The biggest challenge with bundled deals is that they often contain many line items for different products or services and also different units of measure for the same products and services.
Edmund Zagorin: That’s terrific because I was going to ask about what you recommend for writing procurement job descriptions next. You actually anticipated the next two questions that I had teed up here. But to zero in a bit, I think what jumped out at me from your description is the term “cross-functional”. There are certainly times where one gets the sense that in procurement, along with local government and even corporate enterprise positions as well, the sense that people have their lane, have their channel, have their silo, and they’re very much encouraged not to look beyond their purview to build value and create opportunities for the organization. And the reason for that is that, if people have a clear understanding of what is and is not their responsibility, then there won't be conflicts over authority, or ambiguity over responsibility and accountability, which can cause frustration. Silos don't exist in a vacuum, after all -- they evolved to meet a need -- they help people have good interpersonal communication. But now, particularly as you look towards the adoption of technology platforms, a lot of times the value that is most delivered is beyond a single role or function, e.g. it is "cross-functional." I saw this in some of my work at Responsible Purchasing Network looking at sustainable procurement initiatives for local government. There the value is really to the organization, in some cases to leadership who have set aggressive targets, for example, for carbon reduction or waste reduction, etc. But in some cases, when such an initiative it is one small part of too many people's jobs, then it fails to gain traction among people who are very focused on what is or is not their core area of responsibility. This might be a long way to a ham sandwich, but my question is how do you see procurement leadership working against these silos, working towards this "cross-functional" idea where everyone is part of a team that has strategic enterprise value and customer service as its North Star, and how do you hire for that kind of a team?
Brent Maas: I tend to think in terms of outcomes. Let’s talk about the hiring process itself, for example. Having conversations where they talk about outcomes- how did what you did impact your staff, your teammate, your superiors, other departments, etc? I think engaging in the conversation is really about hearing whether or not folks are relatively fluent or articulate in talking about their understanding of impacts and because of the job that they do, they are contributing in some manner to the organization. If their experience is restricted to a particular category of product or service and they don't seem to indicate much awareness of any other attribute of organizational function, in fairness, you can ask some questions, probably reviewing to probe a little bit to find out whether they hadn't been given an opportunity to form much awareness and are therefore ignorant (I don’t mean that in the negative connotation), especially in an entry level type job.
But the more they could reflect the capacity to understand- “I recognize there’s multiple stakeholders across the organization and I can’t figure out why we can’t, to use your earlier example, seem to move the needle on carbon emissions related programs? Why aren’t we doing that?" Well, there are a lot of reasons - not just within single organizations, but across communities we see problems like this, where getting groups of people to be motivated enough to take difficult actions and make tough choices is what leadership is all about. And I can come up with a bunch of reasons but I think part of it is having a conversation with folks to help facilitate their thinking to go beyond what their immediate task is or what their immediate charge may be. There are some folks that can’t go beyond the hypothetical or get into a creative mode where they are conceptualizing beyond the black and white, and that’s OK, you need people like that, too. But in terms of looking for those you might develop into roles that could conceivably be formal leadership roles, you are looking for those who naturally drift into talking about problems and challenges from multiple perspectives, seeing a problem like an organization. And then cultivating that person and giving them opportunities to get more insight and understanding into the functionality and the processes and culture, the strategic goals throughout the organization. Then hopefully they express “Hey, I have an interest in pursuing this further or any opportunity for me to contribute, but I haven't been invited to participate.” And then you start getting into, what I think, are issues for organizational leaders to ensure that they are developing the culture that allows for that kind of development opportunities for his or her people. That may or may not exist, but asking: how can we create opportunities for people to own the outcomes of their own work? It’s not always the procurement piece at all, it’s really very much about management issues - how does the organization manage power? How do organizational leaders influence the environment in which the work is being conducted? Are you helping your people perform in a highly effective manner? Do your people have the desire to go above and beyond?
Edmund Zagorin: That’s a pretty profound set of questions. And we're starting to see a shift in a lot of organizations, where it's about of a culture of opportunity discovery. If people can find problems, brainstorm creative ways to solve them and then get the backing of leadership to execute, that's the sign of a great culture. Because sometimes the best ideas in an organization come from people who are closest to the work. A true leader's realizing that suggestions from workers are not a challenge to their authority, and that these suggestions can actually be a source of tremendous value. Now, of course not all of those ideas are going to be that great, but some of them will. And having the patience to hear people throughout the organization on things that they want to try and even create, in some organizations we're beginning to see the emergence of something like a Chief Innovation Officer or someone who is simply tasked with allowing the organization to execute on opportunities for value. What is that role if not: get some projects, define roles and responsibilities, brainstorm what success looks like, define metrics, define outcome scenarios and then once you've gotten decently close to clarity, then begin executing. I think that that is partly due to the rapid advances in certain sectors of technology, but I think it's also due to just a general recognition that people genuinely prefer to work for an organization that is willing to at least hear them out on an idea and potentially, that could be an area where they can see themselves in the organization as part of having launched an initiative. Everyone ends up benefiting from that approach..
Brent Maas: Certainly the opportunity to meaningfully contribute to something new or to elevate an existing program is a very rewarding kind of experience.
Edmund Zagorin: Absolutely. I just looked at the time and realize that I want to try and stop close to the top of the hour here. To close out, I had two quick questions which are more take-aways from this larger picture that we're painting. So the first question is what is one thing, it could be a device, machine, institution, process, really anything that exists in public procurement today that you think won't exist in 10 years?
Brent Mass: This is making my brain spin because, particularly in the public sector, the less well off agencies will hang on longer to legacy everything than would a bolder and well-funded and well-managed agency. We know demographically there is a higher percentage of college grads than was 30 years ago anyway, look forward 10 years, the number of college grads in management roles will probably be a bit greater than it is today. There are a number of things I wish would go away, in some manner. What should go away is making decisions in a vacuum - I think there’s no reason that any acquisition decision should be made without having ready access to comparative price data, at a minimum. There is just so much latent data and should be sufficient to provide an expansive resource to make comparisons. The challenge is to bring together that data from the myriad of disconnected sources and being able to make that data available to whomever might be interested. I think acquisition decision-making will be gone - people will set parameters but computation will do much of the rest. Anyone who continues to do that will be because they have stuck their head in the sand and refuse to pull it out.
Edmund Zagorin: To me, it seems almost counterintuitive to me that everyone doesn't already have access to at least some form of benchmark for that, but I hear you on that. Procurement that doesn't beat the market, at a minimum, I think will start to receive more scrutiny, especially in the context where it seems like there's an unfulfilled mandate for free and fair competition.
Brent Mass: I’m speaking about making purchasing decisions with comparative data, whether you are "in procurement" or not. Anybody might engage in the activity, specifically authorized or not. Overall I think people want to make more informed buying decisions, and I think that will involve a lot of changes.
Edmund Zagorin: Last question here - If you were to make a two or three point checklist for any procurement leader of things to make sure that you're either doing over the next couple of years or are doing regularly, what's on that checklist for you? It could be anything from a type of meeting or a type of administrative procedure to looking at a particular category. In other words, where are some low hanging fruit that you think potentially are no-brainers across some of the portfolio of change management initiatives?
Brent Mass: It really comes down to data. What am I doing to aggregate the data to be most helpful for me to be able to assess performance. Outcome, as it relates to performance outcomes, as well as procurement specific, what is that data and how can I go about getting it? And in particular, what I have in mind contextually, is that, at minimum, you should work regionally, whether that’s through local government or if you have to do direct outreach, work with multiple agencies share the data and extract from that data what would be most informative to you in helping your agency. It’s about data analytics. Number two - How are you aligning your activities with the goals of the organization? Are you talking with your people about that regularly? Do they understand how what they do aligns with what you are trying to do? Number three - What are the ideal activities or things that “if only we could do” this would help us be closer to meeting those goals?
Edmund Zagorin: That last point was particularly helpful - asking: what if. Taking initiatives to look outside your department, lift your head up and see the bigger picture. Incitements to do that are, in 2018, much needed and as we look towards the future, there's going to be more opportunities for folks who get good at doing that regularly and build a culture that honors and rewards seeing that bigger picture. So I want to just say a big thank you from the team at Bid Ops for your time today. It's been a pleasure as always, getting to chat.
Edmund Zagorin: Today we’re speaking with Damian Beil, a practitioner and professor specializing in strategic sourcing and operations at the University of Michigan’s Ross School of Business. Damian’s research focuses on multi-phase procurement auctions and the discovery of uncommon value in common requests for goods and services up and down the supply chain. Damian, is there anything you'd like to add to that, that introduction?
Damian Beil: Mostly right. Uncommon value sounds grandiose, but we do try to teach business students at the University of Michigan how to identify and create value in supply chain relationships. Happy to chat with you today.
Edmund: Excellent. Well, Damian, I'm only going to ask you a few questions because I know your time is very valuable. I'll just dive right in. What do you see as happening in the next five and 10 years in supply chain, particularly in the Source to Contract phase as a technology becomes more sophisticated both in the gathering of data and of course in use of digital commerce networks?
Damian: Good question. I think data is going to be increasingly important in a lot of different areas. One major way is that data will to allow us to make better predictions about things. If you put that into the context of procurement, you could, for example, better predict which supplier is going to perform well, under what circumstances. At scale, you could predict what a certain market is going to look like in the next six months, maybe even what the outcome of a certain auction would be. Of course, we developed a lot of models on outcomes in markets like auctions, but I think with more and more data available, it will become easier and easier to do that well. The data may be slow in coming, but I expect it will come – eventually, emerging technologies like blockchain will probably help here. So I really think the big change is mostly is going to be around making better predictions and it's going to be a question what are the ingenious ways people think of to use that in in sourcing settings.
Edmund: Absolutely. Very insightful. I’d tend to agree with that and would be interested actually in at another time digging more in on the types of models that you’re using today for these procurement auction forecasts. Shifting gears for a second, I’d like to also ask what you see as the biggest priority for a procurement or a supply chain leader today? I know historically it's saving money and, and delivering bottom line revenue. Are there other leadership priorities that you see emerging?
Damian: I think one big area that is really hot right now is risk management around global supply chains. With all the movement on tariffs that is a big issue on people's radars. And it has huge implications for sourcing and procurement. It's unclear how long lasting this will be but that's definitely something important right at this moment. Taking a 30,000 foot view, talent development will continue to be important. There's still a lot of firms out there that have talent needs in the supply chain area, sourcing in particular. So it will continue to be a priority to grow talent and invest in people who can add value to the firm.
Edmund: Absolutely. And out of curiosity and I know you train, teach and coach folks that are going into the field in the Ross MBA program, so I wonder if you could share one question that you could ask someone to determine their kind of aptitude or in a job screening process for procurement?
Damian: That one is pretty easy. I think it would be a question devised to assess, for whatever industry I’m recruiting for, whether or not the candidate is able to identify the business case - the value add - between a buyer and supplier relationship.
Edmund: Absolutely, yeah. Holistic analysis.
Damian: I think that is what separates the wheat from the chaff. It's all about “why” a buyer and supplier are doing business together - understanding really clearly what the case is. The details are less important, but if you have clarity on the case, the details will work themselves out. I think that's where a lot of people struggle --- to identify or think at that kind of strategic level from the get-go.
Edmund: Right, to kind of see the value both short and long term in a decision.
Damian: Yes. It’s the ability to identify the value/business case/opportunity and to be able to understand it and articulate it. And then the rest of it is execution. The identification of the opportunity in the business case is where the creativity and seeing the big picture come into play. That's what justifies the high salaries that the people who are really talented in supply chain deserve.
Edmund: Completely agree. Shifting gears for a second, I wanted to get your view on the future of procurement with a different phrasing of an earlier question: are there any tools that you see used by procurement or supply chain practitioners today that you think will not be used, say 10 or 20 years from now?
Damian: Airplanes. By which I mean that I think eventually we'll get to the point where virtual meetings do a sufficiently good job replicating face to face relationships that people won’t need to travel so many days a year in these positions. For other market mechanism tools, I think the tools are going to get more sophisticated. Simple tools still have a place in your toolbox, like your price only auction, but you may become more sophisticated and use it for fewer applications than you would today as you becomes more sophisticated and can incorporate more aspects like full cost and value and all that stuff. That’s going to continue to become more widespread. I think it will probably supplant some of the simpler manifestations.
Edmund: Haha, I think many folks in the industry would be just fine with fewer travel days, not to mention our families. And my last question, well, I can't not ask you about this. Where do you see any leading indicators of the role that artificial intelligence and machine learning is going to play in supply chain and procurement today, or in the near future?
Damian: I think it gets back to how you identify creative applications of better prediction abilities. You can think of a self-driving car. Why does that work? Because we’ve had computers looking over the shoulders drivers for millions of miles and eventually they became able to predict what a good driver would do in any given situation. Right? So if you can have a computer look over the shoulders of procurement agents for millions and millions of transactions then maybe you could do something similar, in other words, you can predict when suppliers are going to have a problem and take proactive steps to counter that or predict what the market is going to be, when an event's going to be successful, when it's not. These aren't necessarily the best applications. But I think the really interesting things will happen when people get creative about what cool things you can get data on, and therefore when you can make good predictions. That's where there's going to be a lot of applications and new value created. Have to call out blockchain again (sighs) it might help with the data needs.
Edmund: Damian, that’s a fantastic note to end it on. It’s wild to think about what the procurement landscape and the economy as a whole will look like when more of the business commerce is transacted automatically, even autonomously. Thanks for talking with us today!
Hello, and welcome to Bid Ops Insights, a blog about business strategy for procurement, and the relationship between strategy and combinatorial bidding.
The name sounds scary, but combinatorial bidding is simply the idea that when buyers awards a contract to a vendor, they typically use a process that involves multiple phases to evaluate multiple vendors on multiple criteria.
Technical specifications, price, value, geographical location, quantity and vendor presentations usually play a role in the award decision, but there are often oddball considerations based on the category, and some criteria will apply to certain classes of vendors and not others (for example, localization or vendor diversity preferences).
Today, in many organizations, buyers struggle to analyze those different criteria in order to reach an award decision.
This schema — relating selection criteria to produce a sourcing outcome — is what drives the process of ‘*combinatorial bidding.’
At Bid Ops, we would argue that all bidding is combinatorial bidding. Even the simplest RFP places inherent non-price limitations on the pool of responsive vendors. Paperwork itself (e.g. the RFP itself) is an intrinsic limitation -- if a vendor doesn't have time to read a long document, they simply will not respond. This demonstrates that even the simplest RFP is a qualifying process that selects for a smaller segment of the market than would otherwise be available.
By using software to reduce inherent limitations, masters of combinatorial bidding processes can create a "supply funnel", in much the same way that salespeople use a funnel-based approach to drive growth. That's what this blog is about, effective techniques to get the most out of your bids using design thinking, automation and artificial intelligence.
By learning to think explicitly about how a procurement process produces inherent limitations and selection criteria for the winner, we are opening a conversation about how procurement can lead from within the enterprise: on improving margins, innovation and inclusion.
These posts are not intended for a technical audience, and we welcome contributions from a diverse range of readers in the procurement, sourcing, technology and organizational & business process design community.
Our goal is to channel suggestions to transform bid processes into a race to the best, and transform procurement processes from a bottleneck into an engine for enterprise value.