When "moneyball" meets procurement

Baseball fans will be familiar with the concept of "moneyball." Dreamed up by Oakland Athletics General Manager Billy Beane, the concept involves selecting a team's players based on data and statistics, and not just on reports from scouts. Now the global conglomerate Maersk, perhaps best known for its container shipping line, is experimenting with what it calls "moneyball sourcing."

"Moneyball sourcing" involves analyzing data from auction events to create sourcing strategies or general principles, according to Jacob Gorm Larsen, head of digital procurement for Copenhagen, Denmark-based A.P. Møller-Maersk Group. Larsen spoke on the topic at the CPO Rising 2016 conference in Boston, Massachusetts, USA, on March 30, 2016.

For example, after analyzing data from the more than 8,000 e-auctions it has held since 2009, the company found that every time it added one more supplier to the auction, incremental savings rose by 1 percent. That curve, however, breaks at around eight, Larsen said. After that point, there was limited value to adding more suppliers.

"So, if we are holding an auction and we have eight suppliers signed up, we don't spend time finding more suppliers," Larsen explained. "But if we have only five suppliers, we do."

The data also showed a direct correlation between suppliers' participation rates and savings, and that the best day to run a negotiation was Tuesday (the worst day was Friday). In Larsen's experience, if you only conduct a small number of auctions, the strategy won't make much of difference. But for a company that's running thousands of auctions, it will be worthwhile.

"It's important to recognize that this is not scientific research," Larsen cautioned. Still, he added, "these are interesting statistics," and the company plans to work with a benchmark provider to better understand the data's implications. Maersk envisions that in the future such analysis could help it to better answer questions such as whether an existing contract should be extended or put out to bid.