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	<title>Social Procurement &#8211; EdgeworthBox</title>
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	<title>Social Procurement &#8211; EdgeworthBox</title>
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		<title>How Do Buyers and Suppliers Create Trust?</title>
		<link>https://www.edgeworthbox.ca/how-do-buyers-and-suppliers-create-trust/</link>
					<comments>https://www.edgeworthbox.ca/how-do-buyers-and-suppliers-create-trust/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Tue, 08 Jun 2021 15:24:17 +0000</pubDate>
				<category><![CDATA[Relationships]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2021/06/08/how-do-buyers-and-suppliers-create-trust/</guid>

					<description><![CDATA[People in a relationship collaborate to obtain a better joint outcome. 
]]></description>
										<content:encoded><![CDATA[<p>Using reverse auctions to source inputs dates back to the Industrial Revolution. Buyers would use it to purchase commodities. Imagine purchasing a quantity of bricks. A brick is a brick is a brick. Hosting a reverse auction in which suppliers competed to provide bricks at the lowest price made sense. Price was the only variable dimension in this equation.</p>
<p>In this context, buyers and suppliers have an adversarial relationship. We call it a zero-sum game in which the gains of one party come at the expense of the other party. Buyers may be able to squeeze a price at which the supplier breaks even. Or suppliers can charge an artificially high price because nobody else bids.</p>
<p>Today, with the Request for Proposal (or Quotation or Information), many buyers continue to purchase goods and services this way.</p>
<p>We call it a reverse auction because there is one buyer and many suppliers. (In an auction, there is one supplier and many buyers.)  Suppliers compete by offering to sell at a lower price.</p>
<p>Buyers select a supplier. Then, they negotiate a contract. Often these contracts have covenants on performance (“supplier shall”). Buyers see this as a contest over a limited amount of value. They believe it’s their job to obtain as much of that value for themselves as possible.</p>
<p>If the buyer is stringent enough, the contract becomes an exercise in compliance.</p>
<p>The procurement function is focused on the transaction<b>.</b> CFOs want to see cost savings. It makes sense. For a company with a 10% EBIT margin, $1 in cost savings is the equivalent of $10 in incremental revenue, ceteris paribus. But relationships are complex these days. Companies don’t purchase commodities; they buy differentiated goods and services. They don’t buy on a discrete basis; they purchase on a continuous, long-lived basis. Failure to buy the right solution from the right vendor can have persistent cascading consequences across the enterprise.</p>
<p>In the language of game theory, a transactional approach to acquisition is to play a one-period game when the company as a whole is playing an infinite-period game.</p>
<p>In the language of the CFO, the purpose of procurement shouldn’t be to obtain cost savings for their own sake; it should be to increase margin dollars.</p>
<p>The way to increase margin dollars is to raise the percentage margin by being more efficient, to lift revenue by bringing a better solution to market, or to do both. Intuitively, we know that we could get massive cost savings by purchasing inputs of low quality and poor product-solution fit, but the hit to revenue could be devastating.</p>
<p>If revenue drops because our customers think we sell a cut-rate product, then other fixed costs need to be amortized over a lower base. In turn, this means a lower percentage margin. A lower percentage margin on lower revenue translates to significantly lower margin dollars.</p>
<p>To focus on cost savings is tactical. To deliver margin dollars is strategic.</p>
<p>But the story isn’t over. It’s just beginning.</p>
<p>Three waves of disruption are hitting procurement successively.</p>
<p>Technology<b> </b>is evolving quickly. The pressure for “digital transformation” is immense. The end game for this piece is transactional efficiency. Many of these solutions answer the question: how can we execute our traditional process with less friction?</p>
<p>Globalization is under the gun as geopolitics rears its ugly head. Will we near-shore production and/or distribution? How reliable is our sourcing? Pressure on trade requires a new set of assumptions.</p>
<p>The final, most unpredictable force is the Covid crisis. What permanent impact will Covid have on the way we do business? How can we work remotely? How do we make the enterprise more resilient?</p>
<p>These three forces have brought into relief the fact that the enterprise today is not the company of the Industrial Revolution. We don’t buy commodities. We develop complex, long-lived relationships with counterparties, not in a chain, but in a network.</p>
<p>Covid has forced thoughtful CFOs and COOs to rethink the nature and importance of their relationships.</p>
<p>Make no mistake. These are relationships. They are alliances based on <i>mutual</i> benefit. If one side does well, then the other side does well. A relationship isn’t a zero-sum game; <a href="https://www.tutor2u.net/economics/blog/qa-what-is-a-positive-sum-game">it’s a positive sum game </a>in which one side does not win at the other’s expense.</p>
<h3><b>People in a relationship collaborate to obtain a better <i>joint</i> outcome.<i> </i></b></h3>
<p>&nbsp;</p>
<p>In our highly competitive world, this comes down to partnering on innovation. Getting to market faster. Getting to market with the better solution for the ultimate customers’ problems.</p>
<p>If digital transformation is about executing the traditional process more efficiently, then relationship-driven procurement is about developing a new way of buying goods and services.</p>
<p>The relationship is the objective. Get the relationship right and everything else follows.</p>
<p>One day (and for some leading companies that day is already here), we will do things differently.</p>
<p>In this version, procurement isn’t about one-off costs. It’s not even about the total cost of ownership. These are 20th century concepts.</p>
<p>In the 21st century, value derives from the total benefit of the relationship<b>.</b> A relationship doesn’t focus on complying with restrictive contractual covenants. It is built on trust, instead. With trust, the two (or more) sides can create the conditions for rapid, relevant innovation. By the way, with trust, costs can fall, too.</p>
<p>As <a href="https://www.speedoftrust.com">Stephen M.R. Covey writes</a> in &#8220;The Speed of Trust&#8221;:</p>
<h5><i>“Trust always affects two outcomes – speed and cost. When trust goes down, speed will also go down and costs will go up.” </i></h5>
<p><i> </i></p>
<p>And:</p>
<h5>“Compliance regulations have become a prosthesis for the lack of trust – and a slow-moving and costly prosthesis at that.”</h5>
<p>&nbsp;</p>
<p>In this post-Pandemic period in which “supply chain” has become a piece of jargon in the lexicon of those who know, <a href="https://michiganross.umich.edu/rtia-articles/how-increase-trust-between-suppliers-and-buyers">Stephen Leider of the University of Michigan is correct when he states</a>:</p>
<p>“A successful firm depends on the capacity, reliability, and the trustworthiness of its supply-chain partners.”</p>
<p>How many suppliers turned out to be capacity constrained during the lockdown? At some point, every company suffered from these restrictions. Yet, when tight capacity goes “on allocation,” it is the customers seen as partners who receive priority in the queue. Partners invest in capacity and capabilities to help the greater good.</p>
<p>Wouldn’t you, as a buyer, prefer to have a supplier who did that for you on faith, even before you committed? What kind of a signal do they send when they do so?</p>
<p>Leider talks of what he calls the “collaborative cycle.”</p>
<ol>
<li>Supplier invests in capacity and capabilities, including technology.</li>
<li>Buyer rewards them with a higher price (sharing the benefit of the higher margin revenue the supplier’s investment is necessary in generating).</li>
<li>Supplier delivers a high quality good or service to ensure margin/revenue maximization for the buyer’s ultimate sale to its customers.</li>
</ol>
<p>How do you build trust? What does it look like?</p>
<p>In &#8220;<a href="https://hbr.org/2019/09/a-new-approach-to-contracts">A New Approach to Contracts</a>&#8221; from the <i>Harvard Business Review, </i>the authors give some good suggestions:</p>
<ul>
<li>Have an agreement that governs the terms of the relationship, setting expectations and mechanisms for periodic evaluations and adjustments</li>
<li>Focus on areas of overlap including goals, principles, and interests.</li>
<li>Instead of trying to develop covenants around potential conditions, develop a partnership framework for how the parties will work together to overcome obstacles and exploit opportunities</li>
<li>Figure out ways in which both sides can maintain alignment</li>
</ul>
<p>A successful relationship is one in which each side accelerates the profitable growth of the other side. — EdgeworthBox is a platform for procurement.<b> </b></p>
<p><a style="font-size: var( --e-global-typography-text-font-size ); font-style: var( --e-global-typography-text-font-style ); font-weight: var( --e-global-typography-text-font-weight ); font-family: var( --e-global-typography-text-font-family ), Sans-serif; text-transform: var( --e-global-typography-text-text-transform ); background-color: #ffffff;" href="http://pricing" target="_blank" rel="noopener">EdgeworthBox’s</a> digital transformation offers both transaction efficiency improvements and strategic relationship-driven sourcing. We bring tools from capital markets to improve the current approach to acquisition.</p>
<p>Suppliers can onboard easily, meaning that buyers can solicit a broader array of potential vendors than if they just solicit those with whom they have antecedent relationships.</p>
<p>Buyers and suppliers can access market intelligence more easily with our “market tape.”</p>
<p>Finally, buyers and suppliers can communicate, frequently and across multiple functions, developing the foundations for trust, with our social network. Whether you’re a procurement professional or a sale leader, we are looking for feedback on how to improve the process.</p>
<h4>Contact us to learn more about how to optimize your outcomes, or share your insights.</h4>
<p><a role="button" href="https://www.edgeworthbox.ca/contact/"><br />
Contact Us<br />
</a></p>
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		<title>Make It Easier for Suppliers to Give Buyers What They Want</title>
		<link>https://www.edgeworthbox.ca/make-it-easier-for-suppliers-to-give-buyers-what-they-want/</link>
					<comments>https://www.edgeworthbox.ca/make-it-easier-for-suppliers-to-give-buyers-what-they-want/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Tue, 25 May 2021 10:45:00 +0000</pubDate>
				<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[Innovation]]></category>
		<category><![CDATA[procurement]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2021/05/25/what-can-procurement-do-to-address-the-different-requirements-of-buyers-and-suppliers/</guid>

					<description><![CDATA[Buyers have taken so many steps to protect themselves that they have made it significantly more difficult to maximize the benefit from an acquisition. The tradeoff between risk and reward is out of whack.
]]></description>
										<content:encoded><![CDATA[<p>How do we make it easier for suppliers to give buyers what they want?</p>
<p>As part of its post-Brexit transition, the <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/944196/CCS001_CCS1020400576-001_Transforming_Public_Procurement_WebAccessible__1_.pdf">UK government revisited its procurement policies</a>.</p>
<p><span id="more-197"></span></p>
<p>“We propose enshrining in law, the principles of public procurement: <strong>value for money</strong>, the public good, transparency, <strong>integrity, efficiency, fair treatment of suppliers and non-discrimination</strong>.” (emphasis added)</p>
<p>In many organizations, the focus is on procedures that guard against the oft-cited triumvirate of “waste, fraud, and abuse.” The procurement process has evolved into something fundamentally adversarial</p>
<h3><b>Buyers have taken so many steps to protect themselves that they have made it significantly more difficult to maximize the benefit from an acquisition. The tradeoff between risk and reward is out of whack.</b></h3>
<p><b>&nbsp;</b></p>
<p>The only thing an adversarial approach to procurement does is to dictate the kind of company that can win in a sourcing situation: corporate gladiators who know how to play the game.</p>
<p>These winning vendors are quasi-insiders. No wonder laymen assume that the procurement system is rigged.</p>
<p>An adversarial approach to procurement risks crowding out potential suppliers. It can discriminate against firms with certain characteristics. It substitutes complex layers of often conflicting rules for integrity. It is transactionally wasteful. It can be difficult for vendors to understand what buyers actually need.</p>
<p>If buyers do not get enough relevant suppliers to show up competitively in their reverse auctions, then they end up overpaying for a second-best solution.</p>
<p>None of this is consistent with “value for money.”</p>
<p>You can see this in the systems and the business models that buyers use.</p>
<p>How can we characterize the current, common approach to sourcing?</p>
<p>Onboarding a supplier can take months. Suppliers need to answer massive questionnaires and provide buckets of documents. (Side question: do buyers actually read these?) Suppliers can only respond to RFx they receive. Buyers often send suppliers irrelevant solicitations. Or worse, they fail to send suppliers RFx for products that the supplier actually does sell. The decision cycle takes far too long. Statements of work are often poorly written. Buyers and suppliers lack ready access to contemporary market intelligence. Frequently, a single supplier will “shape” a statement of work subverting the integrity of the process.</p>
<p>The systems people use reflect this reality. They are large, cumbersome, and bureaucratic. They do nothing to adapt the model; they only seek to capture the model.</p>
<p>These approaches are indifferent to the needs of suppliers: a simpler process, a faster cycle, and better access to potential customers who want what they sell. Smaller suppliers cannot compete. These include firms run by minorities, women, and other historically disadvantaged groups.</p>
<p>Why is this the case? It is so because buyers are the ones who pay for the systems.</p>
<p>If you asked suppliers to design a sales system (as opposed to a sourcing or procurement system), you would get an entirely different answer.</p>
<p>A supplier would like to have some key features:</p>
<ul>
<li><b>Collaboration</b>: The supplier wants to get to know the customer’s business and the problems that get in her way to see if the supplier can help her succeed</li>
<li><b>Data</b>: The supplier needs to have a way of organizing his own data, but also a tool for seeing what other people are doing to the extent that it’s available</li>
<li><b>Speed</b>: The supplier doesn’t want to spend weeks or months trying to navigate a sale once the process has started</li>
<li><b>Standardization</b>: Ideally, the supplier would like to see the use of common templates across buyers, where possible to make onboarding and responding easier</li>
</ul>
<p>Ironically, if buyers give suppliers these features, they are more likely to obtain value for money in a competitive process that makes “waste, fraud, and abuse” impossible than with an adversarial approach.</p>
<p>If you make it easier for suppliers to give you what you want as a buyer, you’ll be more likely to get it.</p>
<p>Of course, buyers still need to have protections in place. But you can’t expect to win a medal in competitive swimming if you’re wearing a life preserver.</p>
<hr>
<p>We built <a href="https://www.edgeworthbox.com/">EdgeworthBox</a> to help make procurement collaborative and effective. It’s an exchange with tools for hosting structured procurement data; standardizing and simplifying onboarding and RFx; and speeding up the sourcing process.&nbsp;</p>
<p>Our approach increases the quantity <em>and</em> the quality of responses buyers receive when they solicit vendors. Sellers like the simplicity and exposure to potential customers with the right product-solution fit.</p>
<p><a href="https://www.edgeworthbox.ca/contact/" role="button"><br />
Contact Us<br />
</a></p>
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		<title>What Is Next for Digital Procurement?</title>
		<link>https://www.edgeworthbox.ca/what-is-next-for-digital-procurement/</link>
					<comments>https://www.edgeworthbox.ca/what-is-next-for-digital-procurement/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Tue, 15 Dec 2020 23:05:54 +0000</pubDate>
				<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2020/12/15/what-is-next-for-digital-procurement/</guid>

					<description><![CDATA[Digital procurement promises that it will rescue us from the tedious bureaucracy, the pre-occupation with cost over risk-adjusted value, distortions stemming from the pro forma attempts at gaming the compliance...]]></description>
										<content:encoded><![CDATA[<p>Digital procurement promises that it will rescue us from the tedious bureaucracy, the pre-occupation with <a href="https://blog.edgeworthbox.com/strategic-sourcing-is-risk-management-not-cost-minimization">cost over risk-adjusted value</a>, <a href="https://blog.edgeworthbox.com/shaped-rfps-are-self-defeating">distortions</a> stemming from the pro forma attempts at gaming the compliance regime, and the adversarial relationship between buyers and suppliers.</p>
<p><span id="more-207"></span></p>
<p><a href="https://federalnewsnetwork.com/reporters-notebook-jason-miller/2020/12/air-forces-next-hack-of-the-federal-procurement-system-one-year-funding/">Here’s US Air Force Major General Cameron Holt</a>, deputy assistant secretary for contracting talking about this moment in procurement:</p>
<p>“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 …”</p>
<p>We would expect the Department of Defense to be bureaucratic. But this comment is probably more representative than we would like.</p>
<p>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 <a href="https://www.gov.uk/government/news/new-plans-set-out-to-transform-procurement-providing-more-value-for-money-and-benefitting-small-business">latest plans</a> (of many over the years) to traverse the administrative morass:</p>
<p>“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. <strong><em>This will also drive increased competition through much simpler procurement procedures</em></strong>.” [emphasis added]
<p>The private sector is no better. Survey after consulting firm survey shows that digital transformation of procurement continues to underwhelm.</p>
<p>For example, looking at the <a href="https://www2.deloitte.com/content/dam/insights/us/articles/2019_CPO-Survey/6267_CPO-Survey-Collection-Page/DI_CPO-Survey.pdf">Deloitte Chief Procurement Officer Survey of 2019</a> (abstracting from the implications of the Pandemic), they report general dissatisfaction with the results.</p>
<p><img fetchpriority="high" decoding="async" style="width: 896px;" src="https://f.hubspotusercontent20.net/hubfs/4057670/Deloitte%20Survey%20121520.png" alt="Deloitte Survey 121520 - digital procurement edgeworth box" width="896" height="701"></p>
<p>Why hasn’t digital procurement delivered us from this pain and suffering?</p>
<p>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.”</p>
<p>The <a href="https://en.wikipedia.org/wiki/Iatrogenesis">iatrogenic</a> 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.</p>
<p>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?</p>
<p>Let’s start with <a href="https://www.brainyquote.com/quotes/bill_gates_104353">Bill Gates’ two rules for enterprise software</a>:</p>
<p>“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.”</p>
<p>This is amplified by another general rule of digital transformation, this time from <a href="https://stratechery.com/2020/social-networking-2-0/">Stratechery’s Ben Thompson</a>:</p>
<p>“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.”</p>
<p>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.</p>
<h3><strong><em>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.</em></strong></h3>
<p><strong><em>&nbsp;</em></strong></p>
<p>Thompson uses the example of social networking to explain his rule.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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 …”</p>
<p>Social networks are evolving. Witness the explosive growth of TikTok, for example. TikTok does two things differently:</p>
<p>“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.”</p>
<p>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 <em>its entire</em> network.</p>
<p>TikTok can do this because it learns what to send each user, training itself constantly on the preferences of the individual.</p>
<p>How does any of this apply to procurement?</p>
<p>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.</p>
<p>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.</p>
<p>To borrow Thompson’s terminology, Procurement v1 involves porting a real-life network into a digital solution.</p>
<p>In Procurement v1, the digital business process is unchanged from its analog predecessor.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>Procurement v2 adapts the business process to exploit the flexibility that the digital approach permits.</p>
<p>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.</p>
<p>Let’s say the buyer is in the market for trucks.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>“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.”</p>
<p>Messaging will be the place in which the substantive, specific discussions take place among members of self-selected sub-groups.</p>
<p>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.</p>
<p>“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.”</p>
<p>Wouldn’t understanding, not posturing, in procurement v2 be a wonderful thing? It would help people get to <a href="https://blog.edgeworthbox.com/is-problem-solution-fit-more-important-than-cost-in-procurement">product-solution fit</a> much faster, without the overhead of distortions and a contrived sense of adversarial opposition.</p>
<h4><a href="https://www.edgeworthbox.com/">EdgeworthBox</a> was built for Procurement v2.</h4>
<p>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.</p>
<p>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 <a href="mailto:sales@edgeworthbox.com?subject=EdgeworthBox%20-%20Procurement%20v2">shout</a> or take us for a <a href="https://www.edgeworthbox.com/apply">free trial</a>.</p>
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		<title>Why Does Diversity Matter in Procurement?</title>
		<link>https://www.edgeworthbox.ca/why-does-diversity-matter-in-procurement/</link>
					<comments>https://www.edgeworthbox.ca/why-does-diversity-matter-in-procurement/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Wed, 18 Dec 2019 13:27:13 +0000</pubDate>
				<category><![CDATA[Diversity & Inclusion]]></category>
		<category><![CDATA[Innovation]]></category>
		<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[collaboration]]></category>
		<category><![CDATA[procurement]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2019/12/18/why-does-diversity-matter-in-procurement/</guid>

					<description><![CDATA[You can make ethical decisions in diverse suppliers &#8212; and also make a positive impact on the bottom line &#160; The Business Roundtable recently released a high-profile “Statement on the...]]></description>
										<content:encoded><![CDATA[<h3><b>You can make ethical decisions in diverse suppliers &#8212; and also make a positive impact on the bottom line</b></h3>
<p><b>&nbsp;</b></p>
<p>The <em>Business Roundtable</em> recently released a high-profile “<a href="https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans" target="_blank" rel="noopener">Statement on the Purpose of a Corporation</a>.”</p>
<p><span id="more-232"></span></p>
<p>What they are calling Common-Good Capitalism is a hot topic these days with politicians descrying the current state of capitalist affairs and promoting concepts like “<a href="https://business.catholic.edu/news/2019/10/human-dignity-and-the-purpose-of-capitalism.html" target="_blank" rel="noopener">common-good capitalism.</a>”</p>
<p>A prior, more fundamental question is, “What is the purpose of a corporation?” something the Business Roundtable endeavors to answer after laying out a list of commitments most notably, “Dealing fairly and ethically with our suppliers.”</p>
<blockquote>
<p style="font-size: 20px;"><em>“Each of our stakeholders is essential. We commit to deliver value to </em>all of them<em>, for the future success of our companies, our communities, and our country.”</em></p>
</blockquote>
<p>A company, in this articulated vision, is an artificial construct generating value by providing goods and services, sharing the value it creates in an economically and social optimal way across its different “stakeholders:” government, management, workers, owners of capital, and communities.</p>
<h3><b>We live in remarkable times.</b></h3>
<p><b>&nbsp;</b></p>
<p>The <em>balance</em> between different stakeholders is a topic of debate.</p>
<p>Some would argue that optimality is driven by the <em>amount of value </em>any putative distribution can create. Some allocations of value lead to a bigger pie than others.</p>
<p>Other argue that the <em>fairness</em> of the distribution is equally or more important than the size of the pie. Why? Because fairness implies sustainability. A company can generate much more cumulative value over time with a fair distribution than one that is perceived to be inconsistent with the times.</p>
<p>And the times, they are a changin&#8217;, as the bard wrote.</p>
<p>An important part of the shifting perspective on balance and fairness stems from our changing demographics. Women make up a greater percentage of the workforce and of the entrepreneurial class. There are more minorities proportionally than there used to be.&nbsp; We are more sensitive to the historical injustice of the treatment of indigenous peoples. We are grateful for the <a href="https://business.defense.gov/Small-Business/SDVOSB/" target="_blank" rel="noopener">sacrifices of men and women who were disabled in service to their country</a>, as we should be.</p>
<h4>From the <a href="https://weconnectinternational.org/images/supplier-inclusion/HackettGroup_SupplierDiversity_2016.pdf">2016 Hackett Supplier Diversity Study</a>:</h4>
<p><img decoding="async" style="margin-left: auto; margin-right: auto; display: block;" src="https://cdn2.hubspot.net/hubfs/4057670/Diversity%20Study%20121919.png" alt="Diversity Program Objectives Study"></p>
<p>Yet, according to <a href="https://www.ups.com/us/en/services/knowledge-center/article.page?name=a-new-perspective-on-supplier-diversity&amp;kid=art16d697656c9&amp;articlesource=longitudes" target="_blank" rel="noopener">UPS</a>, there are big problems.</p>
<blockquote>
<p style="font-size: 20px; text-align: left;"><em>“According to the 2019 Supplier Diversity Study conducted by the Hackett Group, supplier diversity programs hit only half of their intended goals, and more than three-fourths of corporations say they lack funding for outreach and training.</em></p>
<p style="font-size: 20px; text-align: left;"><em>“This is not how critical business functions typically work, and no amount of CEO statements or awards banquets can overcome the level of misalignment between supplier diversity and corporate strategy.”</em></p>
</blockquote>
<p>More from the UPS citation of the Hackett study on diversity:</p>
<blockquote>
<p style="font-size: 20px;"><em>“Today, two-thirds of corporations find it difficult to get the organization to adhere to supplier diversity program policy …”</em></p>
</blockquote>
<p style="font-weight: bold;">There’s the rub.</p>
<p>For supplier diversity to really take hold, everyone involved needs to understand why it’s important for generating value, to making the pie larger and/or more sustainable.</p>
<p>And it needs to be easier for these diverse suppliers to engage with large corporations. This means better user experiences, more engagement, more mentoring.</p>
<h3 style="font-weight: normal;">Again, from the <a href="https://weconnectinternational.org/images/supplier-inclusion/HackettGroup_SupplierDiversity_2016.pdf">2016 Hackett report</a>:</h3>
<p><img decoding="async" style="margin-left: auto; margin-right: auto; display: block; width: 758px;" src="https://cdn2.hubspot.net/hubfs/4057670/Diversity%20Study%20II%20121919.png" alt="Tactics used to develop local supplies, diversity in procurement" width="758"></p>
<h3>Just saying you’re going to spend more with diverse suppliers isn’t enough.</h3>
<p>Buyers have to develop their suppliers with investments of time, money, and knowledge.</p>
<p>Get this right and there are plenty of benefits to <a href="https://vxi.com/dividends-of-supplier-diversity/" target="_blank" rel="noopener">investing in diversity in procurement</a>.</p>
<ul>
<li><strong>&#8220;Better ROI: </strong>From a financial perspective, a report from the Hackett Group, <a href="https://weconnectinternational.org/images/supplier-inclusion/HackettGroup_SupplierDiversity_2016.pdf">ROI Related Supplier Diversity</a>, found that companies that participate in a long-term supplier diversity program generate a 133% greater ROI than those companies that use the suppliers they have traditionally relied upon. “On average, supplier diversity programs add $3.6 million to the bottom line for every $1 million in procurement operation costs.”</li>
<li><strong>&#8220;Lower operating costs and higher profits: </strong>Companies in the Hackett Group survey with supplier diversity programs <strong>spent an average of 20% less on their buying operations</strong> compared to similar companies operating without these programs. These “pro-diversity” organizations also drove an additional $3.6 million to their bottom lines for every $1 million spent in procurement operating costs.</li>
<li><strong>“Increased innovation: </strong>A Harvard Business review study <a href="https://hbr.org/2016/11/why-diverse-teams-are-smarter">reported</a> that increased cultural diversity is a boon to innovation, and businesses run by culturally diverse leadership teams were more likely to develop new products than those with homogeneous leadership. As an added twist, a <a href="https://www.bcg.com/en-us/publications/2017/people-organization-leadership-talent-innovation-through-diversity-mix-that-matters.aspx">study </a>conducted by Boston Consulting Group (BCG) showed that organizations with more than 20% of women in management positions are likely to see 10% more innovative revenue — revenue driven by radical new products or services– than their less-diverse peers.”</li>
</ul>
<p><a href="https://www.edgeworthbox.com/">EdgeworthBox</a> overcomes key obstacles to dealing with suppliers from traditionally disadvantaged backgrounds.</p>
<p>An easy user experience that requires little-to-no training, a cloud-based SaaS offering with no IT footprint, social networking and a data clearinghouse to facilitate mentoring and knowledge sharing, and a zero cost option for suppliers make it very straightforward to onboard diverse suppliers.</p>
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		<title>What Are Procurement Ethics?</title>
		<link>https://www.edgeworthbox.ca/what-are-procurement-ethics/</link>
					<comments>https://www.edgeworthbox.ca/what-are-procurement-ethics/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Thu, 03 Oct 2019 08:00:00 +0000</pubDate>
				<category><![CDATA[Finance]]></category>
		<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[collaboration]]></category>
		<category><![CDATA[Innovation]]></category>
		<category><![CDATA[procurement]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2019/10/03/procurement-ethics-need-to-be-updated-for-a-new-age/</guid>

					<description><![CDATA[Procurement fraud is something we don’t talk about enough. &#160; Core to the six types is conflict of interest. Procurement staff have a duty of loyalty to their organization. But,...]]></description>
										<content:encoded><![CDATA[<h3><b>Procurement fraud is something we don’t talk about enough.</b></h3>
<p><b>&nbsp;</b></p>
<p><span id="more-237"></span></p>
<p>Core to the six types is conflict of interest. Procurement staff have a duty of loyalty to their organization. But, in an age of cost cutting and layoffs, in a time of conspicuous personal consumption, it can feel as if the organization’s loyalty to the individual is diluted. In that light, some people fall prey to the Faustian compact and prioritize their personal needs over their company’s requirements. They use corporate resources in ways that have negative consequences for the buyer over time.</p>
<p>“SAS research shows that almost 31 percent of businesses in the UK have fallen victims to contract bid rigging, and over 43 percent have been given fraudulent invoices. Besides, the PwC has ranked procurement fraud as the second most prevalent economic crime since 2014.” That quote comes from this CIOReview article entitled, “<a href="https://www.cioreview.com/news/how-to-avoid-procurement-fraud-nid-30455-cid-100.html" target="_blank" rel="noopener">How to Avoid Procurement Fraud</a>?”</p>
<p>The Gordian knot of rules and procedures that buyers employ hasn’t prevented procurement fraud. If anything, one might argue that these processes and their attendant complexity and opacity have <em>enabled</em> procurement fraud.</p>
<p>My sense is that most organizations may feel lulled into a sense of complacency that the putative rigor of procurement is a protection against malfeasance.</p>
<p>According to <a href="https://apps.dtic.mil/dtic/tr/fulltext/u2/a424697.pdf" target="_blank" rel="noopener">this framework</a> from James R.S. Gayton in his MBA thesis at the Naval Postgraduate School, there are six classes of procurement fraud.</p>
<p>1. <strong>“Defective Product/Product Substitution”</strong>: Supplier promises a good that meets the buyer’s requirements but delivers something inferior and cheaper-to-deliver, pocketing the difference in cost as pure profit.</p>
<p>2. <strong>“Defective Testing”</strong>: Supplier doesn’t perform the required tests to the standard agreed upon in the contract.</p>
<p>3. <strong>“Bid</strong>&#8211;<strong>Rigging”</strong>: The buyer pays a higher price because either the buyer, the supplier, or the two of them set up a bid scenario that artificially limits competition.</p>
<p>4. <strong>“Bribery and Corruption”</strong>: This involves a supplier paying someone with influence or control over a purchase to sway the decision in their favor, potentially at a higher price than a truly competitive dynamic would produce.</p>
<p>5. <strong>“Defective Pricing”</strong>: When suppliers certify a price during the bidding for a contract, only to raise those prices in the delivery phase (citing ostensibly unanticipated cost shocks), this constitutes misrepresentation.</p>
<p>6. <strong>“False Invoices”</strong>: Either submitting an invoice for goods or services not delivered or submitting a full invoice when delivery has been incomplete is outright theft.</p>
<p>It’s easy to imagine the bribery and corruption cases. Here are a couple of great examples from <a href="https://www.supplychaindive.com/news/procurement-ethics-decentralization/563713/" target="_blank" rel="noopener">Supply Chain Dive</a>.</p>
<p>“A manager showing everyone the keys to a condo in Florida he borrowed from one of his suppliers, bragging about the family trip he had planned during school vacation. But he was upset that he couldn’t find anyone to pay for the airfare … and meals.”</p>
<p>“The buyer who yelled at the supplier for bringing a case of liquor to the buyer’s desk at holiday time, and for not putting the bottles in the buyer’s unlocked car trunk as directed. It seems as if the trunk was already filled with some new golf clubs and there wasn’t room.”</p>
<p>Our belief is that bid-rigging and defective pricing are likely the two most common types of fraud.</p>
<p>Some of the experienced procurement hands reading this article will read some of these classes of fraud and recall specific instances where they have seen this.</p>
<p>For example, imagine an IT services contract where the dominant criterion is price. It might be to supply three Java developers for three months to bolster the in-house development team on a new website. One supplier strategy might be to lowball the price below any reasonable price, undercutting all the competitors, subsequently raising the price to levels that exceed the total cost of delivery that the reasonable competitors would have ended up charging. This is not an unusual scenario. It is fraud. Do people identify it as such? Or, is it so commonplace in the context of the archaic RFP business process that people fail to recognize it as such?</p>
<p>How angry and frustrated does it make suppliers who submit ironclad bids to get undercut on price by a competitor they know will raise the price exorbitantly once they have won the contract?</p>
<p>And what happens to the people get caught doing these things? Are they prosecuted? More likely, they move on to the next buyer … and nobody knows. They pull the same defective pricing “act” with an unsuspecting newbie.</p>
<p>Whenever we tell laypeople that we want to adapt the RFP business process for the 21st century, we get the same earful.</p>
<p>“Oh, it’ll never work. The whole thing is political. It’s about the supplier who gets to write the RFP.”</p>
<p>That’s exactly the problem! What these laypeople are describing is bid rigging. This is what they think of procurement.</p>
<p>Imagine that you are an honest supplier and you see this kind of activity. I can guarantee you that it keeps suppliers at bay. Why invest all the time and money in developing a proposal if you think that the fix is in and the buyer has picked the winning vendor already, executing the RFP as a pro forma gesture for the compliance Gods?</p>
<p>When you start to think of instances like this, it’s no wonder that PwC characterizes procurement fraud as “the second most prevalent economic crime since 2014.”</p>
<p>In the case of “wired” RFPs that have been “shaped” by a supplier salesperson (as they are trained to do), this sort of kinder, gentler bid-rigging is a result of the fact that buyers don’t have the time or the money to conduct diligent, independent market research. Suppliers get to write the RFP for the buyer because buyers just ask salespeople to educate them about the marketplace, in the absence of any quick, inexpensive ways to acquire this knowledge.</p>
<p>One possible solution to the problem of fraud is to use data to try to identify unusual relationships or red flags. <a href="https://www.cioreview.com/news/how-to-avoid-procurement-fraud-nid-30455-cid-100.html" target="_blank" rel="noopener">CIOReview</a> sums it up well, “The analytics approach leverage [sic] machine learning to balance the behavioral anomaly detection.”</p>
<p>Things are compounded even more as procurement becomes decentralized.</p>
<p>Again from <a href="https://www.supplychaindive.com/news/procurement-ethics-decentralization/563713/" target="_blank" rel="noopener">Supply Chain Dive</a>,</p>
<p>“Where it all breaks down is in the decentralization of the procurement process. “Do it yourself purchasing” is becoming the procurement strategy at many organizations now and likely others in the future. As a result of enterprise level supply management software, and an effort to control staffing, procurement gives up significant control of buying to engineers, lab managers, facilities staffs and assorted requisitioners across the company, each with their favored suppliers.</p>
<p>“While there may be established contracts and approved supplier lists, maverick spend outside of those constraints continues to be an issue, leading to the potential of bad behavior for buyers and sellers. “Some sellers look to the unsophisticated buyer as an opportunity to infiltrate a company, bypassing the purchasing department and gaining direct access to the customers. The new “buyer” may just assume gifts (or more) are considered business as usual, given the traditional reputation of the purchasing agent.</p>
<p>“There are also those in the supply chain management function with increasingly unsupervised supplier communication, including planners, expediters, transportation managers, warehouse managers and anyone with direct supplier communication as a result of changes in the supply management process. They have direct and unmonitored access to suppliers, for better or for worse. Increased supplier interaction by those with limited ethics training, or even malintent, provide an opportunity ripe for unethical behavior by customer and supplier alike. This can undermine ethics related compliance and put a company in legal jeopardy.”</p>
<p>So, an ideal solution would combine analytics for behavioral anomaly detection, an audit trail even in a decentralized context that permits people from across the organization to access procurement directly, and tools that made the six types of corruption less likely to happen.</p>
<p><a href="https://www.edgeworthbox.com/" target="_blank" rel="noopener">EdgeworthBox</a> attacks these three problems head-on. Analytics are impossible without quality data in a structured format. We enable companies to organize all of their procurement data in a private repository for live RFPs, historical RFPs (and the attendant responses), and historical contracts using a structure promulgated by the <a href="https://standard.open-contracting.org/latest/en/" target="_blank" rel="noopener">Open Contracting Data Standard</a> that was developed to fight corruption in emerging markets public procurement. We also give buyers and suppliers access to similar data in a public repository, typically related to government purchasing. Buyers can also use or social networking tools to connect to other buyers for market intelligence. Our business model charges organizations a license and then offers an unlimited number of seat licenses within the organization. This brings in different functions such as Finance, Operations, Sales, and Product to the sourcing conversation, making it truly strategic. It also reflects the entropy towards decentralized procurement, bringing with it an audit trail. Give us a shout at <a href="mailto:sales@edgeworthbox.com" target="_blank" rel="noopener">sales@edgeworthbox.com</a>. We’d love to talk to you about what we’ve learned.</p>
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		<title>How Can RFP Templates Help?</title>
		<link>https://www.edgeworthbox.ca/how-can-rfp-templates-help/</link>
					<comments>https://www.edgeworthbox.ca/how-can-rfp-templates-help/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Mon, 23 Sep 2019 08:00:00 +0000</pubDate>
				<category><![CDATA[Finance]]></category>
		<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[collaboration]]></category>
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		<guid isPermaLink="false">https://www.edgeworthbox.ca/2019/09/23/buyers-want-rfp-templates/</guid>

					<description><![CDATA[What is the most common complaint about the archaic RFP business process? Time. It takes time to research a category market (even if you have deep domain expertise). It takes...]]></description>
										<content:encoded><![CDATA[<h3><b>What is the most common complaint about the archaic RFP business process? Time. It takes time to research a category market (even if you have deep domain expertise). It takes time to develop the statement of work, a problem that is compounded if you need to coordinate a committee of people in writing the RFP. It takes time to solicit proposals and answer questions. It takes time for suppliers to decide whether to respond and, if so, to develop the proposal. It takes time to evaluate the proposals and score them to select one with whom to negotiate a contract.</b></h3>
<p><b>&nbsp;</b></p>
<p><span id="more-238"></span></p>
<p>Templates are a way to impose order and accelerate the timeframe. They superimpose a structure on the document for buyers who write them.</p>
<p>See this article from <a href="http://procurementoffice.com/the-architecture-and-anatomy-of-template-design-process/" target="_blank" rel="noopener">The Procurement Office</a> which, in turn, refers to the UNCITRAL protocol.</p>
<p><img decoding="async" src="https://miro.medium.com/max/1300/1*IG8hCZnGoCZTRfki0dUmDw.jpeg" alt=""></p>
<p><a href="http://procurementoffice.com/newsreel-for-september-9-2019/" target="_blank" rel="noopener">http://procurementoffice.com/newsreel-for-september-9-2019/</a></p>
<p>Some of these relate to the procedure. For example, every RFP will have a procedure for suppliers to contest a decision, the “Bid Protest Procedure” from the chart above. In this framework, there are elements present in every process, elements that are determined by the type of format one is executing, and elements that vary from instance to instance.</p>
<p>Sophisticated procurement organizations may have templates for the first two; it is much less likely that they have a template for the third.</p>
<p>Specifically, I refer to the description of the Statement of Work. This is the idiosyncratic element of the RFP that marries the buyer committee’s work to gather intelligence about the specific category market with their individual requirements.</p>
<p>More than this, it often requires finding information about what the buyer organization has done in the past.</p>
<p>This data is often unavailable to buyer committees. It may be siloed, or difficult to find. <a href="/you-cant-spell-ai-without-data" target="_blank" rel="noopener">Dark data</a> refers to the way in which this data tends to be locked up in systems and not used.</p>
<p>Ideally, buyers would have one place where you could see examples of recent RFPs written by other organizations for the same category.</p>
<p>Think of it as a template for setting up the Statement of Work. Given enough examples, despite the idiosyncratic requirements of the buyer’s situation, there should be enough commonality to provide the framework for the Statement of Work. The professional procurement staff can take care of wrapping the procedural parts and finishing the RFP.</p>
<p><a href="https://www.edgeworthbox.com/" target="_blank" rel="noopener">EdgeworthBox</a> enables this database. It is a platform for transforming the RFP business process to drive cost reduction efficiencies (including cost avoidance), to promote enterprise-wide strategic engagement with purchasing through an easy-to-use interface, and to enable the use of data and social networking to obtain better outcomes. Our platform, borrowing features from financial markets in an interface we deem to be like a “Bloomberg machine for procurement,” enables much easier search for and vetting of suppliers while also facilitating communications with our contemporary messaging platform. We call it Network-Based Sourcing™. Drop us a <a href="mailto:sales@edgeworthbox.com" target="_blank" rel="noopener">line</a>. We would love to talk to you more about your individual situation and how we can help you.</p>
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		<title>How Can Procurement Partner with the Business?</title>
		<link>https://www.edgeworthbox.ca/how-can-procurement-partner-with-the-business/</link>
					<comments>https://www.edgeworthbox.ca/how-can-procurement-partner-with-the-business/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Tue, 10 Sep 2019 08:00:00 +0000</pubDate>
				<category><![CDATA[Finance]]></category>
		<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[collaboration]]></category>
		<category><![CDATA[Innovation]]></category>
		<category><![CDATA[procurement]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2019/09/10/effective-procurement-organizations-are-integral-and-strategic-partners-to-the-business/</guid>

					<description><![CDATA[The promise of digital transformation of the RFP process (and procurement, generally) is not the use of technology for its own sake. It is the opportunity to change the business...]]></description>
										<content:encoded><![CDATA[<h3><b>The promise of digital transformation of the RFP process (and procurement, generally) is not the use of technology for its own sake. It is the opportunity to change the business process, and with it the role of the procurement department, within the organization. It is the chance to move from a narrow focus on cost savings and processes to an orientation around value.</b></h3>
<p><b>&nbsp;</b></p>
<p><span id="more-239"></span></p>
<p>The Hackett Group has an excellent article entitled “<a href="https://www.thehackettgroup.com/world-class-pro-1905/" target="_blank" rel="noopener">World-Class Procurement: Redefining Performance in a Digital Era</a>” published earlier this year that talks about some of their findings.</p>
<p>“The Hackett Group defines digital transformation as ‘improving customer experiences, operational efficiency, agility and business value contribution by fundamentally changing the way services are delivered, using digital technologies as the enabler of holistic transformation.’”</p>
<p>Fundamentally changing the way services are delivered.</p>
<p>Procurement is a service organization within the enterprise. It is subject to the same forces of change as every other part including a shifting fabric of risk, massive technological disruption, rapid development of new business models, intensified competition, changing social mores, demographic trends, and political disruption.</p>
<p>It must change the way it does business to adapt to these volatile conditions.</p>
<p>Key to this transformation, as Hackett notes, is that “Procurement organizations are moving beyond inward-focused KPIs to also measure the experience of their key internal and external customers.”</p>
<p>That is a powerful statement.</p>
<p>When it works, the effect is profound: “… world-class procurement influences 93% of spend versus 64% for more typical organizations (i.e. the peer group) and generate 75% more savings.”</p>
<p>There is a circle of trust here. If you engage procurement in the strategic conversation, then procurement can help the enterprise obtain its strategic goals more effectively. But, first, the organization must trust procurement. Are they reliable? Can they deliver? Do they have the human capital and the right tools to add value? Are they easy to deal with, or is the customer experience painful and bureaucratic?</p>
<p>In world-class organizations, procurement strategy is viewed by 75% as aligned with overall business strategy, compared to just 40% for the peer group, per Hackett. All of this is even more critical when one considers the ongoing tendency to centralize purchasing.</p>
<p>When they get it right, Hackett <a href="https://bpc19.hackettconferences.com/wp-content/uploads/sites/7/2019/06/Hackett-NA-BPC-19-World-Class-Procurement-1906.pdf" target="_blank" rel="noopener">estimates</a> the Return on Investment for world-class firms is 11.0% compared to just 5.0% for the peer group, with cost avoidance making up 24% of total cost savings. 95% of survey participants see the objective “Elevate the role of procurement as trusted advisor” as either “highly important” or “critically important,” on par with “Reduce and avoid purchase costs.” Of course, when procurement measures its performance, it is still tilted towards buying the “right goods and services AND at the right price” with “Value management,” “Demand management,” and “Total cost of ownership” taking a back seat.</p>
<p>This is all true even as savings as a percentage of spend falls as procurement’s influence increases. When procurement gets involved for the first time, they can obtain large savings of 8.3% on average, but these taper to 4.7% as they have a more persistent influence and the easy one-time gains at the beginning are no longer available.</p>
<p>This means that the raison d’etre for procurement must become more strategic in driving value creation at the enterprise-wide level.</p>
<p>This is compounded by the changes in the workforce as Millennials come onboard. See our earlier <a href="/good-procurement-staff-are-hard-to-find-and-hard-to-keep" target="_blank" rel="noopener">comment on the difficulty in finding and keeping good procurement talent</a>.</p>
<p>How do you engage people in procurement in a world of beautiful user experiences, immediate response, and data-driven decision-making?</p>
<p><a href="https://www.edgeworthbox.com/" target="_blank" rel="noopener">EdgeworthBox</a> is a platform for transforming the RFP business process to drive cost reduction efficiencies (including cost avoidance), to promote enterprise-wide strategic engagement with purchasing through an easy-to-use interface, and to enable the use of data and social networking to obtain better outcomes. Our platform, borrowing features from financial markets in an interface we deem to be like a “Bloomberg machine for procurement,” enables much easier search for and vetting of suppliers while also facilitating communications with our contemporary messaging platform. We call it Network-Based Sourcing™. Drop us a <a href="mailto:sales@edgeworthbox.com" target="_blank" rel="noopener">line</a>. We would love to talk to you more about your individual situation and how we can help you.</p>
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		<title>Social Justice and Procurement</title>
		<link>https://www.edgeworthbox.ca/social-justice-and-procurement/</link>
					<comments>https://www.edgeworthbox.ca/social-justice-and-procurement/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Tue, 20 Aug 2019 08:00:00 +0000</pubDate>
				<category><![CDATA[Finance]]></category>
		<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[collaboration]]></category>
		<category><![CDATA[Innovation]]></category>
		<category><![CDATA[procurement]]></category>
		<category><![CDATA[social justice]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2019/08/20/the-social-justice-of-teaming/</guid>

					<description><![CDATA[Teaming refers to an agreement between two companies to work together in bidding for business, often with a government buyer. &#160; It can be a contract for sub-contracting, or something...]]></description>
										<content:encoded><![CDATA[<h3><b><a href="http://www.aigclaw.org/tic63.html" target="_blank" rel="noopener">Teaming</a> refers to an agreement between two companies to work together in bidding for business, often with a government buyer.</b></h3>
<p><b>&nbsp;</b></p>
<p><span id="more-240"></span></p>
<p>It can be a contract for sub-contracting, or something more primitive like a letter of intent bridging the parties to the signature of an eventual contract should they be successful in bidding.</p>
<p>One company performs the role of prime contractor and there may be one or more subcontractors. The prime contractor may execute some of the work while also acting as the overall project manager, using the subcontractor to extend capacity or capabilities.</p>
<p>On its own, the subcontractor may not be able to win the business but can still participate in the contract and gain experience, while also potentially increasing their capacity or gaining new skills and relationships. Often, buyers require extensive experience that subcontractors, including startups, just don’t have.</p>
<p>It is intended to be mutually beneficial.</p>
<p>It doesn’t always end up that way, depending on the power dynamic between the prime and the sub. For example, imagine a complex project with a large prime contractor whose principal focus is on management of many subcontractors. Complexity here means that there are intricate inter-dependencies between the work of different subcontractors, leading potentially to cascading failure if the orchestra conductor doesn’t do a good job.</p>
<p>Given the length of the bidding process, which in the case of government RFPs can take years, there are important dimensions to the teaming arrangement. Can the prime lock up the subcontractor exclusively, or can the subcontractor work with other primes? Does the contract with the buyer need to mandate terms related to the subcontractor relationship? Does the subcontractor have a seat at the table in negotiating the contract with the buyer? How much can the subcontractor trust the prime with intellectual property and other confidential information? How do the parties propose to allocate risk among themselves? What kind of transparency should the parties provide to the buyer as part of the bidding disclosure?</p>
<p>There are two critical problems that the prime contractor faces in developing a teaming arrangement.</p>
<p>First, prime contractors must find the subcontractors. This is a search problem. Often, primes will work with subcontractors with whom they have worked before. This may cause them not to seek out potential partners with whom they have not worked in the past. Search costs are high because the primes must ensure that they vet the subcontractors for risk.</p>
<p>Second, primes and subs need to collaborate. This means collaborating on winning the RFP, or the task order in the case of an Indefinite Delivery, Indefinite Quantity contract, including coordinating resource availability. This is complicated further when buyers don’t communicate well themselves. Problems cascade.</p>
<p>Another way to think of teaming is that as a response to category management.</p>
<p>Category management refers to the way in which some large buyers will consolidate internally their purchases of items, or will work with other buyers, to purchase in scale, thereby obtaining price economies for themselves. It is used commonly for indirect spending. We have written <a href="https://medium.com/@chandsooran/does-technology-make-category-management-unnecessary-af67ed4f2b31" target="_blank" rel="noopener">elsewhere</a> how category management leads buyers to purchase from large sellers. It is fundamentally difficult for smaller sellers who lack the scale or the scope of large sellers to compete. This discriminates especially against businesses owned by women, minorities, and members of other disadvantaged groups.</p>
<p>Teaming, especially when it involves smaller suppliers teaming with one another, effectively acting as their own prime contractors, enables these firms to form large enough cooperatives to compete with large suppliers.</p>
<p>Category management with its consolidation of buyer activity within and across purchasing organizations feeds income and wealth inequality. Here is <a href="https://mitsloan.mit.edu/ideas-made-to-matter/consolidation-corporate-buyers-driving-income-inequality?utm_source=mitsloantwitter&amp;utm_medium=social&amp;utm_campaign=wilmersineqaulity" target="_blank" rel="noopener">Professor Nathan Wilmers from the MIT Sloan School of Management</a>:</p>
<p>“… I found that, over time, as a company becomes more reliant on sales to big buyers, its wages and labor costs tend to decline. I also looked at what happens when big buyers merged together. I found that when big buyers consolidate, wages at their manufacturing and logistics suppliers go down. And this phenomenon — the increasing power of large buyers — explains around 10% of wage stagnation since the late seventies.”</p>
<p><a href="https://www.edgeworthbox.com/" target="_blank" rel="noopener">EdgeworthBox</a> enables teaming, in all its applications, by solving both the search problem and the collaboration problem. Our platform, borrowing features from financial markets in an interface we deem to be like a “Bloomberg machine for procurement,” enables much easier search for and vetting of suppliers while also facilitating communications with our contemporary messaging platform. Prime contractors can act as buyers on the platform, demonstrating to their ultimate clients a similarly disciplined process for soliciting subcontractors to the one the buyers use to decide upon prime contractors. We call it “<a href="https://edgeworthbox.com/EdgeworthBox_eBook_2018.pdf" target="_blank" rel="noopener">network-based sourcing</a>™.” <a href="mailto:sales@edgeworthbox.com" target="_blank" rel="noopener">Drop us a line</a>. We would love to talk to you more about your individual situation and how we can help you.</p>
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		<title>What Is a Good Procurement User Experience?</title>
		<link>https://www.edgeworthbox.ca/what-is-a-good-procurement-user-experience/</link>
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		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Tue, 13 Aug 2019 08:00:00 +0000</pubDate>
				<category><![CDATA[Finance]]></category>
		<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[collaboration]]></category>
		<category><![CDATA[Innovation]]></category>
		<category><![CDATA[procurement]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2019/08/13/your-procurement-systems-user-interface-needs-its-own-user-interface/</guid>

					<description><![CDATA[Dark data is probably one of the most relevant concepts today that people don’t discuss enough. &#160; “Dark data is data which is acquired through various computer network operations but...]]></description>
										<content:encoded><![CDATA[<h3><b>Dark data is probably one of the most relevant concepts today that people don’t discuss enough.</b></h3>
<p><b>&nbsp;</b></p>
<p><span id="more-241"></span></p>
<p>“<a href="https://en.wikipedia.org/wiki/Dark_data" target="_blank" rel="noopener">Dark data</a> is data which is acquired through various computer network operations but not used in any manner to derive insights or for decision making. The ability of an organization to collect data can exceed the throughput at which it can analyze the data.”</p>
<p>It is data that enterprises collect, but don’t use to its full effect.</p>
<p>This likely understates the problem. It is also messy, unstructured data.</p>
<p>To say that data is messy means that it needs to be <a href="https://www.techopedia.com/definition/14650/data-preprocessing" target="_blank" rel="noopener">preprocessed</a> before it can be used.</p>
<p>“Data preprocessing is a data mining technique that involves transforming raw data into an understandable format. Real-world data is often incomplete, inconsistent, and/or lacking in certain behaviors or trends, and is likely to contain many errors. Data preprocessing is a proven method of resolving such issues.”</p>
<p>Whereas, <a href="https://en.wikipedia.org/wiki/Unstructured_data" target="_blank" rel="noopener">unstructured data</a> “is information that either does not have a pre-defined data model or is not organized in a pre-defined manner. Unstructured information is typically text-heavy, but may contain data such as dates, numbers, and facts as well.”</p>
<p>Large enterprises today have large, growing pools of messy, unstructured data that nobody is using. It’s not a data lake. It’s a series of loosely connected cesspools. This unused data is sitting in legacy systems, often, accessed by too few people.</p>
<p>In the case of procurement, access typically means procurement officers. When a large organization executes an RFP or RFQ, the company pairs up a businessperson, like a program manager, with a procurement officer. The function of the procurement staff is to make sure that the RFP complies with the rules while the program manager is focused on making sure that the acquisition meets the organization’s business requirements.</p>
<p>Practically, this means that the only people that access sourcing data are the procurement staff. Sure, the program manager and whatever committee there is put in place to review the acquisition get to see the proposals that suppliers submit.</p>
<p>But, often, they don’t get to see information from their own organization’s prior RFPs directly; the businesspeople need the procurement staff to get that for them.</p>
<p>Businesspeople also don’t get to see the RFPs issued by other buyers, or the contracts signed by other organizations. Procurement staff often don’t get to see that information. And even if anyone did, they would be hard-pressed to see it in a usable preprocessed, structured format.</p>
<p>The solution to this is to have a layer with a 21st-century user interface that sits on top of the incumbent system, extracting the dark data, preprocessing it, and presenting it in a structured format accessible to a wide constituency across the organization.</p>
<p>For years, people have spoken about the need to make the strategic sourcing process <em>actually</em> strategic, as opposed to the functional backwater it is in practice in many organizations. Here is Ayming talking about the issue in this July 2017 Procurement 2020 <a href="https://www.ayming.co.uk/insights/opinion/future-cpo/" target="_blank" rel="noopener">report</a>:</p>
<p>“’Procurement continues to become more strategic,’ says Alejandro Alvarez, director of operations performance at Ayming. ‘Companies that have seen the value that can be driven from good procurement would say it is now a strategic priority. Savings are not a particularly high focus. It’s more about service delivery.’”</p>
<p>If procurement staff really want to engage at a strategic level across their organizations, they need to make the information practically usable <em>and available</em> to the point that it influences the way decisions are made about product design, sales and marketing, and finance.</p>
<p><a href="https://www.edgeworthbox.com/" target="_blank" rel="noopener">EdgeworthBox</a> is a platform for exactly this purpose. It sits on top of the incumbent procurement processes and brings information to bear for use across the organization. We combine a marketplace with features from financial markets including a central clearinghouse for administration; a central clearinghouse for data; and social networking tools. Think of it as a Bloomberg machine for procurement. We call it “<a href="https://edgeworthbox.com/EdgeworthBox_eBook_2018.pdf" target="_blank" rel="noopener">network-based sourcing</a>™.” The data sits in a structured format, adhering to the <a href="https://www.open-contracting.org/" target="_blank" rel="noopener">Open Contracts</a> data standard, partitioned into a public repository and a private repository. The public-side data is shared information about live RFPs, historical RFPs, and historical contract awards, typically from government agencies. The private-side data is organization-specific information about live RFPs currently being considered, historical RFPs and responses, and contracts the organization has signed. Users also get access to one another and to counterparts in other organizations on the EdgeworthBox platform. <a href="mailto:sales@edgeworthbox.com" target="_blank" rel="noopener">Let’s talk.</a> We’d love to hear about what you’re doing and how we can help you get more out of your existing processes and infrastructure.</p>
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		<title>How Should Buyers Deal with Small Suppliers?</title>
		<link>https://www.edgeworthbox.ca/how-should-buyers-deal-with-small-suppliers/</link>
					<comments>https://www.edgeworthbox.ca/how-should-buyers-deal-with-small-suppliers/#respond</comments>
		
		<dc:creator><![CDATA[Chand Sooran]]></dc:creator>
		<pubDate>Fri, 09 Aug 2019 08:00:00 +0000</pubDate>
				<category><![CDATA[Finance]]></category>
		<category><![CDATA[RFP]]></category>
		<category><![CDATA[Social Procurement]]></category>
		<category><![CDATA[Sourcing]]></category>
		<category><![CDATA[collaboration]]></category>
		<category><![CDATA[Innovation]]></category>
		<category><![CDATA[procurement]]></category>
		<guid isPermaLink="false">https://www.edgeworthbox.ca/2019/08/09/how-do-you-deal-with-lots-of-small-suppliers/</guid>

					<description><![CDATA[One of the key problems enterprise buyers have is that they do not have enough of the right suppliers submitting bids in response to their Requests for Proposal. &#160; Another...]]></description>
										<content:encoded><![CDATA[<h3><b>One of the key problems enterprise buyers have is that they <a href="/the-principal-supplier-risk-is-not-getting-the-right-suppliers-to-bid" target="_blank" rel="noopener">do not have enough of the right suppliers</a> submitting bids in response to their Requests for Proposal.</b></h3>
<p><b>&nbsp;</b></p>
<p><span id="more-242"></span></p>
<p>Another problem that purchasers may have, paradoxically, is that they have too many suppliers. Consider a large corporation like a bank. How many small suppliers does a large financial institution have delivering specialized or regional services like compliance training?</p>
<p>Here is <a href="https://www.forbes.com/sites/jwebb/2018/02/28/how-many-suppliers-do-businesses-have-how-many-should-they-have/#23e039839bb7" target="_blank" rel="noopener">Forbes</a> describing the issue:</p>
<p>“The supply chains of most organizations have grown ungovernably large. It is not uncommon for global brands to possess tens of thousands or even hundreds of thousands of suppliers.”</p>
<p>Think about the administrative complexity of managing such a large network of suppliers. Registering them as vendors. Paying them. Monitoring their performance.</p>
<p>The natural reaction is to rationalize or reduce the supplier base.</p>
<p>But doing so penalizes smaller suppliers, who are often owned and operated by members of historically disadvantaged groups such as minorities, women, service-disabled veterans, and members of the LGBTQ community. Some of them are sole proprietorships or very small entities with only several employees. This stands in contrast to the stark and growing pressure to diversify supply chains.</p>
<p>One way to fix this problem would be to consolidate the suppliers into something akin to a “Group Selling Organization,” ideally with a disadvantaged wrapper.</p>
<p>How might this work in practice?</p>
<p>Consider the example of Metrobank. They need to purchase compliance training for their employees working in retail stores across the country. They might purchase an online solution from a large seller and require their employees to do the training by a certain date, on their own time. Or, they could source these services from small training companies located across the country for in-person delivery.</p>
<p>If they do the latter, then they must deal with hundreds of suppliers. This means identifying them, gathering vendor management information on them, paying them, and tracking their performance.</p>
<p>In traditional sourcing involving small suppliers, just as in life, there are tradeoffs. There are always tradeoffs. Between risk and efficiency, cost and suitability. All of it.</p>
<p>The Group Selling Organization we propose here would be a centralized counterparty for Metrobank. Instead of buying from five hundred Mom-and-Pops, they would deal with one company, GSO Corp.</p>
<p>Practically, the Group Selling Organization would have the hundreds of suppliers on their platform, including detailed supplier profiles, marketing materials, and vendor management information. Metrobank could peruse the GSO platform, select the individual supplier who would deliver the service, but contract only with the GSO. Metrobank pays the GSO and the GSO pays the individual supplier, albeit at a nominally discounted price to reflect the transactional friction.</p>
<p>Naturally, the Group Selling Organization would require contractual indemnification from the buyer and the supplier such that the buyer would acknowledge they have no recourse to the GSO for any performance failure or other issues and the supplier would indemnify further the GSO from the costs of any litigation risk or required performance make-wholes.</p>
<p>It would be as if the buyer were purchasing directly from the supplier, but with the administrative simplification of executing through the GSO.</p>
<p>To make this happen, the GSO would require a platform that could sit as a layer on top of the buyer’s incumbent strategic sourcing architecture, while at the same time providing a much more user-friendly interface for the small suppliers. It would have to be a platform that could onboard suppliers easily with detailed vendor management. Ideally, there would be links to supplier profile pages (including marketing information); think Shopify for B2B. And there would be social networking like messaging to facilitate greater collaboration between small suppliers, or the development of relationships between buyers and suppliers. There could even be <a href="http://info.sirionlabs.com/slw-product-brief-contract-lifecycle-management" target="_blank" rel="noopener">contract management</a> for things like invoice reconciliation.</p>
<p>This is precisely the kind of platform we have built at <a href="https://www.edgeworthbox.com/" target="_blank" rel="noopener">EdgeworthBox</a>. We have taken techniques from <a href="https://medium.com/@chandsooran/the-rfp-process-should-operate-more-like-financial-markets-ae091bca1cfc?source=your_stories_page---------------------------" target="_blank" rel="noopener">financial markets</a> and applied them to the RFP business process to reinvent the way organizations purchase goods and services for the 21st century. We call it “<a href="https://edgeworthbox.com/EdgeworthBox_eBook_2018.pdf" target="_blank" rel="noopener">network-based sourcing™</a>” We would love to talk to you about what we have learned about procurement and how we want to change the way the world buys goods and services. <a href="mailto:sales@edgeworthbox.com" target="_blank" rel="noopener">Let’s talk</a>.</p>
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