As I’ve mentioned before, my procurement technology career began years ago in eSourcing. I worked for a company called IBX (which was first acquired by Capgemini that later sold it to TradeShift). IBX was primarily an eProcurement/marketplace provider, but it also resold an eSourcing solution called Emptoris (later acquired by IBM and subsequently sunsetted) where my job was to train and support IBX clients on how to use this tool.
The Emptoris eSourcing tool was, at the time, one of the most advanced in the market and would, from a functionality point of view, hold up well against most solutions even today. That said, the user interface wasn’t ideal, and it took training and regular use to utilize it. So, for almost 20 years there wasn’t much innovation in the eSourcing space. But that has changed in the last couple of years, and now we are (finally) seeing some interesting innovation in the eSourcing space. These innovations are often bundled together under the term “autonomous sourcing.” In today’s article, we’ll break down this new development and look at some of the areas of innovation.
Sourcing Process Automation
Although most eSourcing solutions have supported the cloning of events and the use of various templates for the last 20 years, it required several manual steps to set up a sourcing event. However, over the last five years, specialist eSourcing providers as well as S2P suite providers, have started leveraging AI and RPA-type technologies to automate some of these steps.
Depending on the complexity of the sourcing events, more or less of the entire process can be automated. For more complex categories, specific bots might have to be set up that take the characteristics of those categories into account. But steps like price grid set up, supplier selection, supplier invitations, and bid evaluation can be automated. More advanced solutions can even automate a multi-round sourcing event, including feedback to suppliers between rounds. Depending on complexity and optimization functionality, even the award process could be automated. For now, most organizations probably don’t want to automate that step, choosing instead to stop at a recommended award scenario/decision.
Sourcing and Cost Analytics
Over the last decade, there has been a tremendous development in analytics. Vendors like Arkestro are leveraging analytics, as well as some of the automation mentioned above, to further streamline and improve the sourcing process. By combining historical spend data with market data and game theory, the solution suggests target pricing (or anchor pricing in game theory terms). Suppliers can then accept or edit the suggested pricing. If these pricing predictions are accurate, it can speed up and improve the sourcing process for both parties.
Automated Negotiations
Speaking of game theory, vendors like Pactum are taking one more step and automating one-on-one negotiations. Bots are configured by category and can use exclusivity periods, payment terms, or other, often category-specific, negotiation levers to secure the best possible price. The drawback (for now at least) is that setting up these bots takes work, so it’s primarily suitable for categories with high spend and large numbers of spot buys or small tenders. One of the key benefits of this approach is that it can be done whenever the supplier is available, meaning the process is much faster than if both the supplier and buyer must be available to negotiate.
The Evolution of eSourcing Is Speeding Up
As more vendors combine these various technologies and concepts and devise new ones, we will see even more automation and value from eSourcing solutions. By automating tactical and tail spend (and even parts of larger more complex sourcing events), sourcing professionals can focus on building relationships and collaboration with key suppliers and stakeholders as well as coming up with value-creating category strategies.
As always, if you have any questions, Ardent Partners is here to help. Don’t hesitate to reach out!
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