Is this the renaissance of Market Informed Sourcing?

The term renaissance is one that is much over used but it is useful shorthand to describe how ideas, concepts and technology can have a ‘rebirth’ and develop into something not previously imagined.  And in our sector it seems that Market Informed Sourcing is now having something of a rebirth of its own. 

The phrase ‘Market Informed Sourcing’ was initially coined by Peter Smith of Spend Matters* to encompass the ‘advanced sourcing’ and ‘sourcing optimisation’ technologies that allow potential suppliers to be creative when making offers so, in effect, the market informs buyers of the most effective way of meeting their particular needs.  This contrasts with the traditional approach of buyers pre-determining their requirements and asking the market to fulfil their needs.  Why Market Informed Sourcing is so useful for buyers is that it means they can leverage any synergies, economies of scale and a host of additional factors that only become apparent during the sourcing process as suppliers reveal their strengths.

Market Informed Sourcing means buyers can leverage any synergies that only become apparent during the sourcing process as suppliers reveal their strengths. 

Despite these benefits and despite these techniques being available for almost 15 years, the ‘sourcing industry’ as a whole has been slow to adopt the methodology.  There are many reasons for this but it is largely due to accessibility and ease of use, the entry cost for buyers and also resistance to change in the buying community. 

Back in 2000 huge computing power was not readily available.  The internet was largely being used to display and share information and the concept of true cloud computing, where you can buy into services that give you extra processing and storage capabilities on demand seemed like a pipedream. Fast forward to the present day and storing and processing information in ‘the cloud’ is commonplace and as consumers all we want is our data to be secure and any online data processing to be fast and accurate.  And if the price is right, we are happy to pay.  

Overcoming individuals’ and organisations’ resistance to change is harder to achieve than improving hardware infrastructure but resistance to change does diminish over time.  As with all new technology, once people see the benefits others are achieving and then experience these benefits themselves, the new ways of working  seem less intimidating and start establishing  themselves as the norm.  This is the case with Market Informed Sourcing and thanks to the efforts of companies like ourselves and our competitors,  organisations are starting to embrace the techniques and technology and uptake is steadily speeding up. 

But as with all technology it never stands still so when a number of our customers start morphing Market Informed Sourcing into areas that go beyond its original definition we have a new concept – one that we call Beyond Sourcing®.  And this is the true renaissance of Market Informed Sourcing as it has developed into something even more powerful to sourcing professionals.

Beyond Sourcing is the true renaissance of Market Informed Sourcing as it has developed into something even more powerful. 

The early adopters of Market Informed Sourcing have already seized the low hanging fruit that it delivers and are now moving the same techniques in to other areas.   Today’s leading edge buyer, or supply chain manager, (the roles are fast becoming interchangeable), is now looking up and down the length of their supply chain, looking for creativity from their suppliers and looking to optimize the whole of their supply chain in one exercise. They are less interested in theoretical network modelling with static data and they want to work with actuals in as near real time as is possible. They want to be able to place their whole supply chain on the market at the same time. They want to have a collaborative relationship with their suppliers and customers and they recognize the fact that every part of the supply chain, even those inside their own business needs to act as a customer to the people or functions it serves. 

This approach has only become possible in the last couple of years as the tools and the power to use them have been developed on software platforms such as ours. Buyers and supply chain managers in sectors such as retail, automotive, and FMCG are all seeing and realizing the benefits of looking at their supply chains holistically and they have reduced their unit costs, improved quality, improved their customer service and have gained a wealth of knowledge about their supply chain. They have done this by simply recognizing that Market Informed Sourcing is not the end, it is the beginning and the renaissance has started once again as we move Beyond Sourcing.



*Market-Informed Sourcing: A game-changer for Procurement, Peter Smith, Spend Matters UK/Europe, October 2011


Beyond Sourcing® is a registered trademarks of Trade Extensions TradeExt AB


70% growth in Q2

It has been a great first half to the year and revenue grew by 70% in Q2, 2014 compared with Q2, 2013 with year-on-year growth running at 50% and the company being in the position to pay shareholders a dividend for the first time. 

The growth is consistent with our impressive performance over the last few years which has seen the company double revenue since 2012. Companies are recognising the operational benefits they can achieve with sourcing and optimisation projects and this greater understanding of TESS is a significant reason for the company’s continued growth. 

During Q2, the largest growth has occurred in Europe, specifically the Nordic region, but US performance is strong. 

To further support the US market, we have recently appointed a new Support Consultant - Kevin Neveu - based in California.   Kevin's appointment is the second significant recruit we have made this year in North America after Mark Maxwell joined as first dedicated Sales Director for the region. These appointments reflect the increased activity of our US customers and the importance of the region as a whole. 

Our performance in the first half of the year shows how the business is developing.  We are becoming embedded in companies’ day-to-day operations as they see how our platform helps improve sourcing and the supply chain. 

Trade Extensions, CEO, Garry Mansell


Indirect procurement leads to direct confusion

One of my favourite bloggers, having recently attended an ‘indirect’ procurement event, questioned the terms direct and indirect procurement and whether it is necessary to differentiate the two or if  they should both should simply be termed ‘procurement’.  This is something I have been thinking about for a while now because I too am not convinced that differentiating ‘indirect’ and ‘direct’ spend is either helpful or meaningful. 

We can see this when we look at how the terms are used in different industries.  For example, a retailer will see the things it buys to sell onto its customers as direct procurement, but the IT services it buys to support its business as indirect procurement. However, the same IT services are likely to be classed as direct procurement for a bank while the hotel next door would see them as an example of indirect procurement.    

Confused yet? Probably.  So let us go back a step and try and define the two terms. 

Direct procurement is generally considered as being concerned with the core business of the organization buying the goods or services while indirect procurement is concerned with the supporting functions of the business – buying the goods and services that have to be bought to ‘make everything else work’. 

So instead of indirect and direct procurement should we now be making a more operational distinction and be talking about core function and non-core function procurement?  I’m not so sure because this throws up the same inconsistencies as direct and indirect since the same goods and services could be classified in either category depending on the industry.  For any classification to be useful and taken seriously it needs to be consistent and mean the same thing to all audiences.  

For any classification to be useful and taken seriously it needs to be consistent and mean the same thing to all audiences. 

Another helpful criterion for a classification model is that it is necessary in the first place and I would suggest that this is not the case with indirect and direct purchasing.  When thinking about why these terms came into being the cynic in me feels it’s largely because someone cleverer than me saw some money to be made.  Unsurprisingly most organisations pay most attention to the goods and services that are the core of their business so by identifying an area in a business where there has been little attention you can bring focus to it for the first time and make money from the ‘new idea’ – in this case indirect procurement.   The facts of running a business are that if it needs something in order to function the business makes a decision. The questions are simple “Do we do this ourselves?” or “Do do we buy it from someone else?” If it’s the latter, then the “thing” is already being bought so is there really a need to create a new classification and end up with two separate terms for things we buy? 

As you can gather by now I am not a fan of the terms direct and indirect, they mean nothing in my opinion and worse still they introduce potential confusion because the terms mean different things to different people. 

As I mentioned earlier, any classification model needs to consistent so if we do want to differentiate  we need a simple system and for me it doesn’t need to be any more complicated than  “stuff you can touch”  i.e. goods  and  “stuff you can’t touch” i.e.  services.  This has the benefit of being easy to understand and potentially useful since they are bought and sold in different ways. 

For me it doesn’t need to be any more complicated than  “stuff you can touch”  i.e. goods  and  “stuff you can’t touch” i.e.  services. 

When buying goods, you are buying something physical -  boxes of beans, bags of sugar, car bulbs. They can be specified very well and you can physically touch them and see real examples of the work of the company you are buying from. When buying services you can still specify them very well but in my experience people find it harder to specify services then they do goods. For example,  how do you specify when a floor in a supermarket, or a telephone on a desk is clean?  Yes , of course you can take up references from other existing clients, but how do you know their standards for the services they buy are the same as yours?   This is why a classification of ‘goods’ and ‘services’ could be useful because buying services is harder and requires different skills and techniques.  There is a great term used in service selling which is “selling the invisible” because that is what service salespeople are doing. They are selling you something you cannot physically touch or see in real terms. Often you are buying the salesperson and their credibility, not the service their organization provides.  As buyers we need to be aware of this so that we ensure the services we pay for do what we want them to do.  

I think it’s time to get back to basics in the world of procurement, or is it sourcing or buying we should be calling it?  Let’s stop calling it direct and indirect; let’s talk about goods or services.  That’s something I can truly see as being different from each other. 


It's not what you know but who to know

Another week and another list of ‘who to know’ has been published but for once it’s actually quite a useful one.

What makes Spend Matters' list better than most is that while it collected information in the traditional way  - demos, questionnaires, interviews and the like – it draws the final list from its consultants’ opinions as to whether the provider meets a single criterion  - ‘is this company worth knowing about?’
The fact that the single criterion is, intentionally, loosely defined means it relies on their consultants' abilities to process the information they collected, including  the vital intangibles, and come to an answer.  The wisdom of the crowd is well understood it makes the list much more useful than some other more high profile ‘tick box’ reports that exist.  We know from experience that if you don’t tick all the correct boxes you don’t get on the list or in the report despite being best in class for the other criteria or, in our case, being the first company ever to score the maximum five out of five for optimisation capabilities.  

Clearly, we are pleased to be included as one of Spend Matters' “Providers to Know” and of course we feel we should be there knowing the very satisfied clients we have, our technology and the impressive growth we have been recording in the last few years. 

But in addition, we are equally proud that there are a number of our customers on the list as well.   AT Kearney and McKinsey are two pure consulting firms that make the list and are big users of our technology.  We have worked with them for some time and see them as partners in our quest to introduce advanced supply chain and sourcing optimisation into the world. Their mix of sourcing and supply chain expertise, matched with our technology, provides a powerful and compelling solution for companies who want to enlist the help of consultants in their sourcing and supply chain endeavours.  Their clients seem to agree and we see this from the significant growth in the projects and engagements we have been involved in with these two clients. 

One other interesting thing about the list is that another of our partners, a company that could be viewed as a competitor by some, is included in their own right. Although my honour (and a non-disclosure agreement!) prevents me from naming them here, it is very nice seeing them make the list knowing our software complements their sourcing suite so their customers benefit from world class optimisation. 

I do realise history is written by the winners and understand our opinion of the list's credibility may be influenced by our appearance on it, but I do think Spend Matters' approach of choosing to be your 'well informed friend' puts them in a strong position and is much more useful to sourcing professionals.

As Jason Busch of Spend Matters puts it, 

 “It is critical to us to make the 50/50 both approachable and something of substance. We collectively think there’s a real racket in the list and awards business that says nothing about whether or not a provider deserves a closer look on a pragmatic and intellectual basis. As such, there’s no cost to “winning.” Who needs another cheesy paperweight engraved with SMAT50 (that would be “Spend Matters Almanac Top 50”) or a sales pitch to sponsor an awards dinner with gross wine and awkward small talk?”
My personal view is that life is too short for 'gross wine' and it's not obligatory at these things, but I do agree wholeheartedly with his sentiment. 



New recruits on both sides of the Atlantic

Continuing our 'stellar' 2013 and to help us ensure 2014 is just as good (if not better), we have made two new senior appointments - a Sales Director for North America and a new Strategic Sourcing Consultant in Europe.

Mark Maxwell joins as Sales Director, North America and Ian Milligan joins as a Strategic Sourcing Consultant in Europe and it is fantastic for me to be able to welcome them to the company. 

Mark becomes Trade Extensions’ first dedicated Sales Director, North America and the new role is key to growing this market along the lines we saw in Europe last year.  And Ian's 25+ years experience will be invaluable as we look to generate momentum on both sides of the Atlantic in order to maintain our phenomenal growth which saw us increase revenue during 2013 by 53% - the signs are already looking good for 2014 with year-on-year sales growth greater than 50%.

We are always looking for good people to join in our success so if you think a career in Trade Extensions could be for you, have a look at our 'Jobs' page on our website.