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

Put yourselves in the position of the buyer. They may lack access to market research. They certainly don’t have a lot of spare time. Perhaps they issued a Request for Information to try to overcome these deficits. Even then, the buyer may have gone down the wrong path.

Frequently, the only thing that the RFI manages to accomplish is to give buyers a false sense of confidence in their approach, even as they burn through supplier resources by making them respond. (We’ve written previously about how the typical RFI is a counterproductive waste of time and money.)

What if there were a better way for suppliers to educate their customers before the RFI gets in the way?

Do it properly and buyers can benefit from access to information, even as suppliers shorten and simplify the sales cycle.

From the supplier’s perspective nothing should be more important than educating the customer. Yet, according to prior research, only 14% of sales organizations think that “a majority of their customers are educated adequately.”

The article continues:

“Presale educational materials, for example, could convince potential customers to convert by making a complex, technologically advanced product more approachable. Organizations should focus on presale educational materials because products are becoming more complex and technologically advanced.”

This kind of customer education is vital for products that are complex and/or products that require behavioral modification.

It is something that can accelerate the customer from a lead to a closed sale, potentially even upselling the prospect to entertain a more comprehensive solution.

What would the ideal customer education tool look like, if we were to design one from scratch?

It should have at least the following four characteristics:

Simplicity: We would make it very easy for customers to obtain and trust the information they need to make the purchase. Suppliers should be able to impart this knowledge with little effort.

Speed: Customers should be able to obtain the information they need to make an informed judgment s. Suppliers should be able to establish whether they are the right fit for the customer’s problem on a timely basis so that they can optimize their allocation of sales resources.

Completeness: The information suppliers give customers should include everything they need to know, without the distraction of information they do not require, to make an informed decision that is correct for them.

Authority: The communication must convey to the buyer that the vendor has the authority and the leadership she can trust.

Typically, suppliers will educate customers with familiar tools, including:

• Knowledge bases
• Tutorials
• Blogs
• Video blogs
• Manuals
• Demonstrations
• Reviews
• Trade show appearances
• Seminars
• Case studies

There is nothing wrong with these, of course. People use them because they work. But they may not be the most efficient tools.

There is another way, although it might seem counter-intuitive.

Imagine a scenario in which an individual supplier could develop a “Model RFP” or “Golden RFP”. It would ask the questions suppliers think buyers should ask and only those questions. The supplier could pre-populate this Model RFP with their answers.

Once the salesperson has qualified the buyer as a potentially good fit, he could send the customer access to this document.

One of several scenarios could result.

The buyer may decide that she has enough information to decide. Using the Model RFP and its response, the line manager in charge of the purchase could conclude that she had everything she needed. If necessary, she might invite procurement to inspect her work. She then proceeds to a sole-source procurement.

If the buyer’s organization requires execution of an RFP process, the buyer could use the Model RFP as her own to execute a reverse auction quickly.

Or she may elect to develop her own questions, relying in part on the input of the Model RFP.

How do you educate your customers? Maybe you don’t have to. Perhaps the most interesting scenario would be if the buyer invited several suppliers to send her their individual Model RFPs. Instead of having a single, common RFP document to which every supplier responded, each vendor could simply send their Model RFP and their related answers. In reading multiple Model RFPs, the buyer would garner a tremendous amount of market intelligence from the questions that different suppliers included.

Instead of one RFP, there would be multiple RFPs. Suppliers could respond instantaneously with pre-set answers. It would be effectively costless to respond. Of course, the buyers would have to read through many more responses, but the buyer would consequently make a much more informed decision. One day this scoring could be automated, as well.

With the Model RFP approach, buyers get the suppliers to do all of the work. It is potentially much more informationally efficient and much faster.

EdgeworthBox is an exchange like the CME. Instead of developing liquidity in financial contracts, we focus on making acquisition of goods and services more efficient. Our model has the flexibility to enable the Model RFP approach, wrapped in a very friendly user experience.

Are you a buyer or a salesperson and you’d like to learn about how we can help you become more efficient? We would love to speak with you.

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As part of its post-Brexit transition, the UK government revisited its procurement policies.

“We propose enshrining in law, the principles of public procurement: value for money, the public good, transparency, integrity, efficiency, fair treatment of suppliers and non-discrimination.” (emphasis added)

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

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.

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.

These winning vendors are quasi-insiders. No wonder laymen assume that the procurement system is rigged.

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.

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.

None of this is consistent with “value for money.”

You can see this in the systems and the business models that buyers use.

How can we characterize the current, common approach to sourcing?

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.

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.

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.

Why is this the case? It is so because buyers are the ones who pay for the systems.

If you asked suppliers to design a sales system (as opposed to a sourcing or procurement system), you would get an entirely different answer.

A supplier would like to have some key features:

• Collaboration: 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
• Data: 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
• Speed: The supplier doesn’t want to spend weeks or months trying to navigate a sale once the process has started
• Standardization: Ideally, the supplier would like to see the use of common templates across buyers, where possible to make onboarding and responding easier

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.

If you make it easier for suppliers to give you what you want as a buyer, you’ll be more likely to get it.

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.

We built EdgeworthBox 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. 

Our approach increases the quantity and 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.

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There are (at least) three dimensions to the problem.

One, we want to find the right match. It is a difficult search problem on both sides. What characteristics does the right person have? Should we try to figure this out in advance, or should we keep an open mind so that we can be surprised pleasantly?

Two, it can be an expensive, time-consuming process. The single person may need to kiss a decent amount of frogs before they can find the right match. That means a lot of awkward first date conversations over coffees and meals. People can spend more time matching and not enough time connecting, as they say.

Three, it can be risky. By definition, you’re considering all kinds of people you’ve never met before. How can you ensure you’re not going out with someone who is going to steal your identity or attack you physically?

Naturally, there are tradeoffs involved. If we’re willing to take on more risk, we can widen the aperture of our search to consider a broader array of candidates, but potentially lengthening the timeline and adding to the expense of filtering people.

Or we can try to engage in so-called speed dating, hoping to see enough of the relevant features in a short period of time. Of course, we risk moving so quickly that we end up overlooking potentially wonderful fits, but at least our transactions costs are lower.

Dating apps come in all manner of forms to try to help us address these issues.

The right apps allow us to open or tighten our search on some common factors such as education level, location, income, physical appearance, etc., ideally focusing our search so that the investment in further relationship building is more likely to be productive. But they can just as easily expose us to risk in the form of harassment or worse.

There is a tremendous breadth of dating apps. Some permit the woman to make the first move. They exist on a spectrum of a targeted relationships from casual to serious. Increasingly, these apps appear to focus on demographic categories. They all seem to have some algorithm for improving the likelihood of a match.

Dating apps are focused on developing three things:

• Fit: Is this the right person for us?
• Trust: Can we trust this process?
• Efficiency: Can we find our match with the least amount of effort?

They must minimize risk and bias. Here, risk means the risk that the person we meet might waste our time (or, in the worst case, do us some physical harm). Bias refers to algorithms that may be predisposed to favor certain factors and discount others, including potentially race or education or social status.

Procurement poses a similar problem: efficiently matching buyers with the right suppliers for the best combination of value and risk.

Before the pandemic, the conventional wisdoms defined the right match in terms of cost minimization.

This is not necessarily the case after the supply chain disruption experienced during the lockdown. We have other issues to consider in thinking about what makes value for money — including supplier risk, supplier relationships, and diversity and inclusion.

Some people suggest that the best way to understand risk is to have full visibility into the supplier network: to know who supplies your suppliers and who supplies those vendors, ad infinitum. This may or may not be feasible, especially in the case of complicated supply networks such as those in construction services.

An ideal sourcing system would permit buyers to cast the widest possible net in order to see the broadest array of potential solutions and suppliers. 

It would help buyers and suppliers access reliable, contemporary market intelligence rapidly and inexpensively. It would have a way to verify information about vendor performance. And it would permit relationships and collaboration, perhaps the best way to manage risk. Know your customer becomes know your supplier.

This is what we have built at EdgeworthBox. Our cloud-based web application sits as a layer in the procurement technology stack. We improve the existing approach to sourcing with tools from capital markets. 

Buyers can solicit suppliers, regardless of their existing relationship, given the ease with which they can onboard them using our tools. Buyers and suppliers can access market intelligence quickly and inexpensively. 

And everyone in the ecosystem has the opportunity to collaborate and build relationships using familiar social networking tools. Come give us a shout.

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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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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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If there were ever a year in which procurement should be treated strategically, it is 2021. The massive Pandemic-induced supply chain disruptions showcased the lack of visibility, the concentrated vulnerability, the geographic risk exposure, the cost of weak supplier relationships, the suitability of systems for remote work, etc.

What does it mean to say that a business process is strategic? What is strategy?

A business strategy determines where a business seeks to go and how it plans to get there.

What markets will the firm target? What products will the firm sell? How will we allocate our scarce resources to make this happen in a sustainable, profitable manner? What does this mean for the way the enterprise organizes and finances its operations? How complex are our operations? Where are the risks to our success and how should we mitigate them?

Tactics on the other hand revolve around the execution of this strategy on a day-to-day basis.

How do I deliver a particular project for a specific customer? What do I have to do right now to make good on my promises to customers and other stakeholders? How do I onboard new vendors? What does my spend cube look like?

Here’s the real question: is procurement strategic or is it tactical? How do you drive internal collaboration around procurement?

The truthful answer is that it is both, but that companies have relegated it to the realm of the reactive and the quotidian.

Chief Financial Officers and pliant procurement staff have coalesced around the notion that procurement is about cost reduction. Value-for-money in this view is about the lowest price. In this characterization, procurement is entirely tactical.

Covid 19 revealed the weaknesses of this thinking.

Procurement is also strategic in that it spans questions about sustainability and macro direction.

What kind of firms do we want as suppliers? How do diversify our exposure to different vendors so that we can reduce the vulnerability of the firm to supply network disruption? Once we have decided upon a particular market to target, what inputs will we choose for our products? How will we purchase goods and services from third-parties? How do we manage supplier relationships so that we get the most benefit?

We’ve spoken before about how Boards should think about procurement.

“The lessons of the Pandemic are that strategy at the firmwide level is about managing the risk profile to maximize the upside and minimize the downside subject to resource constraints and that sourcing is an integral part of this strategic management of risk.”

We have also talked about complexity and strategy, quoting the Deloitte CPO survey of 2019:

“Complexity can be exploited to expand procurement’s influence beyond traditional sourcing-centric spend management toward a broader engagement model and service offering. This includes efforts to more broadly influence business stakeholders in strategic areas (e.g. capital expenditures, enterprise risk management), as well as to more deeply influence stakeholders through demonstrated leadership in areas such as corporate development.”

The best way to do this is to bring the key strategic decision-makers into the procurement conversation.

To do this we need a forum for the conversation. Experience tells us that it is profoundly difficult for procurement to insert itself into the “room where it happens.” Out of sight is out of mind.

Key people from across the firm need access to data and processes, delivered in an inclusive manner, to be able to want to talk about procurement.

If the VIPs aren’t going to log into the ERP module to check out procurement, then the CPO will have to bring this process to them.

This is precisely why we built EdgeworthBox.

By layering on an inexpensive platform that not only connects buyers and suppliers but also people within the purchasing firm to one another across differing functional responsibilities, CPOs can bring procurement data and processes to critically important internal players. This is the way to make procurement strategic.

This may be the only way to make procurement strategic.

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.

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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.

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