Can you really afford to leave Millions on the table?

As proved time and time again, that’s what the majority of you – who still aren’t using optimization – are doing each and every time you execute an e-Sourcing project of even minimal complexity without using optimization.

At reSource, Iasta provided five case studies of recent projects that it executed in conjunction with its clients that ranged in value from 2.8M to 110M. Savings on these projects ranged from 5.5% to 40%, and even the most complex project was completed in under a week. Furthermore, 18.2%, or 20M, was saved on the largest project and 40%, or 20M, was saved on the second largest project. More importantly, each of these projects were completeable by an average buyer or analyst through the user-friendly UI provided in Iasta’s Smart Optimization. (Yes, it is more complex than an e-Auction and, yes, you do need to have a basic understanding of what you are doing, but compared to the other optimization solutions out there of equivalent power, it is very easy to use and you can be up and running on the basic decision optimization tool included with the basic e-Sourcing suite within a day if you take the time to get training or take advantage of Iasta services on your first few projects.)

I know that optimization still has the stigma of being too complex, too hard to use, or too slow, and that this is still true of some solutions on the market, but some vendors, like Iasta, who have made a significant R&D investment into optimization over the last few years now have solutions that are much more straightforward to use, usable by an average buyer (with training), and very quick. In each of the case study projects, including the two large projects where 20M was saved, the average scenario solved in under a minute. Furthermore, most of the scenarios were built by the analyst in 15 to 30 minutes (with the most complex scenario clocking in at slightly under two hours to build, as it required between 60 and 100 constraints). Running the math, this says that you can analyze an average project in one to two days, as you’ll be able to build, solve, and compare somewhere between 7 and 28 scenarios in a day, and most projects usually don’t require more than 5 to 20 scenarios to hone in on the best award for your business. (In the case studies presented, most were completed with 2 days of analyst time. The most intense project required 60 scenarios and took close to a week, but it saved 20M. Also, one of the intense projects that took almost a week used to take 6 months, as it took almost a week to build a single scenario in Excel.)

In addition, it’s a lot easier to get started with optimization than it used to be. If you’re working with the right vendor, you have the choice between getting trained and doing it all yourself, using optimization-as-a-service and having the vendor do the project for you (which can be very cost effective giving the savings and / or cost avoidance that is likely to result), or having the vendor work with you through the project (so that you’ll be ready to do it yourself next time). You can start by having the vendor do a few projects for you and explaining what they did, then do a few yourself under vendor guidance, and then, when you’re comfortable, start doing them all on your own. Considering that the average cost savings is 12% above and beyond what you’ll get with an e-Auction, and that you’re likely to save 5% even in categories where you’re efficient, I don’t see any reason why you shouldn’t be trying it – because you’re leaving millions on the table if you don’t – and with prices skyrocketing across the board, how can you not do everything you can to squeeze every penny?

2 Responses to Can you really afford to leave Millions on the table?

  1. Great post, Michael. There is some very easy to follow advice here and shows that the process can be simplified and executed. There are some truly remarkable results that come out of this efforts.

  2. Outsourcing has become a very popular alternative for a number of very valid reasons. Outsourcing initially emerged as a way for companies to cut costs by having processes such as manufacturing and assembly done in overseas locations where costs were much lower. Lower wages and operating costs both contributed to these reduced costs.

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