Sourcing Optimization
Tim Johnson - Account Director

Sourcing Optimization – Easier than Ever and an Ongoing Need

  • Blog
  • CPG
  • Sourcing Optimizer
  • Transportation and Logistics

Most people have heard Einstein’s famous quote, that “genius is making complex ideas simple, not simple ideas complex”. The same can be said of the intellectual efforts that have been invested into the sourcing of complex categories.

The hard slog went into creating the tools that make it possible. The genius is in making it simple and easy to use for everyone.

So, ignore the term “sourcing optimization” for a moment, and think “sourcing simplification” instead.

Because for me, the real genius in the latest edition of our Sourcing Optimizer tool is not so much that it has a lot of advanced functionality (although of course, it does) but rather, that it’s designed to make it easy to use those advanced functions, which means more savings and a better looking bottom-line.

Find out more about sourcing with JAGGAER.

Sourcing optimization tools assist procurement teams in finding the best solutions to their most complex sourcing challenges.

Challenges that require market insight, advanced game theory concepts paired with improved combinations to discover solutions to sourcing when there are a wide variety of factors and real-world constraints such as cost, supplier location, supplier risk, volume and bundle options and more.

Manual approaches, and the use of outdated Excel spreadsheets to reconcile these various factors have proved inadequate.

Enterprise organizations are now driving real-time results that enable the resolution of sourcing complexities at greater speed with vastly improved business decision-making.

Into the Mainstream

The early generations of sourcing optimization software achieved some amazing analytical feats.

But setting it up required an extensive investment of time and effort by highly trained analysts and developers.

Just to get started with an optimization project, i.e., to generate a sourcing scenario, you would need to understand the objectives and the constraints around those objectives, then how to accurately model the set of constraints, and you would need to write the code to run the model.

Finally, you would need to train the suppliers so that they could participate effectively in the bidding event.

Obviously, people with such a skillset are rare and in consequence sourcing optimization had trouble entering the procurement mainstream, especially in the early years of sourcing and procurement organizations.

Moreover, there was little return in using it to solve anything other than the most intricate sourcing challenges faced by procurement departments. User organizations were typically already highly advanced and had huge resources behind them, i.e., companies such as Coca-Cola or PepsiCo.

Sourcing optimization is still widely perceived as every bit as complex as the problems it sets out to solve; however, with new technologies and advances in digitalization, optimization is more achievable than ever before.

As is traditionally the case with technological change, perception takes a while to catch up with the new reality.

JAGGAER’s Sourcing Optimizer was designed specifically for the sourcing of complex categories.

Naturally, the early adopters were sourcing experts who have a deep understanding of their categories and needed capabilities beyond what is offered in standard sourcing solutions. But while it has always been, and remains, a true powerhouse of a tool, Sourcing Optimizer has been refined and developed over the years to be more easily configured and used.

Of course, it takes sophisticated technology to turn the complex into the simple. But those complexities, analyzing millions of data sets and rules, are hidden from the user and what the user gets to experience is a smooth and seamless user experience.

Easy Wizard: Guided Events

An event wizard intelligently guides users step by step through the entire process of setting up a sourcing event. Setup is further accelerated with the use of RFxpress templates and live, strategic, online resources.

Users simply plug in their own data and the system guides them through what is needed for their specific category.

JAGGAER Sourcing Optimizer has thus evolved into a solution that guides the user towards the right award decisions.

This is a major step forward, because it opens up possibilities for a larger user base looking to make better sourcing decisions across a wider range of categories and in different industry sectors.

You need to understand your category, of course, but you don’t need a PhD in Advanced Analytics to get results. In fact, Sourcing Optimizer will do all the calculations for you once you have entered the scenario constraints and has many different reporting tools for you to present the data in any way you need.

The Intelligent Award Navigator (IAN) feature introduces artificial intelligence and is another great leap forward in sourcing optimization computing capabilities.

As discussed in my last article, IAN has shown new users how to “think big” about award scenarios, removing some of the apprehension common for the uninitiated, by helping users to narrow in on a solution when they are not entirely sure what solution they are looking for.

IAN’s guidance helps them to take advantage of the power of optimization to its fullest, becoming the next big step towards simplifying the complexity of sourcing decisions at a grand scale as part of the JAGGAER mission, “Procurement Simplified”.

Experienced users will also find this additional functionality a great time saver and it will allow them to compare multiple possible scenarios at once.

Taken together, these developments significantly flatten out the steep learning curve that was so burdensome in the early years of sourcing.

The biggest “barrier to entry” for new users was, to put it bluntly, just knowing where to start and what to do. But the wizard feature in Sourcing Optimizer makes the challenge far less daunting.

IAN builds on this by providing a guiding hand to sourcing teams, showing them other options for awarding their business within the constraints and preferences they have already identified.

Cross-Functional and Cross-Company Collaboration

By simplifying and automating JAGGAER Sourcing Optimizer with IAN makes sourcing optimization more accessible and mainstream. And not just for buyers. suppliers find JAGGAER Sourcing Optimizer easy to use too, which enables sourcing professionals to involve a more diverse range of suppliers in bid events.

Crowley Solutions, a major contractor to the US military, executed its first event with Sourcing Optimizer in 2020. Jerome Thomas, Manager, Global Carrier Development at Crowley Solutions, said: “I was surprised at just how easy JAGGAER is to use.

Many small business trucking companies do not have the experience or internal resources to navigate complex RFP tools. Using JAGGAER meant that even the smallest trucking companies could be included.”

And Angela Reno, Director of Procurement, Crowley Solutions, told us that the JAGGAER Sourcing Optimizer “gives us an intuitive platform, easy to use and even easier to execute, while providing confidence in a secure execution.”

Modern sourcing optimization projects typically involve dozens or even hundreds of stakeholders and suppliers. That would be difficult to manage without fantastic data handling capabilities.

Transplace manages sourcing events that involve more than 200 carriers and thousands of shipping lanes. “The ability to handle all the data in a nice, neat way, and streamline communication to participants. That’s the real power of optimization,” according to Ben Cubitt, SVP of Consulting and Engineering at Transplace.

I’m confident that in the coming months and years this ease of use means we will see deployments expand rapidly beyond transportation and logistics to categories such as packaging, in food and beverage, pharmaceuticals and MRO, and in both direct and indirect sourcing.

In fact, it’s already happening. CEVA Logistics, for example, which has 800 locations worldwide, extended the use of Sourcing Optimizer from ground transportation to bid events for forklift trucks and pallets, citing the standardized template structure for supplier bidding, while still allowing for detailed, flexible specifications and supplier feedback as reasons for their success. And QSCC, which oversees the supply chain for more than 6,100 Wendy’s® company-owned and franchise restaurants in North America, leverages Sourcing Optimizer to source food products, consumables, packaging, disposables, smallwares, kitchen equipment, and facility services as well as transportation.

At JAGGAER, our brand promise is “Procurement Simplified”. We don’t think sourcing optimization should be complex or needs to be complex. Even when handling the most complex of categories.

Want to find out more? You can arrange a demo or ask me any questions at tjohnson@jaggaer.com.

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