Earlier this week I had the opportunity to speak with Dr. Alan Holland, CEO of Keelvar. Based in Ireland, this relatively small company reminds me of the way CombineNet used to fit into the overall solution space – before they were acquired by SciQuest that is. CombineNet was never intended to be the solution that addressed 80-90% of categories, but rather to be high performance enough to handle the requirements and scale of the largest or most complex 10-20%. But I think, to be fair to both companies, that is where the comparison must end.
Holland and I spoke about the Keelvar solution, not in terms of the number of line items it can handle, or the combined data points it can analyze as a result of the umpteen suppliers, items, and bid fields of a large event. We mostly talked about how it might change the way procurement thinks about optimization. After all, there are many more opportunities than just freight or location-based retail that would benefit.
Maybe I’m selling Keelvar short by calling it simply ‘optimization’. On their site they describe Holland’s research into “electronic commerce and mechanisms for improving economic efficiency in complex trading environments.” (If I had thought of it in time I might have suggested ‘ECMIEECT’ for short. That’s catchy, right?) If you focus on three key terms in that description – mechanisms, efficiency, and complex – it becomes clear that there are many points in the sourcing process and many decision making opportunities where optimization can improve both speed and accuracy of results. Any place where there is complexity that obscures visibility and efficiency to be gained or lost an optimization mechanism can be applied.
For example, as Holland pointed out, why not use optimization early in a sourcing project to automate the selection of a sourcing strategy? If there are multiple data inputs, competing constraints, and measurable objectives, optimization can support the decision making process. Perhaps more importantly, it can help procurement and their stakeholders understand the relative impact and influence that any one constraint or objective has on their decision.
Early in our conversation, I asked Holland if he had a hands-on role in the design of their optimization engine. If I had waited a few minutes, I would have been able to answer the question for myself just by listening to him speak. After being married to an engineer for almost a decade, I recognize the way their brains work – quickly, constantly, and directly. He knows the capabilities of their solution inside and out and sees the potential for its application in the business world. That is where my characterization of the Keelvar vision as clear and simple in the title of this article comes from. The solution is not simple (under the hood at least) but the applications are clear.
Although it is not designed to handle all projects, Keelvar will best benefit procurement teams that have gotten over the following two setbacks:
The notion that optimization is ‘scary’. The fact that some of the categories of spend where advanced optimization can be applied have been held as ‘sacred cows’, off limits from procurement, has contributed to the notion that procurement is somehow not qualified to handle these categories or the decision-making mechanisms that need to be applied to them. I believe that in many cases that belief is held both inside and outside of procurement. The rest of the organization doesn’t want to relinquish control to procurement, and procurement is too wary of the risks and challenges to fight back.
A lack of competency in cost modeling. When I talk about procurement needing to be able to build cost models, I don’t mean that we can’t collect subtotals and roll them up. That is done all the time in Excel. But if I had a dollar for every sourcing client back in my consulting days that told me they were just going to put a “Total Cost” field in an RFP online because it was easier/better/more effective to allow suppliers to offer up their own itemized bid format I would being drinking a Mai Tai on Maui while writing this post (and I am not).
If we can, in fact, get over those hurdles, becoming more comfortable with the applications and use of optimization could change the way procurement is seen in the rest of the organization. The fact of the matter is, many of our internal colleagues think optimization is scary too. They would benefit from being able to talk through various scenarios and the constraints and objectives that lead to them. And if procurement is able to engage them in that effort, facilitating the conversation and helping build optimization scenarios or point out the difference in results when one variable is changed, we will finally find ourselves in the long-coveted position of being a trusted strategic partner and advisor.
I am looking forward to seeing and hearing more from Holland and the rest of the Keelvar team.