New York, NY | September 9, 2021 – EdgeworthBox announces the launch of its cloud-based strategic sourcing platform focused on small and medium businesses (including the divisions of larger organizations). With EdgeworthBox, companies can transform their procurement process digitally with free access to tools, data, and community for both buyers and suppliers. Buyers can elect to pay to host and execute a Request for Proposal or a simpler Request for Quotation on a pay-as-you-go basis.

The pricing model distinguishes EdgeworthBox from incumbent systems requiring commitment to expensive subscription fees. Additionally, EdgeworthBox brings a unique combination of features to the procurement technology stack including central clearing of counterparty risk, public and private repositories of live and historic RFP data, and social networking in the form of profiles and messaging connecting all the users on the platform to one another. Buyers can use it to augment their incumbent approach, ranging anywhere from a combination of email and spreadsheets to the sourcing modules of cloud-based ERP systems. Suppliers can use it enable sales.

“Covid has disrupted supply chains globally for well over a year. Most procurement processes were built for a world that no longer exists. EdgeworthBox helps buyers and suppliers adapt to the new environment with tools proven to work in financial markets. There is no implementation of the cloud-based platform, so users can get to work immediately. Buyers get a solid set of features for free, paying only for RFPs and RFQs they execute on the platform. Suppliers access the tools, data, and community for no charge. Our prices are much lower than the equivalent large systems in the space making EdgeworthBox well suited for small and medium businesses, as well as groups within larger organizations.”

EdgeworthBox is a cloud-based software platform for shortening the sourcing cycle, lowering transactions costs, and lowering opportunity costs by helping to increase both the quality and the quantity of proposals buyers receive when they conduct reverse auctions as part of a buying process while also reducing the cost of sales and identifying new highly qualified leads for suppliers.

CONTACT:

Chand Sooran
Founder & CEO
EdgeworthBox, Inc.
chand.sooran@edgeworthbox.com
201-649-3228
87 35th Street, 2nd Floor
NYU Tandon Veterans Future Lab
Brooklyn, NY 11232

For the smallest items by dollar value, policy permits sole-source acquisition. The item is so small that competing it among multiple suppliers isn’t worth the effort. The cost in time and distraction outweighs whatever one might save. So, you can buy a couple of hundred pens by walking into Staples. There is usually an upper limit, say of $5,000 to $10,000.

After this break point, we move into the catalog part of the spectrum. In Canada, they might refer to this as a “standing arrangement.” US governments talk about “schedules.”

Imagine that you are charged with purchasing $50,000 worth of servers. You visit the internal website your company operates for employee use and you navigate to a section called “procurement.” There, you will be able to choose from a set of categories, including technology. You see the logo for a well-known vendor of servers and you click on it.

This appears to take you outside of your corporate website to the vendor’s site where you can see a catalog of what appears to be everything they sell. You search for the kind of servers you require and you see a list price.

Actually, what you are visiting is a “punchout” catalog designed just for people from within your organization with prices that reflect a pre-negotiated discount to the supplier’s publicly listed prices.

Were you to visit ServerCo’s public catalog, you might see more items from which to choose, but the prices would be higher. Or they should be higher.

In the punchout catalog, the buyer’s procurement department has won percentage discounts to list pricing in exchange for some sort of promise of volume. ServerCo is willing to do this because of the buyer’s size and historical spending patterns.

These discounts are typically static, reflected in a contract of one- or two-year’s duration. If it is for technology, one might anticipate an adjustment to reflect the natural deflation of prices for technology on a like-for-like basis.

A dynamic price quote would be one that reflected supply-and-demand conditions at the time.

For example, it may be the case that the supplier has a surplus of a particular item. This condition may make the supplier much more willing to discount the list price aggressively at that moment in time.

By contrast, with a punchout arrangement in place, the supplier may be unwilling or unable to make such an adjustment even if it were mutually acceptable given the contractual constraint.

Finally, the third section of the procurement spectrum refers to purchases so large that procurement policy demands the execution of a reverse auction to surface competition on price and solution. We have discussed previously how these reverse auctions can lead to poor outcomes both in the quantity and the quality of responses vendors end up submitting.

The best way to improve acquisition performance is to make it easier for suppliers to give buyers what they want.

Why don’t buyers run a reverse auction when it comes to the catalog part of the spectrum? It comes down to transactions costs and savings. Traditionally, it has been easier to operate a catalog.

However, if the buyer can execute a hasty RFQ for purchases in the catalog bucket, then there should be no reason for the punchout catalog to exist.

The best way to do this, particularly for commonly purchased items, is to use a simplified template.

With templates, buyers can execute a reverse auction in days.

Suppliers like it because they may be able to recycle their responses very easily, updating only a handful of items such as price or delivery schedules.

Templates can be reused across buying firms to drive competition and simplify the sales cycle.

Ideally, one would combine this with tools to expose a larger variety of suppliers and to onboard them quickly through the risk vetting process.

EdgeworthBox helps buyers make this happen. It is simple to use. You can store templates from your internal library or select from a commonly accessible set of templates for a given category. 

We also have tools that clear centrally vendor onboarding data to expedite risk assessment so that buyers can solicit suppliers with which they do not have an existing relationship.

We’d love to talk to you. Give us a shout.

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For what you are able or willing to pay, you were able to hire someone with the right skills, the potential to grow into and through the position, and, most importantly, the personality and maturity to join the team without disrupting its efficacy, instead enhancing its performance.

You didn’t hire the person who came at the lowest cost. You didn’t hire the person with the flashiest presentation, the best smile, or the nicest clothes. You made an offer and someone who could do the job said yes. Maybe there was only one viable candidate, or maybe there were multiple reasonable options from which to choose.

To find this individual, you needed to advertise the role to a tremendous number of people in a way that the ideal candidates would understand the job and the organization and would want to apply.

You had to look in the right place at the right time with the clearest possible description of what you hoped to see.

It’s easy to tell if you have done this badly by how people respond to your job description.

One scenario means that very few people respond, in which case you are much less likely to have cast a net that managed to catch at least one ideal candidate. (You’re confident that the ideal candidate exists.)

Another scenario involves getting many responses, almost all of which are inappropriate. What’s worse is that it is costly for you to wade through this dreck, hoping to find the diamond in the rough.

Perhaps you hire an agent like an executive recruiter to help you find and parse potential hires. That is expensive.

But in the final analysis, it all comes down to how you write the job description. How well you articulate who you are and what you are looking for will determine the quality and the efficiency of your job search.

In the best-case scenario, you receive enough applications to satisfy yourself that you have done an appropriate amount of due diligence, but not so many that you are overwhelmed with the work of having to sift through masses of distracting chaff.

It is no different with an RFP.

How do you write a good RFP? A good RFP event is one in which you get a sufficient number of relevant responses to generate competition. You receive enough submissions so that the marginal benefit of the incremental proposal is equal to the marginal cost of evaluating it, as an economist might say. It attracts competition on price and solution from the most relevant vendors.

How do we write an RFP that can solicit the optimal level of interaction from vendors?

Write in Plain English

Make it easy to understand and simple to answer. You have to help the suppliers give you what you want.

Use one voice. Too often, buyers write by committee with different individuals penning separate sections. Use a committee to draft the sections, if necessary, but ensure that you have one person who is articulate and clear rewrite the entire Statement of Work to give it a consistent tone. This makes for easier reading and reinforces the message you seek to communicate.

Writing in plain English means avoiding jargon. It is too easy to throw in technical terms that the author thinks they understand but may not have the same meaning for different readers.

Label the document so that it matches your desired outcome as closely as possible. When a supplier sees an RFP that appears to be in their domain, they will triage its suitability by reading it. This may take an hour or more of the time of an experienced hand to assess its relevance to their product offerings. Nothing can be more frustrating than spending time reading a proposal after its title promises opportunity only to find that it bore little resemblance to what the buyer intends to purchase.

Describe the Problem You Are Trying to Solve

You are purchasing a good or service to obtain an outcome, typically a solution to a problem that you face. Buying the right product means lower costs or easier execution or new sales, for example.

Start with a description of how this purchase is going to solve the problem.

This will help suppliers tailor their response to your specific needs and you may be surprised by the kinds of solution that you see in their proposals.

Do Not Tell Them What to Do

Tell them what the desired end state looks like.

For example, consider the City of New York. They may issue an RFP for a new fleet of snow trucks in which they describe what a snow truck looks like in detail. It has four wheels. It has a plough in the front. It has the ability to carry x cubic meters of snow, etc.

Instead, if the City of New York described the problem differently, they might widen the aperture of ideas vendors suggest. If the City noted that they currently clear the streets after large snowfalls using a fleet of dedicated snow trucks but wasopen to seeing what the latest snow truck technology was or even to alternatives to clearing the snow themselves, we could imagine someone proposing to clear the streets of snow as a service. If they offer to do it for a fixed cost, they will have bundled in weather insurance so that the City can budget with certainty.

Encourage creativity.

Do Your Own Homework

Do market research to understand how other people think of the problem.

If you can hire a consultant, that’s great. But don’t let them restrict how you think about the gamut of possible solutions.

If you have access to a database of prior RFPs and responses, consult them to understand what matters in this vertical category. Ideally, you can find similar RFPs from public sector entities to see how they articulated the problem and to garner intelligence about the marketplace. Find other buyers of the targeted good or service, whether they are from your industry or not, and ask for their opinions about how to specify your Statement of Work and who the players are in the category.

Avoid visiting supplier websites. Too many of them have tools for detecting your presence, some of which can be sophisticated enough to alert them of your identity (and, most significantly, of your intention to purchase). Every supplier who figures out you are in the market will hound you in a race to “shape” the Statement of Work in such a way that confers unique advantage on them at the expense of their competitors.

If you write an RFP that you have permitted a supplier to “shape” (the dreaded so-called “wired” RFP), then others will not bother to respond. It converts the entire exercise into a pro forma exercise in compliance that distorts the spirit of the business process.

Be Clear about the Obstacles

Suppliers want to know the context. The last thing you want to do is conceal the actual situation from them, only for them to discover the truth and impose multiple change fees down the road.

It may also be the case that suppliers who understand what you’re up against can offer novel approaches.

Everything Else Is Just Form

Of course, it’s necessary to talk about how they can respond, when they can ask questions, what media you will accept, etc.

That’s not what gets the right suppliers to respond. Those are just table stakes.

We built EdgeworthBox to give you the tools to be able to write the kind of RFPs that get you the outcomes you want. We have vendor onboarding tools to simplify and accelerate the process so that buyers can solicit any supplier, confident that they can vet their risk in an expedited fashion. That is, buyers don’t have to restrict themselves to sending their RFPs to suppliers with which they have an existing relationship.

We have repositories of structured data related to live RFPs, historic RFPs, and historic contracts so that buyers and suppliers can organize and execute market research on a limited budget. And we connect buyers to other buyers, suppliers to other suppliers, and buyers and suppliers to one another for relationship building and even more intelligence gathering.

Come check us out. We’d love to talk.

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When we describe something as complicated, we say it is difficult to understand or to analyze. For example, chess is a complicated game. The Shannon number describes the number of possible moves, on the order of 10¹²³.

For something else to be complex, it must be part of a system.

“Complexity characterises the behaviour of a system or model whose components interact in multiple ways and follow local rules, meaning there is no higher instruction to define the various possible interactions.

“The term is generally used to characterize something with many parts where those parts interact with each other in multiple ways, culminating in a higher order of emergence greater than the sum of its parts. The study of these complex linkages at various scales is the main goal of complex systems theory.”

This is not a distinction without a difference. It could not be more relevant for the modern enterprise with its multiple moving parts and the implication of cascading consequences of failure from behavior within and across these different pieces.

Procurement in the contemporary context is both complicated and complex. Most companies have evolved complicated bureaucracies around procurement, requiring systems to implement the rules, with administrative organizations to enforce them. 

This is done ostensibly for the purpose of obtaining value-for-money. Another key purpose is risk management: protecting the organization against fraud, waste, and abuse.

All of this activity exists within the broader complex adaptive system of the marketplace. The way in which the buyer interacts with suppliers and with other buyers has consequences.

For its putative benefits, complexity has costs.

Beyond the obvious administrative drag and inflated transactions costs, it can mean that the buyer misses out on potential suppliers, alternative solutions, or, generally, competition for its spending dollar.

Within the enterprise itself, bureaucracy, and complexity act as a tax on the political capital of the Chief Procurement Officer and her staff.

It is entirely possible that the administrative pain of the procurement apparatus has the complex consequence of leading product to exclude it from early-stage conversations about design at a stage where procurement could have a meaningful positive impact, for example.

Here are three ways to reduce the complexity of procurement.

First, standardize wherever possible. Do this within the enterprise and do this across the enterprise. Consider using standard questionnaires to vet suppliers. They can update these dynamically in a “lockbox” held by a trusted third party to which buyers are granted access.

Second, use templates for RFPs and RFQs. set up common ways of asking for quotation on commonly purchased items. For example, multiple departments within the firm may purchase the same technology. Give them the ability to use a template to request a quote. Encourage them to request quotes instead of using a punchout catalog to obtain more dynamic pricing reflective of shifting conditions across suppliers.

Third, decentralize procurement. It’s happening anyway. Make it easier for people within the enterprise to purchase goods and services by giving them the tools to do so, while maintaining audit trails and procurement department oversight. An ancillary benefit of doing so is that procurement staff can focus on higher value-added activities such as contract management and vendor performance evaluation.

This is what we have built at EdgeworthBox: a platform to connect buyers and suppliers to one another with tools for easing vendor administration, sharing structured data within and across firms, and social networking between buyers and other buyers, suppliers and other suppliers, and buyers and suppliers with one another. We’d love to talk to you. Give us a shout.

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The answer to these questions is increasingly moot. Line managers are inserting themselves into sourcing and procurement decisions more aggressively, especially in areas like IT.

The better question to ask is, how should organizations enable this ineluctable trend so that it complies with policy.

This trend is a function of strategy, culture, and technology. That is why it is going to happen anyway. Of course, one could argue that these things come in waves of centralization and dispersion.

Nimble organizations are ones in which strategy is well-communicated throughout the firm. Everyone knows where the ship is going. As the Marines say, every Marine is a rifleman. So the argument for centralization to preserve strategic consistency may be out-of-date in the contemporary enterprise.

Culture is defined as the substance behind the statement, “People like us do things like this.” In a world competing for talent, trust is key. Can we trust the people within the organization to do the right thing? If not, perhaps they shouldn’t be working here.

The central question is, can technology enable the enterprise to have its cake and eat it, too?

Traditionally, the tradeoffs have been between control and compliance, between localized intelligence and market intelligence, between speed and value.

Is there a way for technology to permit the management of these tradeoffs in a compliant manner?

The ideal tool for this purpose would give a simple user experience to people throughout the organization, experienced or not with procurement; disseminate and share market intelligence; and give them a standardized, straightforward mechanical approach to implement when acquiring goods and services.

For example, an IT line manager should be able to get data on the market for extended workforce services as it relates to, say, JavaScript coding, including leveraging resources within the firm and prior enterprise acquisition activity of such services. She should be able to find a standardized template for executing this acquisition from vendors who are vetted previously (or who can be vetted quickly). All of this needs to be subject to audit trails and oversight from the procurement function, who would be freed up to do supplier performance evaluations and contract management, creating greater value for the firm overall.

This is what we have built at EdgeworthBox.

We incorporate features from capital markets in a tool that augments the existing purchasing approach; there is no need to rip out the expensive plumbing. EdgeworthBox is a way to expose procurement’s function firmwide, for the general benefit. Give us a shout. We’d love to talk to you.

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• A combination of email and spreadsheets (the most common)
• Legacy software, typically built in-house
• Sourcing modules from on-premises Enterprise Resource Planning (ERP) implementations
• Cloud-based sourcing modules offered by ERP vendors
• Cloud-based source-to-pay Independent Software Vendors (ISVs)

The purpose of these systems is to reduce the transactions costs and opportunity costs associated with the purchasing business process.

Transactions costs span the following activities:

• Managing workflows across the different constituencies of the buyer firm
• Sharing data across the buyer firm
• Onboarding suppliers and monitoring their ongoing risk with a vetting process
• Developing relationships with suppliers
• Sharing information about the buyer’s business with suppliers so that they can understand the needs and challenges the buyer seeks to overcome
• Researching markets for individual vertical categories
• Drafting and finalizing the Statement of Work
• Perfecting the Request for Proposal or Request for Quotation
• Delivering the RFP to relevant suppliers
• Communicating with interested suppliers while the RFP window is open
• Receiving the proposals
• Reviewing the proposals
• Scoring the proposals and ranking them

This sounds like a lot of work. It is.

While, logically, it might seem like the right thing to do is to have one comprehensive system, there is a case for having several systems in parallel.

The truth is that procurement has many facets. Buyers need multiple systems (or at least multiple complementary tools) for these different dimensions of the acquisition problem.

No one system spans all these functions. No one system is suited for every use case.

Let’s start with ERP systems and source-to-pay systems. We need to recognize a couple of things.

First, these systems have turned the analog business process of soliciting bids into digital one without taking advantage of the transition to adapt the procedure for the way we do business now. Arguably, the way companies source goods and services is substantively unchanged since the days of the Industrial Revolution when buyers used it to purchase commodity goods, not complex, long-lasting service relationships.

Second, the ERP systems and source-to-pay systems are expensive. With procurement taking up 40-70% of revenue for companies in the United States, systems providers argue that anything they can do to help lower transactions costs or the total cost of ownership of the finally purchased items more than justifies a six or seven figure annual SaaS fee.

Third, these systems vendors designed and implemented the architecture for their software tools years ago. The user experience may not be something that is well suited for contemporary sales and procurement staff, particularly given the demographic turnover on both sides. Is an approach that was built for an industrial application useful for the acquisition of cybersecurity tools, for example?

Fourth, mindful of the pushback against higher costs, the large systems vendors keep adding features. Buyer users feel tremendous stress when confronted with annual price rises justified by the rollout of incremental new functionality that they are unlikely to want or to put into regular practice. Of the hundreds or thousands of features on some of the older, more sophisticated systems, how many do people use on a daily basis? Ten? Fifty?

Fifth, the incumbent structure embedded in each approach is one buyer interacting in a closed loop with a set of previously vetted vendors. It is too time consuming and difficult to solicit a proposal from a vendor who is not a vendor-of-record already. This is fundamentally a one-to-many approach. What if you could solicit any supplier? How would procurement change?

Sixth, many of these approaches, in codifying the bureaucracy, have an incentive to make things complicated and complex (i.e. with cascading consequences of failure)

Seventh, there is a persistent tension between the tendency to centralize procurement activities and those who would push acquisition authority to the most logical local level. Increasingly, procurement takes place lower down in the organization.

The biggest problem, however, may be that not all suppliers are the same. It is also true that not all vertical categories are the same. With new imperatives like social procurement coming to the fore, the procurement problem grows even more complicated.

One size does not fit all.

A system that might work well with large suppliers will not fit the constraints of small and medium-sized vendors.

A system that has a ton of features may not be best for different groups within the buying organization, say at the divisional level, who have simpler requirements.

A system designed for corporate bureaucracy may actively discourage businesses owned by minorities, women, Indigenous people, disabled people, and veterans from engaging with the buyer, contrary to key strategic direction.

By layering different systems intelligently, sophisticated buyers can plug these gaps and get the best problem-solution fit and the most competition on price and service from their suppliers, across the spectrum, while lowering transactions costs and reducing opportunity costs.

EdgeworthBox was built for Procurement v2.

We sit as a layer in the procurement technology stack to augment the existing approach to RFPs/RFXs. We do this by adding proven tools from financial markets to whatever you are using currently. These include central clearing of vendor administration and data, as well as social networking.

With EdgeworthBox, buyers can onboard new vendors rapidly, enabling the solicitation of suppliers who have no antecedent vendor-of-record relationship. We have public and private repositories of structured data of live and historic RFPs and historic contract data for market intelligence and speedier RFP cycles. Our social networking functions include profile pages for advertising organizations and individuals, as well as a messaging platform that connects buyers to buyers, suppliers to suppliers, and buyers to suppliers. Suppliers join for free. Buyers pay an organization license with unlimited seat licenses. Give us a shout or take us for a free trial.

Contact Us

But with more contemporary software such as ERP modules (installed or cloud-based), or source-to-pay SaaS-suites, there is some controversy over who should pay. Depending on the system, buyers pay, suppliers pay, or they both pay.

The correct answer to the question of who should pay is the arrangement that leads to the optimal outcome in which buyers obtain value-for-money: buying the right product from the right supplier at the right price.

On the face of it, the old-timey answer to this question is that suppliers should pay. Buyers with this mentality think that suppliers should be grateful for their business. But, if Covid has taught us anything, robust supply chains are built on a bedrock of good relationships and mutual understanding. Gratitude does not mean servitude.

Buyers should be just as thankful for access to reliable vendors, too.

The best way to ensure value-for-money is to see a wide spread of solutions from a diverse array of suppliers, competing for the buyer’s business.

Buyers should want to encourage suppliers to respond.

On the margin, there will be suppliers who cite a pay-to-play fee as justification for not responding to a bid solicitation.

International trade agreements recognize this obstacle explicitly. For example, the Canada Europe Trade Agreement prohibits charging suppliers a fee to see procurement opportunities at every level of government.

(Arguably, the bureaucracy that buyers impose on suppliers ostensibly for risk management purposes and the difficult user interfaces of some of these systems are also barriers to trade. But I digress.)

Perhaps the old timers hearken back to a day in which suppliers were predominantly order takers. “How much can I put you down for, Bob?”

The sales cycle now is much more sophisticated. Committees of interested parties from the buy side try to do as much research as possible before they speak with a salesperson from any supplier. Conversations start at an advanced stage. It is a journey.

In this context, a good salesperson is a consultant to the buyer. The salesperson is paid a contingency fee by the supplier for finding the right buyer. The right buyer is a customer who will be sticky and who will grow with the vendor because the problem-solution fit is good. Sales helps the buyer to understand her problem and why the supplier’s solution is the best problem-solution fit at the price.

Buyers obtain significant market intelligence and product knowledge from a good salesperson. Should the buyer go with another company’s wares, this consulting is effectively free (or at least blended into the margin earned by the supplier from selling other things to the buyer in question).

If you are a buyer reading this, put yourself in the position of the supplier.

When a vendor receives an RFP or an RFQ (generally, an “RFx”), they need to make an investment decision.

The sophisticated suppliers will convene an internal committee to review the RFx. This group weights the benefits of responding against the costs of participating. Think of this as “value-for-selling.”

How much revenue will the contract generate if they win? What will the margin of a successful bid look like? What are their chances of winning? Can they generate equivalent margin with greater certainty of victory elsewhere?

Against this, rational suppliers must consider how much it will cost them to respond, knowing that they might not get the contract. It is not uncommon for a proposal to cost thousands of dollars to develop, requiring the revelation of confidential information.

Also, what is the nature of the relationship? Do they feel that they need to put in a bid, with no intention of winning, just to satiate the buyer’s expectations of their participation? In financial markets, market-makers will put together a “cover bid” for customer inquiries in situations in which the margin isn’t attractive but they feel that they need to do so for relationship purposes. There is an art to crafting a “cover bid” so that the buyer feels you were competitive, but you “just” missed it. In some markets, say for obscure currency pairs at odd hours, market makers are really competing, not to win the deal, but to be the highest cover bid.

Are you, as a buyer, designing a process with fees, bureaucracy, and a terrible user experience that lead the best suppliers to either reject you or to phone in a cover bid? How is that driving value-for-money?

EdgeworthBox was built for Procurement v2. We sit as a layer in the procurement technology stack to augment the existing approach to RFPs/RFXs. We do this by adding proven tools from financial markets to whatever you are using currently. These include central clearing of vendor administration and data, as well as social networking.

With EdgeworthBox, buyers can onboard new vendors rapidly, enabling the solicitation of suppliers who have no antecedent vendor-of-record relationship. We have public and private repositories of structured data of live and historic RFPs and historic contract data for market intelligence and speedier RFP cycles. Our social networking functions include profile pages for advertising organizations and individuals, as well as a messaging platform that connects buyers to buyers, suppliers to suppliers, and buyers to suppliers. Suppliers join for free. Buyers pay an organization license with unlimited seat licenses. Give us a shout or take us for a free trial.

Contact Us

Here’s US Air Force Major General Cameron Holt, deputy assistant secretary for contracting talking about this moment in procurement:

“On the other side of the coin, I see a renaissance going on. I see people tired of being told ‘no.’ People being tired of all the red tape, a real weariness of overly prescriptive items, and a vastly long time frame and risk averse approaches to contracting …”

We would expect the Department of Defense to be bureaucratic. But this comment is probably more representative than we would like.

Efforts to improve continue but with disappointing progress to show for it. With full credit for their persistence, the UK government this week heralded the latest plans (of many over the years) to traverse the administrative morass:

“Today’s measures will transform the current procurement regime to put value for money at the heart of the new approach, by allowing more flexibility for buyers, enabling government to be more strategic and save the taxpayer money. This will also drive increased competition through much simpler procurement procedures.” [emphasis added]

The private sector is no better. Survey after consulting firm survey shows that digital transformation of procurement continues to underwhelm.

For example, looking at the Deloitte Chief Procurement Officer Survey of 2019 (abstracting from the implications of the Pandemic), they report general dissatisfaction with the results.

Why hasn’t digital procurement delivered us from this pain and suffering?

The theme of the Deloitte survey is “complexity.” The purpose of the technology shift is to reduce “bad complexity” and to increase “good complexity.” Bad complexity “introduces risk and hampers procurement” while good complexity extends the reach of the procurement department “to more broadly influence business stakeholders in strategic areas (e.g., capital expenditures, enterprise risk management), as well as more deeply influence stakeholders through demonstrated leadership in areas such as corporate development.”

The iatrogenic effect of introducing most of the technology to date, we are told, has been to unleash new forms of complexity, even as it chips away at improving the mix of antecedent bad complexity and good complexity.

But what if there is a deeper, more fundamental problem at work? What if the usual explanations for the conventional dissatisfaction are inadequate in addressing the root issues?

Let’s start with Bill Gates’ two rules for enterprise software:

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

This is amplified by another general rule of digital transformation, this time from Stratechery’s Ben Thompson:

“When it comes to designing products, a pattern you see repeatedly is copying what came before, poorly, and only later creating something native to the medium.”

The leading contemporary procurement systems, especially the ERP modules and cloud-based source-to-pay systems, have taken the analog sourcing process and coded it up. Recently, a big trend has been the improvement in the user experience, making the systems marginally easier to use. They are still poorly designed for the most part, cumbersome kluges of functionality. They’re just kluges that are marginally easier to use.

There has been no substantive change to the sourcing business process to take advantage of the digital environment. If anything, current and prior generations of procurement software actually lock buyers into the weakness of the old business process.

Thompson uses the example of social networking to explain his rule.

In the beginning, individuals had real personal networks of friends and family whom they would see or call directly. Facebook digitized these personal networks. It was a stronger player for having more friends and family in the same online location. The conversation now taking place in something Facebook called a “feed.” Individuals would broadcast their speech to a single group: their followers. The content in these individual speech snippets appealed to different subsets of the group. For example, a comment about a sports team might not appeal to your mother as much as a copy of a photo of your daughters playing soccer, but it might speak to your friends from college.

There was only so much value one could obtain from conversations with those in a personal network, so Facebook added professionally created content published by others. This kept engagement high.

Newspapers similarly replicated their business when they first went online by posting their physical newspaper’s stories, locating general advertisements alongside them. This had little economic traction.

However, the introduction of the feed introduced the ability to personalize the content the publisher could serve to the individual and, with it, ads customized for the consumer, as well. This was much more lucrative.

Other types of social networks appeared. Twitter meant “broadcasting conversations as if you were sitting in a bar.” That is, you would be talking to people who were not necessarily in your physical network, but in a new general network of acquaintances you met online. Again, people with broad interests make comments that appeal to different subsets of their group.

Note that there is tremendous pressure to appeal to everyone who follows you. If you have many subsets given the variety of your interests, you dilute your traction. If you only speak on one topic, you are more likely to concentrate a strong followership.

Thompson descries this inability to segment the profile as leading to the breakdown of the conversation in these networks, saying that Twitter has “grown too noisy, performative, and combative to be a place to simply hang out …”

Social networks are evolving. Witness the explosive growth of TikTok, for example. TikTok does two things differently:

“ByteDance’s 2016 launch of Douyin – the Chinese version of TikTok – revealed another, even more important benefit to relying purely on the algorithm: by expanding the library of available video from those made by your network to any video made by anyone on the service, Douyin/TikTok leverages the sheer scale of user-generated content to generate far more compelling content than professionals could ever generate, and relies on its algorithms to ensure that users are only seeing the cream of the crop.”

Where Facebook’s content is developed by either one’s personal network or by professional publishers and Twitter’s content is developed by one’s contrived network-of-relative-strangers, TikTok’s content is developed by everyone on its entire network.

TikTok can do this because it learns what to send each user, training itself constantly on the preferences of the individual.

How does any of this apply to procurement?

In a real sense, the procurement process is centered around content. Buyers issue RFPs or RFQs in which they describe their problem and what they’re looking to buy, as well as the rules around how they will execute the acquisition. Suppliers respond with proposals in which they lay out who they are and what they offer.

The buyers are looking for value for money and for that they need to drive competition, as the British noted above. Competition comes in the form of more proposals from a broader array of suppliers, spanning a diverse set of solutions and price points.

To borrow Thompson’s terminology, Procurement v1 involves porting a real-life network into a digital solution.

In Procurement v1, the digital business process is unchanged from its analog predecessor.

Just as Facebook puts our friends and family into our group online, Procurement v1 solutions give us a virtual environment where buyers and suppliers exchange content. That is, buyers only solicit suppliers who are already set up as vendors-of-record after going through a months-long (or longer) vetting process.

In Procurement v1, suppliers only see the RFPs/RFQs that buyers send to them, typically by email. If a buyer thinks a supplier makes widget X, they will send them an RFP every time the buyer is in the market for X. If a buyer thinks a supplier does not make widget Y, they will never send them a copy of the RFP when the buyer is in the market for Y.

This assumes that the buyer knows accurately what the supplier does and keeps track of this over time. Suppliers complain routinely that they do not see relevant RFPs because buyers don’t know the supplier is in the market.

Procurement v2 adapts the business process to exploit the flexibility that the digital approach permits.

As with TikTok, buyers in Procurement v2 will solicit every supplier for the good or service they seek to purchase, regardless of their antecedent status as a vendor-of-record. As with TikTok, suppliers will see all of the RFPs/RFQs relevant to their vertical categories. They will not miss any opportunities because the buyer didn’t know they were in the market.

Let’s say the buyer is in the market for trucks.

To be able to solicit all the buyers of trucks, the buyer will need to be able to thoroughly vet and onboard a supplier in a matter of days, should they pick a new supplier as having the best bid. This requires rapid access to standardized due diligence materials and customer referrals.

To permit efficient solicitation of all the buyers of trucks, there needs to be a platform that can effect this matching and redundantly provide a space for truck vendors to find the relevant RFP with sufficient time to craft a responsive proposal.

Another point that Thompson discusses is messaging. Messaging permits people to segment groups into those that speak to different aspects of their personality. For example, an investor may also have an interest in finance, sports and correctional reform. Tweeting about all three topics can be distracting and confusing, costing him followers. Instead, being in separate sub-groups for each of these topics may make more sense.

“Even that, though, suggests that the company can’t entirely escape its roots: having one identity is a core principle of Facebook, which is great for advertising if nothing else, but at odds with the desire of many to be different parts of themselves to different people in different contexts.”

Messaging will be the place in which the substantive, specific discussions take place among members of self-selected sub-groups.

In Procurement v2, there needs to be a channel for these kinds of collaboration to take place. Buyers need to talk to other buyers for information and market intelligence. Suppliers need to speak with one another about business development. Buyers and suppliers need to speak with one another to get a better understanding of the marketplace. All of which needs to happen in the context of different, possibly overlapping, vertical categories.

“On the flipside, to the extent that v2 social networking allows people to be themselves in all the different ways they wish to be, the more likely it is they become close to people who see other parts of the world in ways that differ from their own. Critically, though, unlike Facebook or Twitter, that exposure happens in an environment of trust that encourages understanding, not posturing.”

Wouldn’t understanding, not posturing, in procurement v2 be a wonderful thing? It would help people get to product-solution fit much faster, without the overhead of distortions and a contrived sense of adversarial opposition.

EdgeworthBox was built for Procurement v2.

We sit as a layer in the procurement technology stack to augment the existing approach to RFPs/RFXs. We do this by adding proven tools from financial markets to whatever you are using currently. These include central clearing of vendor administration and data, as well as social networking.

With EdgeworthBox, buyers can onboard new vendors rapidly, enabling the solicitation of suppliers who have no antecedent vendor-of-record relationship. We have public and private repositories of structured data of live and historic RFPs and historic contract data for market intelligence and speedier RFP cycles. Our social networking functions include profile pages for advertising organizations and individuals, as well as a messaging platform that connects buyers to buyers, suppliers to suppliers, and buyers to suppliers. Suppliers join for free. Buyers pay an organization license with unlimited seat licenses. Give us a shout or take us for a free trial.

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Problem-solution fit describes how completely a specific solution solves the problem, as it is defined. There can be many alternatives.

For example, in the context of the Covid crisis, governments around the world have wrestled with the problem, “How do I return my country to normalcy as quickly as possible?” Given the seriousness of the situation, all kinds of options have appeared:

• Mass vaccination
• Social distancing
• Masks
• Lockdowns

All of these options have their strengths and weaknesses, leading to tradeoffs that policymakers need to consider. Is a vaccine even feasible? Can we enforce social distancing? Can we get people to wear masks? Can we source enough masks? What are the temporary and permanent economic impacts of the lockdowns? What are the mental health implications of each option? What are the consequences for medical health broadly of each option? For example, will people hesitate to get a lump checked for cancer or to investigate a persistent hacking cough?

Who are the winners and losers in each case? What are the costs that they incur and how can we offset those socially so that we all get the best recovery?

There are no easy answers.

If we could wave a wand and magically conjure a vaccine with 100% efficacy that governments could distribute quickly, then we would have the complete problem-solution fit. People could resume their pre-Pandemic lives (to the fullest extent possible, anyway) once everyone got the vaccine.

The Pandemic is a special example. Nobody cares about the costs of the vaccine or of the lockdowns in a sense. There aren’t too many voices complaining about the cost of the vaccine or its distribution, at least not at first. If lockdowns are sufficient to get us back to work quickly, then the economic burden of paying people to stay at home for a fixed period of time is just something we will have to pay.

Note that we explored all the options. Given the disastrous severity of Covid and massive uncertainty about which alternative would work fastest and most completely, we had to investigate every possibility.

So, without cost being an issue, we optimized for product-solution fit. Absent any other factors, we picked the solution that appeared to solve the Pandemic most completely and most quickly, pivoting as new, better choices became available.

This is problem-solution fit.

But not everything is a fire drill.

In almost every other purchasing scenario, we are not in the kinds of dire straits in which our survival is in question. We buy goods and services subject to a budget constraint.

Our financial policy dictates how we finance our company and what kind of resources we have available to spend on procuring items. It is the job of the procurement group to ensure that we stretch those dollars for the maximum overall benefit of the firm.

We have what economists call a constrained optimization to solve.

We need to maximize problem-solution fit subject to a budget constraint across all goods and services that we procure for the enterprise.

Before comparing on cost, how do you quantify problem-solution fit? How do you say that server A has a better problem-solution fit than server B when you’re looking to kit out a data center, for example?

It is immensely difficult. Perhaps you can measure the different kind of throughput that different options might create for your assembly line, but that is a simplistic example. We often have to consider entirely qualitative factors (or, at least, aspects that are difficult to measure) such as ease of use and projected utilization, etc. Much of this comes down to assumptions, if an attempt at quantifying the problem-solution fit is made, at all.

Often, if not usually, it is easier to quantify cost than it is to quantify (meaningfully and correctly) the problem-solution fit.

Perversely, most procurement exercises, whether they realize it or not, reduce to minimizing cost subject to a constraint that problem-solution fit is “good enough.”

The other issue is one of cost allocation and the concept of opportunity costs. There is a total cost of ownership for the solution. But, in using the chosen option, the firm incurs production costs or operating costs. It could be that these would turn out to be lower with one of the options not chosen in which case the firm has incurred opportunity costs. Of course, these don’t show up in a way that could be used to hold anyone accountable. We just see the lower profit and loss than what we could have had.

This is compounded by the search costs in identifying the most relevant potential solutions and vetting them (and the attendant suppliers), as well as the transactions costs in executing a procurement cycle.

It is no wonder that RFPs, in particular, have become pro forma exercises in apparent compliance, twisting what is essentially a sole-source acquisition so that it looks (falsely) like a competitive solicitation of bids.

Problem-solution fit is at least as important as cost in procurement because of the real issues of lower productivity and higher costs that appear elsewhere in the income statement from picking the wrong solution. These are often not accounted for properly in the optimization problem.

Without thinking about problem-solution fit correctly, procurement risks optimizing for the wrong thing, the wrong way.

EdgeworthBox is a platform for buyers and suppliers that sits as a layer in the procurement technology stack to lower these search and transactions costs. We work with your existing system to help you get the most out of it, whether it’s legacy software, an ERP module, or the latest cloud-based source-to-pay system.

We make it easy to generate competition by accelerating the time to onboard new suppliers, so that buyers can solicit vendors with whom they have no pre-existing vendor-of-record relationship. We enable easy access to market research with databases of live and historic RFP activity in structured format. And we connect buyers and suppliers to one another for the collaborative sharing of intelligence about the markets in individual vertical categories. Check out this short video for a quick overview. Give us a shout.

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When chains started to break in March and supplies tightened, suppliers allocated scarce quotas to buyers with whom they had the best relationships. Relationship management is part of risk management.

Buyers who treated their suppliers as vassals who would (and presumably should) do anything for “the business” suffered disproportionately during the Covid supply chain shock of 2020.

Relationship management is a subset of a broader problem when it comes to risk.

Procurement is an exercise in risk management that buyers in the pre-Pandemic period treated as a pure cost optimization function. Instead of managing risk and preparing for uncertainty, buyers pursued cost minimization relentlessly and ruthlessly, concentrating supplies for marginally lower unit costs, offshoring to emerging markets, etc. We’ve written about this previously.

Buyers obtained false comfort from the thought that they forced their suppliers to take all the risk, giving the buyer putatively infinite optionality in the pre-Pandemic regime.

For example, they issued RFIs with pages of detailed questions instead of paying for market research in individual vertical categories. Suppliers responded with the hope that this was a preliminary step in an acquisition process that would be a fair fight, only to discover that there was never any genuine intention to purchase.

Buyers could force suppliers to take input price risk, or supply disruption risk (force majeure, qu’est-ce que c’est?), or other sorts of risk, all while driving a hard bargain on price.

Yet, many of these same hard chargers would proselytize simultaneously for collaboration and partnership.

The Covid crisis was the harshest test of the buyer’s true commitment to collaboration.

Here’s Miguel Cassio from Gartner speaking at the Gartner Supply Chain Symposium:

“During these turbulent times of Covid-19 we’ve all been starving for that capacity of suppliers. Guess who’s been getting that capacity? Preferred customers of these suppliers. So increasing collaboration with suppliers makes sense and there are tangible benefits to be had.”

Collaboration, practically, means partnership. The buyer partners with the supplier to work together on innovating new solutions. Both sides jointly develop capabilities relevant to the problems the buyer business units seek to solve. Buyers and suppliers evolve together, symbiotically.

One thesis for the lack of collaboration is its infrequency. Structuring these meetings around quarterly performance reviews removes the focus on joint development and demotes the discussion to the quotidian from the strategic.

Here again is Cassio:

“The first one is access to leadership, it has to be constant, and cross functional. [sic]

“This means no more QPRs [quarterly performance reports] or executive meetings where your suppliers are just sending someone from sales, and you’re just sending someone from procurement. No, these meetings usually have to involve the senior leaders across different stakeholders so that you can think and speak about the different things that the relationship needs.”

For buyers to have “skin in the game” means that buyers are sharing in the risk and sharing in the innovation. And it means frequent communication with a broad variety of people from both the buyer and the supplier firms.

EdgeworthBox is a platform that sits as a layer in the procurement technology stack with collaboration as a central feature. We bring features from financial markets to help buyers get superior value-for-money and to help suppliers get a cleaner sales process with more customers. Adding our solution to the incumbent infrastructure makes procurement social with our messaging platform that connects buyers to buyers, suppliers to suppliers, and buyers to suppliers. Collaboration can be frequent, relevant, and multi-dimensional in our framework. in addition to connecting players from across the enterprise into the procurement process. Check out this short video.