Optimization – Dynamic Decision Making to Meet the Needs of the CPO and COO in the Same Meeting

Optimization – Dynamic Decision Making to Meet the Needs of the CPO and COO in the Same Meeting

Imagine a software solution that allows the CPO and/or COO to explore changes in complex award scenarios in minutes to meet a change in constraints.

What if key decision makers from procurement, finance and operations could meet in a room or in a Zoom meeting and run 15, 20 or 25 scenarios in an hour?

What if this type of tool will import the base case from your RFP or even an Excel spreadsheet?

If this technology was available and straightforward to learn, wouldn’t you be just a bit curious to see it?

Seeing is believing.

Last week I was speaking to a prospective client who was working on an MRO award with 5000+ line items, 22 locations and dozens of suppliers. 

Based on experience, to make an acceptable award was going to take 40 to 80 hours.

Notice the word “acceptable” not optimal.

They instantly understood the benefit of the tool, but this is such a paradigm shift that they asked to see a demo to fully appreciate it.

In most organizations:

  • Finance wants the lowest cost possible.
  • Operations wants to keep all qualified incumbents.
  • Procurement wants to achieve measurable savings and can be stuck in-between Finance and Operations .

With an optimization tool, starting with the cherry-pick scenario, adding a constraint and evaluating the impact often takes a minute or less.

Even the most complex events can normally be evaluated in under three minutes.

The second constraint is then added, then a third and a fourth.

Each scenario is automatically saved and can be used as the starting point for the next based on different additional constraints.

The sensitivity of each constraint is measurable.

Say you start with a scenario to maintain 80% with incumbents and then lower that to 75% and then 70%. The impact of each change will provide strategic information for your negotiations.

What if you wanted to keep 80% with the incumbent and then split the remaining 20% with two additional suppliers based on their bids? 

If you could add in target pricing, historical trends, diversity , lead time and more how valuable would that be for your team?

The only limit is your imagination.

See if this sounds familiar.

The procurement group spends a week creating 5 or 6 “ideal” scenarios for a meeting with operations or finance. 

After meeting for several hours, procurement is charged with creating more scenarios for consideration and this takes 3 more days to create.

In this new paradigm, the procurement team can create a handful of base scenarios in an hour or less and present them at the meeting.

As I mentioned earlier, dozens of new scenarios can be created in an hour or possibly two and a decision can be made on the best award.

All this information will be retained for future events in a centralized tool that is searchable.

Reliance on complex Excel spreadsheets that are prone to error and creator dependent will be a thing of the past.

If you are wondering if optimization can give your company a strategic advantage, it will.

If you would like to know more, simply click one of the links and set up a discovery call. In 30 minutes, we should both know if this can help you and your team.

Ask better questions and 2020 will be your best year ever.

Action Step: Finding the right tools for your needs can be a challenging process but it doesn’t have to be. If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want. If you want to go explore this topic in greater detail, please contact me. I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672. 

If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.

You Won’t Drift to Success©

Commit to taking the next step.

Until Next Time, I Wish You Great Success in Your Business and in Your Life

Mike Jeffries