Generally, when businesses think of procurement they often see in terms of a cheaper/better dichotomy, as if one can not be achieved along with the other. The reason for this viewpoint is simply that it is extraordinarily difficult for even a team of human minds to compare and contrast all the variables involved in selecting the absolute best supplier for major purchase a product or service. Quality, price, warranty, service, and speed are only a few of these variables. Purchasing decision makers should also consider a business's reputation, qualifications, or past experience in the field.
While making these complex judgments can be difficult for a human, it can be a more simple operation for a computer. For that reason, more companies are employing strategic optimization software to help provide them with the information they need to make the best purchasing decisions.
Strategic optimization was not created specifically for procurement, however. Originally, this technology was used during World War II to locate the best way to transport goods and soldiers through the fighting areas. Just as it was effective then, companies that use a similar program now are realizing its true benefits.
One feature of strategic optimization is that it uses complex mathematical algorithms to evaluate bids using a combination of all available variables from price to quality to delivery time. The software user can construct different scenarios which can be fed into the computer and the software can then determine which bid or bids it would recommend based on the overall evaluation and the specified criteria.
This type of feature provides many benefits for businesses. First, it allows them to have some idea of which bids or suppliers may be the most appropriate choices for their needs. Therefore, if a company wants to know which supplier would be able to provide it with the lowest price on raw materials in the shortest amount of time, that scenario could be entered into the computer, and the software would conduct the calculations to determine which company would be ideal. The key here is that the inputs into the system need to be good.
Another important feature of strategic optimization is that computers work fast. Even though these are extremely complicated equations with literally thousands of variables that must be figured in, the results can be available in a matter of seconds. When one compares their speed to that of the humans who currently struggle with weighing all these different variables themselves, the benefits become clear. Human workers may spend days trying to determine the best supplier.
Another important consideration with strategic optimization is understanding that the computer's recommendation is not meant to replace human judgment. Obviously, there are still some factors that the computer can not possibly foresee or compute. For example, if a member of the buyer's purchasing staff has conflict with the supplier's staff, then problems which could complicate the relationship might arise and negate the advantage that supplier had over its competition. Likewise, natural disasters and man-made problems (i .e. war, gas price hikes) can have a significant impact on a suppliers ability to deliver goods in a timely and/or affordable manner. Since the computer cannot predict these events and figure them into the equation, the user must prepare for those types of setbacks.
Even though humans are the ones who must make the final decisions when it comes to choosing suppliers, the computer's recommendations at least provide them with a solid, factual foundation on which to base those decisions. However, years ago the process was almost the equivalent of blindly picking a name out of hat. Strategic optimization allows users to take off the blindfold and see how the suppliers really stack up against one another. Once they have that knowledge, making a choice is relatively simple.