March Madness ended on Monday (yesterday, if you follow women’s college basketball) and Monday’s game, like many that I watched was very competitive and went down to the last minute, much in the same way our CPO Rising Tournament did a few years ago [Sidebar: This was our ‘tournament’ to pick the Chief Procurement Officer’s Best Tool or Strategy, worth a few minutes if you have the time].
Every year year or two, a terrible rumor gets started that the NCAA plans to expand the tournament from its current 68 to 96 I shudder at the thought. There is a certain symmetry to the tournament structure of the past 25 years that makes it such a compelling event. For example:
(1) While major upsets are unlikely, some “Cinderella” teams really do have a chance to win a few games.
(2) Different school programs can be tremendously satisfied with different results – getting to the tournament, winning a game, playing a close game, getting to the sweet 16 – can be legendary achievements for the players and coaches at different schools.
(3) The fact that the current number keeps some good teams “on the bubble” (meaning on the threshold of participating in the tournament, but not getting in) makes the regular season and conference tournaments more important and more exciting.
Expanding the current field by such a large number would be in my view, subtraction by addition. But, with the dollars involved, it is highly likely.
There are however, many cases in supply management where you can get ‘addition by addition’ 
– compensation, vacation, supplier savings, compliance, spend under management – you get the idea. But there are also a few areas where some defined number is commonly viewed as an acceptable industry standard, something that is simply “good enough.”
I want to challenge the notion on two of these areas today.
(1) Supplier Enablement and the Pareto Principle: In the case of supplier enablement, there is a standard view that after the 20% of suppliers that account for 80% of purchase order spend (in the case of eProcurement) or for 80% of invoices and payments (in the case of ePayables) have been enabled, the team can focus on other things. I could not disagree more. Supplier enablement should not be an initiative for the initial years of a program only, but rather, an ongoing process that does not end until you are approaching full enablement (orders and payments to one-off suppliers should use p-cards). There is a “network effect” on compliance, on efficiencies, and on spend under management that occurs when enterprises move well beyond that first 20% of suppliers. Supplier enablement is not easy and third-parties can help. An ROI on “enabling he next 10% of your suppliers” is there for most enterprises, even if their “network effect” has not kicked in. An ROI is there on the next 10% too and the next 10% too. Keep at this, deliberately. Set annual goals and in a few years you will look up to find yourself performing at Best-in-Class levels.
(2) eSourcing events with three bidders: eSourcing 101 teaches that a competitive sourcing event can be structured with three qualified bidders. eSourcing 101 is not incorrect; a competitive event can be structured with three bidders. In the case of a small dollar requisition that requires a bid, three bids are all you need and probably all you want – “three bids and a buy” fills a need quickly and efficiently enough to match the opportunity. But there are risks in applying this commonplace sourcing strategy on larger dollar opportunities. Simply put, including only three suppliers in an eSourcing event leaves little to no margin for error in your qualification process and in how you structure the business rules of your event. These are risks that are not worth taking. In my experience eSourcing more than $500 million in goods and services, expanding the number of qualified suppliers has the greatest and most direct impact on improving results. When you adopt the eSourcing 2.0 mindset and conduct all of your negotiations that result in a contract on an eSourcing platform, process efficiencies will enable you to invest more time in supplier discovery and qualification. The wonderful complexities of sourcing different categories make it all but impossible to generally define the ‘correct’ number of qualified bidders. That said, I believe the minimum should be greater than three (More to come on this).
Sometimes, having a “bubble” makes crossing the threshold a more significant and valuable accomplishment and sometimes there really can be too much of a good thing (tequila and sunshine, for example); in the case of supplier enablement and qualified bidders, too much is never enough.
RELATED ARTICLES – Seriously, check out our CPO Tournament articles below:
The CPO’s March Madness – Elite 8
