Dynamic Market Sourcing: Optimizing Procurement in an Unpredictable World

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In the first weeks of the COVID-19 pandemic, business planners, expecting a harsh recession, shut down manufacturing plants and canceled retailing orders. But a few weeks later, a massive rebound took place. Other disruptive events—such as the blockage of the Suez Canal and the war in Ukraine — taught vendors that supply, demand, and pricing were unlikely to remain stable and, as a result, they were no longer willing to lock in long-term pricing. Buying organizations needed to enter the market more frequently and compete to win suppliers’ business. This resulted in an increase in the workload of sourcing organizations and in the volume of data they needed to digest.

A new procurement paradigm, dynamic market sourcing, entered the picture to support an organization’s ability to return to market repeatedly and in an automated fashion. Its technology building blocks include a flexible workflow engine, an optimizer and online bots. The workflow engine ingests rich information so that suppliers can fashion packages that play to their strengths and preferences. Optimization engines calculate the impact of price and non-price factors, such as a company’s emissions policies, allowing decision-makers to assess tradeoffs and freeing up their time to concentrate on strategic initiatives.

The online bots continually scour the marketplace for changing conditions and automate the process of deciding on eligible bidders. Dynamic market sourcing can automate 90% of the procurement workload. One company saved 93% of the time and workload required for ocean-freight tenders, while another saved $60 million by switching from air charters to commercial flights and from an annual RFP process to 17 bids in 12 months. Dynamic market sourcing also allows supply chains to react to deflationary economic conditions, as is now being seen in some sectors of the economy, such as ocean transportation services.

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