Why would a procurement team today need to consider a change -- or addition -- to their existing e-sourcing toolset? After all, precious effort and time were spent evaluating that product choice against other offers, selecting and implementing it, training internal staff, on-boarding the bidders, and seeking to drive financial results and process improvements through its use.
The challenges faced by procurement teams evolve. Everything from new business requirements, changing stakeholder preferences, supply-side innovations and limitations, pricing variability, and competitive pressures are all areas that can and do affect the practice of both strategic and tactical sourcing. The tools that support that work must be able to adapt over time to those evolving needs, or risk obsolescence. In fact, it’s quite common for some buyers to “go retro” and resort to workarounds that rely on spreadsheets and email to get the job done because the e-sourcing tool is too constraining.
In canvassing Keelvar’s customers across a range of industries and global locations, we’ve compiled a list of the five most common challenges that they tell us drove them to re-evaluate sourcing tools: Supporting Large Events; Supplier Bidding Flexibility; Optimize Beyond Lowest Price; Starting New Events; and Innovation.
Strategic sourcing teams need to support their largest annual RFPs with greater ease and efficiency. It’s the perfect use case for technology, but many e-sourcing tools simply can’t handle an event over a certain number of items/lanes/SKUs (rows), bid attributes (columns), and invited bidders. The architecture just isn’t designed for it. That means the buyer is back to using the spreadsheet that is home to the RFP and manually collecting all the bids -- or sub-optimally breaking it up into smaller events. Now, that doesn’t mean there’s a perfect tool that can support the largest-sized event that ever could be conceived (especially for the bidders’ perspective, there is a human element to this too, not just tech prowess) -- but real-world annual bidding events should certainly be easily handled.
Suppliers want to put their best foot forward in a competitive bidding process. If the bidder has a financial incentive, favorable terms, or even an innovation or alternative item or lane to submit that the buyer might view as better overall, they want a tool to accommodate those offers. Many e-sourcing tools don’t allow for more flexible event setups that give suppliers those creative bidding options. Not only does this tie the hands of the suppliers, but the procurement team also misses out on getting insights into new areas of potential savings or risk reduction.
Lowest-price-only buying decisions may be fine for simple e-auction events, but in many cases, buyers and their spend stakeholders want to evaluate other criteria. Many sourcing award decisions must weigh price alongside other factors, such as sustainable sourcing practices, delivery speed and reliability, contract terms, capacity, and more.
Some 20 years ago, sourcing optimization tools gained adoption momentum in procurement because those products allowed teams to strategically source and award against more than the basic e-auction, “lowest bid wins” model. In fact, some large procurement organizations use a combination of basic e-auction/e-sourcing tools and sourcing optimization through a larger procurement suite implementation. But while those first-generation sourcing optimization tools still provide that benefit today, they may not as successfully meet the other challenges listed here that customers regularly face -- particularly around AI-powered automation innovations and scalability.
Another common challenge heard from sourcing practitioners is that moving their existing bid sheet templates into the e-sourcing tool, or designing the event within the tool, may not have been as easy as hoped. This is particularly true if the event needs to go beyond simple price-focused bid collection and analysis as described in the previous point. Some teams even relied heavily on consultants to do this work for them, adding further to the total cost of ownership for their solution.
Here it’s important to have an on-boarding and customer success methodology for making an e-sourcing switch. Customers want (and need) this process to be as simple and seamless as possible to minimize operational disruption and drive internal adoption.
Procurement organizations increasingly rely on technology to help them achieve scale, efficiency, and measurable savings to meet their responsibilities. That means sourcing solutions should continue to innovate. Sourcing leaders seeking competitive advantage and agility are looking more closely at technology product roadmap plans to determine if they are partnered with a solution provider that will carry them forward.
One of the newer advancements proven to drive real-world results is the application of automation features that utilize artificial intelligence and machine learning to take on the more tedious tasks. AI-powered sourcing automation makes it possible to have better responsiveness to execute new sourcing events faster and at higher quality and compliance than ever before -- particularly around market-reactive spot bidding and routine mini tendering and e-auctions.
Adding Up Those Challenges: Lower Adoption Means Lower Results
Taken either separately or in any combination, these challenges lead to lower adoption rates of e-sourcing and optimization tools and less incentive to use the tool beyond what is absolutely necessary. There indeed may be wins for those sourcing events conducted in the product, but how many events and results are under-performing, due to size, complexity, frequency, or even buyer training status? This results ultimately in a lower ROI than planned.
Keelvar’s Approach to Tackle Those Challenges
As a best-in-class provider of a modern sourcing optimization and intelligent automation platform, Keelvar’s products from day one have been designed to address all five of the challenges listed above. We take a partnering approach with procurement teams to identify current challenges and on-board those users in a methodical way:
We work on a plan to support the spectrum of sourcing events, from those large, annual and more complex RFPs, through less complex but still strategic events, to the ongoing smaller spot bids/mini tenders/reactive bids that may come at unpredictable frequency.