Modelling & Simulation Category Procurement Intelligence Report

Several macro changes in the dynamics of overall Science and Environmental Research as well as Modelling & Simulation procurement trends are poised to change the business practices and procurement thumb rules. Proliferation of supply pool in regions such as APAC is expected to intensify supply market competition. This will compel service providers to compete on price points to attract new buyers, which is expected to offset some of the increase in procurement cost arising out of increasing supplier OPEX.

There are only a handful of \"Tier 1\" vendors in the Modelling & Simulation market and they have traditionally enjoyed a premium in their pricing. However, Tier 2 suppliers are giving them a tough competition now as they can provide similar services at a lower cost. Many tier 2 suppliers achieve this parity by finding right talent at a relatively lower cost and maintaining lean operations without any frills.

The market is rapidly showing signs of a great divide - at one extreme is a low-cost market with almost commoditized services and at the other end is the market for high cost specialized services. Modelling & Simulation vendors are adopting starkly different business models and cost structures to address both the markets.

Category managers need to take note of the potential of these developments and reassess the changes required in their procurement practices.

Modelling & Simulation procurement best practices are moving towards a level of sophistication which is typically seen in traditional procurement categories. Category managers now have an attractive opportunity to adapt the best practices seen within this category as well as those being leveraged in other non-related categories. This report summarizes the best practices picked from across multiple categories that could work well for category managers involved with Modelling & Simulation procurement strategy.

For example, Buyers can optimize the costs by arriving at right sourcing mix through an alignment of in-house capabilities with outsourced functions. Buyers can use in-house capabilities for project-specific requirements that can be resolved internally. Third-party providers should be engaged based on their expertise and project-specific requirements that require capabilities not present in the buyers' organization.

Buyers should invite bids from all potential service providers that can meet overall requirements. Bids must be evaluated based on pre-defined parameters such as reputation, service offerings, geographical knowledge and expertise, and track record. Buyers can use standard scorecards to evaluate service providers and provide necessary comments to rationalize the given scores. This helps effectively document the decision-making process for buyers.

Adequate RFP response time should be built in for prospective suppliers to enable them understand the scope and performance requirements.

Modelling & Simulation procurement managers also need to proactively identify and mitigate potential risks that can arise in the supply chain or contracts for Modelling & Simulation procurement. Some examples include: