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The Bottom Line On Sourcing & Procurement Software

August 10, 2010

Tim Minahan, CMO at Ariba, wrote a comment in response to my blog of July 13th on The State of Customer/Supplier Relationships.

Tim made the following observations: “As we’ve discussed in the past, collaboration is often more lip service than a committed initiative. And tough economic periods, like the one we just went through (are still in?) strain even those most committed to real buyer-seller collaboration.

However, the idea somehow that online sourcing and procurement tools are enemies to collaboration is misguided for three key reasons (possibly more):

1) online sourcing tools bring a transparency and openness to negotiations that is often lacking from offline negotiations.

2) leading online sourcing tools enable greater buyer-seller collaboration during the negotiation process, often times allowing suppliers to provide alternative bundles, delivery schedules, or product or process innovation recommendations that can enhance the value of the good/service being purchased and take cost out of the system — without negatively impacting the supplier’s profit margins

3) finally, we must be careful not to confuse the negotiation with the relationship. Such online tools speed sourcing cycles 50%-70%, giving buyers and sellers more time to focus on collaboration and relationship management. (In fact, we’re seeing far greater demand for our supplier collaboration and management solutions from those companies with online sourcing tools than those without.)

Bottomline: I agree that buyers and sellers need to put more commitment into their collaboration oaths. But online negotiation tools and collaboration can not only peacefully co-exist but actually can enhance one another.”

These comments in many respects complement those made in a recent IACCM ‘Ask The Expert’ interview with reverse-auction guru Dr David Wyld (visit the IACCM Member Library to hear a recording). David is an avid proponent of the applications now available to support business transactions and contracting – but of course he stresses that their effectiveness depends on correct use. Introducing reverse-auction software represents a major change-management initiative – and organizations that simply implement it without re-thinking process, without investing in internal and supplier training, without ensuring understanding of its correct use relative to differing contract and relationship types will have problems.

Automation is here to stay because the benefits are undeniable. Ten years ago, I remember feeling (as a supplier) very hostile to the new procurement software tools. Today, I still encounter frequent problems in the way they are used. But in truth, the biggest issue is a lack of imagination and aptitude by the user community. It is once more a case of ‘a bad workman blaming his tools’. So this is the problem on which we must focus.

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