The Digital Supply Chain podcast

Predictive Procurement, And Procurement With Purpose - A Chat with Bid Ops CEO Edmund Zagorin

July 30, 2021 Tom Raftery / Edmund Zagorin Season 1 Episode 152
The Digital Supply Chain podcast
Predictive Procurement, And Procurement With Purpose - A Chat with Bid Ops CEO Edmund Zagorin
Show Notes Transcript

Procurement is a topic we don't cover enough on this podcast. Imagine then if we could cover off procurement, automation, and sustainability in one episode - and that is just what I did with this one. Meet Bid Ops.

BidOps is a sourcing and procurement operations platform that helps procurement teams track key metrics, identify exceptions and run faster sourcing events to influence more spend and report out on procurement's impact.

I invited Edmund Zagorin, the founder and CEO of Bid Ops to come on the podcast to tell us all about it. We had an excellent conversation and, as is often the case, I learned loads, I hope you do too...

If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message over on my SpeakPipe page or just send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

If you want to learn more about how to juggle sustainability and efficiency mandates while recovering from pandemic-induced disruptions, meeting growth targets, and preparing for an uncertain future, check out our Oxford Economics research report here.

And if you want to know more about any of SAP's Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain, and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

And remember, stay healthy, stay safe, stay sane! 

Edmund Zagorin:

We believe that data and analytics can play a role, not just in, you know, short term wins, but actually in long term cultural wins that make just a company more successful and a more desirable place to work and a more desirable partner in the marketplace. And we're beginning to see, you know, sourcing and procurement operations teams, looking at opportunities to do this with sustainability and environmental and social government governance metrics. And so some of those projects are coming down the pipe and and that's something that I personally just get really excited.

Tom Raftery:

Good morning, good afternoon, or good evening wherever you are in the world. This is the digital supply chain podcast, the number one podcast focusing on the digitization of supply chain. And I'm your host, global vice president of SAP. Tom Raftery. Hey, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the show today I have my special guest, Edmund Edmund, would you like to introduce yourself?

Edmund Zagorin:

Thanks, Tom, and excited to be on the show. My name is Edmund segrin. I am founder and CEO of a company called bid ops. Bid ops is a sourcing and procurement operations platform. We help procurement teams track key metrics, identify exceptions and run faster sourcing events to influence more spend and report out on procurements impact. Great to chat with you.

Tom Raftery:

Thank you. So for anyone who hasn't heard of bid ups, what problem are you solving for people? If I'm out there, and I'm thinking, I need to fix something in procurement, and somebody told me beat ups is the one for me, what is it that bit ups is going to do for me?

Edmund Zagorin:

That's a great question. And, you know, I think it depends who you are on the procurement team. If you're the chief procurement officer, the main problem that bid up solves is getting your key metrics, your key performance indicators in one place, not just seeing them in real time, but actually forecasting them using that forecast to identify exceptions that could cost your business money, or, you know, reduce your overall procurement excellence, and then knowing what action to take at the right time in order to improve overall operational performance. And that could take the form of driving additional cost savings, it can take the form of supplier performance in terms of on time and full delivery, it could take the form of processing and approving purchase orders in a more expedient and more compliant manner. So, procurement teams infamously have conflicting objectives in terms of cost savings, you know, making sure that the supply chains are running in a performant and timely manner. And also of course, dealing with compliance issues for legal and risk as well on top of that, so as a result, bit Ops, the thing that sets us apart and and really where we kind of came up with the the unique architecture of the solution is it's a way of looking ahead identifying a likely outcome of a number that matters to you and using that outcome that prediction to identify an exception before it becomes a problem.

Tom Raftery:

Okay, for So, the as you as you probably know that this podcast is quite broad, you know, we do everything from engineering planning, manufacturing, logistics, or like anything people listen to this might and be fully off a with all the things that happen in procurement and in a procurement professionals life. So could you give me a kind of a concrete example of a use case where you solve a problem for a customer?

Edmund Zagorin:

Absolutely. So it companies like BASF, home and asri, or Bell brands, bit ops is a platform for requesting and comparing quotes very quickly, running a process that can take a business need and result in a final word tabulation. So this is a sourcing process. And in procurement, generally, there are two cycles. There's the source to contract cycle that begins with a business needs or someone needs to buy something and they're spending enough money that it makes sense to run a competitive pricing process. And also understand you know what value or different options there are in the market in terms of capabilities or within the existing supplier base. And the output of that is a is a contract and a price file in direct materials, Which is most often where it comes into contact with supply chain. The unique requirement is that you be able to give each individual line item or in logistics lanes to a different supplier or carrier. So that is what we call optimization. So it all it means is that if I have 10 line items, and I have 10 suppliers, each supplier could potentially be awarded a different line item. In indirect, which is more services focused typically, it's a classic procurement cycle from a sourcing standpoint. So you have a contract, there's a number of suppliers competing for it. And generally speaking, one or maybe one or two, or you walk away with the contract. So that source to contract, procure to pay is the procurement process that most of us inside of companies touch on a day to day basis. It involves purchase orders, invoices, and shipping forms. This is sometimes known as transactional or tactical procurement. It's the type of procurement that touches finance and operations and legal bid ops takes data from that process in order to make the sourcing process smarter and faster and more targeted. So in a lot of cases, sourcing has kind of a putting out fires problem where things are very urgent, there's a flavor of the week, priorities change very quickly. And it can feel like there's a different crisis that needs to be managed very quickly. That's, you know, overwhelming the the procurement team that serves supply chain, whether that's more recently, because of things like the big freeze in Texas, which triggered a ton of force matures, or the boat blocking the Suez Canal, or you know, the global pandemic. So, there's been a ton of stuff over the past year that has made this process difficult to prioritize the activities that drive the biggest business impact. And what bid ops does is we take that layer of intelligence from procurement operations, the numbers that matter the key performance indicators. And we use that data to create real time dashboards and automated alerts, so that the right person gets an email to take an action in the supply chain in sourcing when it matters the most,

Tom Raftery:

what kind of actions.

Edmund Zagorin:

So it could be simply to run a buying cycle earlier in the process to secure short supply in a short market, it could be to add more suppliers to a category because there's insufficient competition to generate a business results. It could be simply an alert that suggests that a transaction is not meeting a compliance objective, the payment terms, for example, are an exception. So if you want net, net 60, you're not getting that, if you at that point in time want to say that exception is fine. That's, that's, you know, we are giving people the data to make that decision. It's not, you know, prescriptive unless you turn on a thing that tells the supplier they need to agree to this if they want to move forward in the process. And we do have customers, especially in automotive, and in pharma who do run processes that are more prescriptive. But what we're finding is that because there's so much chaos in the market, and teams have so much work that they need to get done quickly, having a process that allows them to manage a lot of different projects and only see where there are exceptions. That's a really powerful management framework that technology can enable.

Tom Raftery:

Sure. And you mentioned that there was something I forget the expression you use, but you use an expression that said, your platform, the way it was architected, or the way it was set up was different from most others.

Edmund Zagorin:

Yeah, so bit ops is a cloud native web application with a machine learning model that powers an artificial intelligence engine inside of it. And so what that means is that we can run a simulation of every transaction before it happens. So we have some idea of whether or not the transaction is normal or if it's off. And the simplest way of thinking about this is one job to be done for sourcing professionals is am I getting a good price? Like I've gotten a quote? Is it good? Is it bad, I don't know. And procurement teams spend a ton of money and time in data analysts and labor hours trying to figure that out. And they build should cost models and they hire consultants and subject matter experts, and they buy market data. And the truth is, is that all of that can be very helpful in gaining some insight and general parameters into what Whether or not you're getting a good price, and also whether or not you're getting good value based on the statement of work and other criteria, but each transaction is different. There are parameters, things like lead time or minimum order quantity that could meaningfully change whether or not a transaction is going to increase in price. And as we see, when markets change quickly, and you can look at logistics is a perfect example of this. You have people going out to the market with you know, net 60, or net 120 payment terms who are trying to run a process and logistics carriers, you're like, Hey, you want to track there's a line, you might have to get to the end of it. And so in a short market, the process actually has to adapt in order to compete for a relative scarcity of capacity to serve the business. And what bid ops enables is you to run a faster process when you need to. So that you can you can get to the front of the line, you can get that that high impact business outcome that that you're looking for. And we've actually seen, in the past couple of weeks, we've had customers that have not only been able to stand up new logistics programs in specific geographies, but actually run a competitive process, establish a long term contract and save money, all while delivering that operational performance and in business needs. So the idea that, like there are trucks on the road, what typically happens is that when procurement teams are running logistics bid, there is a high amount of uncertainty in the demand forecast for how much truck trucking is actually needed. And typically, that forecast is conservative. So people will go and say, I need this many trucks and this, you know, in this geographical region, the carrier will allocate that, and if they hit capacity, then it's really about, you know, in some places, you know, going on Yelp, or Google or picking up the Yellow Pages and just finding the nearest provider. And we're seeing major major companies that actually pay close to retail prices for trucking in more of their transactions than you could possibly imagine. So that's a very solvable problem. And all that it requires is a little bit of forecasting, a little bit of exception management, and the ability for the people who are managing these categories to have greater insight into their data. Because the problem is, is that these typically this data is siloed. It lives in a bunch of different systems, it's really hard to get at, it's really hard to analyze, it's really hard to report on. And so bit ops is adding that kind of single pane of glass, you can see those those metrics together. But instead of having to parse through them and create the reports yourself, you can be notified about this specific exception and a very large set of data with the next best, next best step, the next action that that it might make sense to take.

Tom Raftery:

Very good. Can you speak to some kind of customer outcomes?

Edmund Zagorin:

Yeah, absolutely. I mean, BASF, you know, world's largest Chemical Company, one of the first, you know, predictive sourcing projects that they did was for fasteners. So these are, you know, literally the screws and fasteners that hold together very large machines. They ran a, you know, sourcing project, that was a $3.6 million contract value, they got 590,000 euros savings on that, on that project, the entire process, from the supplier standpoint ran in under an hour, the entire cycle ran in two weeks, and the previous cycle time was over six months. So you can see like, it just there's so many steps. From a business operation standpoint, you have 1000s of line items, dozens of suppliers, they're all bidding on different combinations of line items. And so the combinatorial number of possible scenarios that you could award just for that one project is an exponent that generates so many integers in the number that it's like, it would take you you know, you know the rest of your life just to just to kind of write write it all down.

Tom Raftery:

If I have an you know, BASF and a lot of large organizations have whole procurement organizations with their own procurement systems in place. How do you integrate with those kinds of systems that are already there? How does that work?

Edmund Zagorin:

That's one of the things about our cloud architecture that we're really proud of is that we integrate with any system through a quick API that can be set up in a matter of hours and that includes SAP includes SAP products in supply chain and in sourcing. So we're actually often you know, people will use a side by side with something like an A Reba or a Jagger or Koopa or I guess a bit ops is also used, you know, independently not just for sourcing, but for communicating with, with suppliers to get actually important, you know, legal documents, financial data, really whatever you need to kind of fetch from your supply chain from a data perspective and bring back into that system of record. At most companies, there is no system of record for quotes. So bit ops ends up being that kind of layer that sits between the E RP or the procure to pay system and the supply chain, that our platform can send and receive emails, it can collect and store documents, it can collect signatures, and importantly, can collect that like very detailed and very complex, multi attribute pricing data that, you know, collects things like lead time and minimum order quantity, and, you know, the certification or spec of individual line items relative to, you know, technical or operational requirements. So, you know, we actually just had one customer, a large automotive, put out a bid, that was over 23,000 line items, two 148 suppliers, and this represents an entire supply chain. And so that is, from our reckoning is the actually the largest bid that's ever been supported by a software solution, at least in the cloud. And so, that type of scale and complexity is really hard to do in a very prescriptive system that might be built for supply chain or built for procure to pay or built for finance. But bit ops is built for sourcing and procurement operations. And so what we're seeing is that every modern function as it's evolving within the corporate structure has an operations team. You have finance operations, you have sales operations, you have marketing operations. And so our question is, where's procurement and supply chain operations, you know, that procurement and supply chain is operation that most companies that that function is called operations. So in a sense, it would be we kind of joke like its operations operations is is the, you know, would be the name of the function. But procurement and supply chain operations has all of this data about how long processes take and what their desired outcome is supposed to be. And so bid ops tracks all of that to help you catch exceptions. And then to run these processes with suppliers. And our platform is two sided. So there's a supplier side, there's a buyer side, and so it's easy for the suppliers to interact with it through their email inbox. Or they can log in and interact with it, you know, within the platform. And if they want to do that it's a one click onboarding, onboarding flow. And messaging flow is actually very similar to the way that LinkedIn messaging and onboarding flow works. We were inspired by how user friendly and easy that that setup looks. And so if you can use LinkedIn, you can use bit ops to do you know, supply chain, and, you know, sourcing and procurement operations.

Tom Raftery:

And that's most of us, I think, how, how do you come up with something like this? I mean, what's the story behind that? What, what made you think that this would be a good problem to solve, or even be aware that it was a problem?

Edmund Zagorin:

That's, um, so the story is pretty, pretty interesting. And I feel like I got very lucky in my career, to work with some just, you know, really passionate procurement professionals, who were open to trying out different processes using technology. And so I got into procurement because I saw that procurement was driving a lot of business impact in organizations, saving money, but also just delivering a lot of operational performance that wasn't necessarily being appreciated or acknowledged by executive stakeholders. And that part of the reason for that was that it's very challenging and time consuming to report and analyze procurements business impact. And so in a lot of companies, the way that this problem has been solved culturally, is that sourcing is segmented out from procurement. And sourcing is what where you kind of get some of the big wins associated with savings or associated with standing up a new supply chain or introducing a new product. So this is kind of driving these big case study of all business impact outcomes. But what's interesting is that sourcing a lot of companies is very time consuming. The processes are often very, there are many, many cooks in the kitchen. Everyone has a different opinion. They're often different objectives. I mentioned this earlier, but procurement and sourcing are always dealing with conflicting objectives is the object To save money, is it to get trucks to show up at the right facility? Is it to make sure that everything's done in a compliant manner? Well, these are all objectives. And often it's the case that you can't, you know, solve for all of them in in the moment, but of course, great sourcing teams are expected to do that. And that often means that sourcing projects can take weeks and months. So now, what, what I saw is that there are different ways to run sourcing processes. And I was actually I, you know, lucky, in a sense to work with procurement teams that were interested in experimenting with auctions. And auctions are, were eye opening to me as a procurement professional, because it essentially is a way to take a process that could run in a very long period of time, say weeks or months, and run it in just a few hours. And most of kind of the legacy manual reverse auction technology is, you know, it's it requires a proctor it requires everyone be trained. There's a lot of setup, but but essentially, it's like, it's like eBay for procurement, like your live bidding suppliers or live bidding. And what I found was that not that reverse auctions are like this thing that everyone should use for every category. And that's not, you know, that's not what bid ops is. But what it opened my eyes to is the fact that this process that takes so long and requires so much manual time, and spreadsheets, and time and email inboxes could be done much, much faster. If there were steps in the process that were essentially automated by default. And so we set out to build an AI engine that simulated reverse auctions, that's where kind of the concept behind the company stemmed from was that, that, see, let's see if we can do this experiment, we ended up being able to do that very successfully. And then we asked, Is it possible to simulate other elements of the transaction simulate, you know, what we would think of is normal for the payment terms are the lead time or the minimum order quantity or other attributes of the transaction. And it turns out that, a, it's not super challenging to do that. It's challenging to do that fast enough that it can be meaningful to the person who's running the process. And so that's really where we feel like we've had a breakthrough, is that bit ops is able to deliver this data to the right person at the right moment to take the right action.

Tom Raftery:

Super, super. Where to from here? What's next? What's on your kind of, on your roadmap of development? What new features are you looking at doing? Or what new? What new features, you're looking at rolling out what what's what's, what's exciting coming down the road?

Edmund Zagorin:

To be honest, a lot of the work that we're seeing right now is from customers who have specific configuration needs around key performance indicators and metrics they track. And we're having a lot of fun, just supporting customers to have visions around the types of metrics that matter to them. And, and that's what's changing. So we just supported box that's a major data storage company publicly traded in launching a supplier diversity program. And what's interesting about supplier diversity is that, you know, you think, Okay, well, I have to know how much money I spent with each supplier, I have to be able to filter that by purchase order department and category. And then I have to know if the supplier is have a certification as a women owned minority owned small, and there's a number of other certifications, that could be relevant. So effectively, you need to be able to instantly customize and launch a entire spend analytics suite. And then layer on top of that these diversity classifications and certifications. And you need to know who the certifying body is. And you need to be able to validate that data with a third party. So, you know, our challenge with box was can the, you know, bid Ops, sourcing and procurement operations platform support, launching this and then updating it in real time and monitoring it in a very, very short cycle, you know, even a few hours. So that was what we were able to do. And because we're able to do it so fast and because box and their chief procurement officer Linda, tron has this great vision around supplier diversity, and what it can mean for the company. It's just a great opportunity for their procurement team to, you know, deliver a big cultural win for the business, and to support the type of culture that box is really proud of. And we believe that data and analytics can play a role, not just in, you know, short term wins, but actually in long term cultural wins that make just a company more successful and a more desirable place to work and a more desirable partner in the market. Place. And we're beginning to see, you know, sourcing and procurement operations teams, looking at opportunities to do this with sustainability and environmental and social government governance metrics. And so some of those projects are coming down the pipe. And that's something that I personally just get really excited about.

Tom Raftery:

So it should be possible to choose your suppliers based on their emissions, or lack thereof.

Edmund Zagorin:

I think that yeah, I think that that is something that people will increasingly, maybe not begin making the choices based on that initially, but at least knowing it, you know, I think right now, there's a lot of prescription without a lot of data. And I think what will happen and how, how you see generally change happen. And there's actually an interesting kind of operations science operations research paradigm around this, which is called the green bullwhip effect. And it comes from the bullwhip effect and supply chain that we all know about. But it refers to this idea that behavior change can move from company to company through a, you know, through the data and analytics that are used around the procurement and sourcing process. And so this was observed in the 80s and 90s, when companies adopt adopted kind of the first recycled paper standard. And then they saw how that actually changed the operations of the pulp mills and the sourcing requirements down chain, and downstream. And so that's something where I think it will begin in a more subtle way at first people will just begin measuring and tracking some of these things. And I think that over time, especially a scope three emissions become a bigger part of the carbon conversation, this will be something that companies want to track and report. I don't think personally, that we're immediately going to decarbonize a lot of categories right away. I think that, you know, there's a lot of industries that emit carbon right now that are, you know, just an important part of the economy. I don't think they're going to go away tomorrow. But I think that a lot of those companies are aware that carbon has an impact on, you know, the environment and the climate, and are working to create small but meaningful and incremental but very regular wins in these categories. I think that's where you're going to see things really start to pick up, especially as this data becomes more ubiquitous, more available. And as the conversation around some of these objectives becomes, okay, how do we get there every day? How do we incorporate this into our everyday decision making process?

Tom Raftery:

Are you good? We are coming towards the end of the podcast. Now, Edmund, is there any question I have not asked you that you wish I had, or any aspect of this, we've not brought up that you think it's important for people to kind of think about, Tom, I

Edmund Zagorin:

think I think we've we've covered it pretty much. I think the you know, the one question that that maybe I would ask you is as your you and your listeners are thinking about price increases and shortages. What What do you think is the kind of pervasive belief around why this is happening?

Tom Raftery:

If If you ask me, I don't know what the pervasive view on this is, I would suspect a lot of it is down to lack of visibility in the supply chain.

Edmund Zagorin:

I think that that's right. And I think that the I think the reason for that is, is that in a lot of supply chains, what we're seeing is that these transactions are in a lot of ways. They're like long lines. And if you think about a long line of people there, you know, they might be imagine a long line of people waiting at a donut shop. And you you show up, you're like, ah, rats, really long one, but I want you know, I need to get a donut. So I'm going to go to the end of the line. What's happening is that because all of these processes are single threaded, there's only one line you have to get to the end of it. And because of that, you don't know when the donut shops gonna run out of donuts. And if you have an intuition that like the line might not be worth it because it's too long, or there aren't enough donuts left, then you might begin running back and forth between different sort of trying to find multiple donut shops to stand in line at. I think that that kind of describes the chaos and the uncertainty that a lot of supply chain managers are feeling from an emotional standpoint is I don't know where my you know, next material that I'm managing is going to come from I know there's some possible Double sources. I know that these people are slammed overwhelmed. It's hard to get a phone call answered, it's hard to get an email answered. And if you think about what causes that, that single threaded process, that bottleneck that creates that backlog. It's administrative processing time, that depends on the number of hours in the day. That's it. It's people. It's us. As long as the line at the donut shop is determined structurally, by how quickly it takes the shop to sell donuts, you're going to see bottlenecks create backlogs, backlogs, create price increases, price increases that lead to shortages and production, shutdowns that aren't anticipated. And that's what creates supply chain Cass

Tom Raftery:

fascinating. Fascinating coop admin if people want to know more about yourself or about bid ops or about any of the things we talked about on the podcast today, where would you have me direct them

Edmund Zagorin:

can check out www dot bit ops Comm. We also have a LinkedIn page, we like to post content relevant to procurement, sourcing and supply chain professionals specifically focused on process metrics, operational targets, and, you know, other fun topics in the news. Sweet. Sweet.

Tom Raftery:

Thanks, Adam. That's been great. Thanks a million for coming on the podcast today. Tom. Thanks for having me. Okay, we've come to the end of the show. Thanks, everyone for listening. If you'd like to know more about digital supply chains, head on over to sa p.com slash digital supply chain or, or simply drop me an email to Tom Raftery at sa p.com. If you'd like to show, please don't forget to subscribe to it and your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.