Automated RFX Software: Is it Ever the Best Option?

Let’s face it – a software to automate the comparison between companies when sourcing a new supplier and provide you with the best choice sounds attractive on the outside versus utilizing the services of a consulting firm. Plug in your needs, and voila – a list of recommendations is populated for you to choose from! All for one quick fee and none of the mess of dealing with a consulting firm (and money). So what’s the catch?

              There’s a reason why procurement consulting is still going strong today. Sometimes what you think you need is either not what you need, or can be captured and addressed through a different service you may not immediately be able to identify. Algorithms are not going to be able to make that distinction for you. Algorithms are also not going to be able to negotiate for you. Identifying needs and negotiating with suppliers are two large skills of procurement consulting firms that a computer simply cannot do. It’s even been proven that companies who have suppliers with the lowest margins were those they were able to negotiate directly with.

              Even when it comes to things like spend analysis and item consolidation that could essentially be partially automated, a living, breathing human being is still needed to validate the results of such an exercise. Several issues can be present in a normalization exercise, such as two separate companies with similar names being grouped into one, or a company being miscategorized based on another firm with a similar name providing a different service offering, or simply not accounting for a service offering from the same firm that falls under one of several different capabilities of that company.

              There’s been some chatter in the procurement world lately that jobs are going to be fully automated soon. While that may be true in terms of actual purchasing software, it simply doesn’t make any sense when the sourcing and negotiation piece is considered. Automated purchasing software is a benefit for all involved – especially procurement professionals. If you’re able to automate the tactical part of sourcing and can focus more of your energy on strategic initiatives, therefore demonstrating greater value to your organization while reducing the need for resources in charge of that piece only (if you currently have it), then it’s a win-win for all involved. Using software to for purchasing with clearly defined parameters can also prevent the dreaded “human-error” aspect involved as well for that particular activity.

              The in-depth expertise that comes along with utilizing a procurement consultant is extremely valuable for any organization that struggles with standardization strategic sourcing initiatives and purchasing compliance. To restate -  a computer cannot take into the unquantifiable aspects of strategic sourcing and negotiation required for the most successful procurement and sourcing initiatives, and although Elon Musk has been sounding the alarm on A.I. as a huge existential threat to society, we probably don’t have to worry about it any time soon as it relates to the field of procurement.