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Keeping Procurement Moving at the Speed of Modern Communications

Keeping Procurement Moving at the Speed of Modern Communications

Many thanks to the Market Dojo team for their cooperation and collaboration on this post - proof that they have attention spans longer than goldfish. 

 

Everywhere you look, there is evidence that the pace of the world is picking up. We share our status instantly in 140 characters or less. Meetings are routinely scheduled for 30 minutes rather than an hour. We check email, make phone calls, catch up on the news, etc. while walking from one place to another so we are fully informed when we arrive. Saying, “Oh, I hadn’t seen that yet...” is likely to be received with skeptical looks and rolled eyes.

 

As an active part of this constantly updating, clipped environment, procurement professionals need to be aware of the general pace of interaction between people and organizations. We have to be both purposeful and accurate if we are going to hold people’s attention long enough to get from them what we need.

 

In fact, recent research found that instant communication channels are both feeding our need for ‘in the moment’ action and also making the problem worse. As reported in the Telegraph, “Researchers surveyed 2,000 participants in Canada and studied the brain activity of 112 others using electroencephalograms. The results showed the average human attention span has fallen from 12 seconds in 2000, or around the time the mobile revolution began, to eight seconds.”

 

Now, whether or not you know what an electroencephalogram is, the message is clear. In 15 years, we’ve lost a third of the length of our attention span. To put today’s available focus period in perspective, the Telegraph also offered up that “goldfish .... are believed to have an attention span of nine seconds.” Unless you are in the business of buying goods and services from goldfish, it is wise to consider the speed of the overall sourcing process and all of the activities that are a part of it.

 

The benefits of online negotiation include increased transparency and the ability to collaborate more effectively, but they may also help us succeed in a sub-goldfish attention span world.

 

eAuctions in particular can help speed up a lengthy negotiation process that could have taken several weeks into a matter of minutes - as one Market Dojo client put it, they enable ‘Fast Track Negotiation.’ Whilst the host may have to spend a bit longer at the start nailing down specs and organising suppliers, they really do reap the benefits later on with the speed at which the negotiation phase takes place. Some clients choose to  run an auction over several days, however Market Dojo has found that most of their auctions are kept short, snappy and fierce!

 

We can see from this graph (taken from a Market Dojo infographic on Strategies to Maximise Your eAuctions) that in the first quarter of the auction, there is an initial flurry of excitement as suppliers start to bid. The level of bidding then drops over the second quarter of the auction (maybe as we get distracted by a shiny new stone in the corner of the tank or something) and slowly, the bids begin to increase again from the second half onwards. Since only active time in an event leads to results, we need to find a way to maximize it - especially given everything we know about today’s attention spans.


bid percentage.JPG

And then…. it happens - the most exciting part. As the auction draws to a close, the dynamic close period kicks in and this is when the savings REALLY happen. The ‘overtime’’ bar in the graph, represents all the savings that take place during the dynamic close period. If you are unfamiliar with this function, a ‘dynamic close’ means that if a bid is placed within the last x number of minutes before an auction ends, the timer on the auction will extend by a preset amount of time (most popularly 2 minutes). This process can be repeated until the auction naturally comes to an end or the host can intervene and alter/end the dynamic close. This shows that no matter what the length of the auction is, it’s important to include a dynamic close period to obtain ultimate savings.

 

This lesson can also be applied to other eSourcing events such as RFXs. Just like the active vs passive time in an auction, having an event open for two weeks or longer does not mean that suppliers are working on it that whole time. To be sure, there are some delays for them internally as they consider requirements and put together a proposal, but it is still likely that they spend more time during the ‘open’ window of time doing other things. That, in turn, leads to the delay time between when the proposal is submitted and when feedback cycles or negotiations begin. Running an eRFX as opposed to one via email, also has the added benefits that the system has inherent deadlines and reminders to keep it moving and not to mention you can invite more suppliers at little extra overhead.

 

Keeping the process moving not only matches the pace of modern business, it communicates intent to the suppliers and ensures that assigned resources like account managers stay tuned in.

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Friday, 22 June 2018

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