the market more frequently. The amount of data organizations had to process in order to make informed procurement decisions multiplied significantly as a result, increasing sourcing teams' workload as businesses switched from yearly to monthly bidding.

"Procurement organizations, even in large enterprises, had to work to become customers of choice by becoming more dynamic and responsive to markets," Mr Holland continues.

Optimizing Procurement

In order for suppliers to create packages that play to their strengths and preferences, the technology that has to be used to make dynamic market sourcing a reality needs to be able to take in rich information.

Presenting suppliers with a thoughtful, automated process goes a long way toward becoming a preferred customer. Processes that don’t allow narrative information to be included will be rejected by bidders.

Dynamic market sourcing’s supporting technology can automate as much as 90% of the procurement workload and digitize 100% of sourcing negotiations. The technology facilitates increased competition for smaller buys while standardizing sourcing best practices, decreasing costs, promoting data quality and simplifying processes.

Keelvar's sourcing optimization engine can also figure out the impact of non-price factors. If a company has a bias towards lower-carbon solutions, Sourcing Optimizer works out the best combination of offers to award based on the buyer’s preferences and clearly delineates the tradeoffs between cost and non-cost objectives.
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Implementing this kind of intelligent e-sourcing solution can help companies switch from cycle-based to market-based sourcing — freeing up the time of buying personnel and allowing them to concentrate on strategic initiatives.

“The idea is to get out of a tactical, firefighting mindset and get into a more strategic mindset that is planned, predictable, and flexible,” says Dylan Alperin, Keelvar's Head of Professional Services.

"Once the procurement organization figures out the scenarios it wants to consider for a particular category, the process becomes repeatable, perhaps with minor tweaks, so that they can be launched quickly."
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“Let the bots figure out who to negotiate with,” added Mr. Holland, “While humans do the things that bots can’t do.”

Excerpt with permission from SupplyChainBrain - read the full white paper here