Many sourcing professionals associate Electronic Sourcing or E-sourcing with reverse auctions only. Reverse auctions are a great tool when used appropriately. It is an efficient and transparent process that helps cut sourcing cycle time and also helps to reveal the true market pricing. The auction is usually used as a final means of negotiation. However this limited view - that e-sourcing consists only of reverse auctions - might prevent them from considering other pre-auction tools that can make their sourcing process more efficient.
There are couple other tools that could be used before running an auction. The tools are, Request for information (RFI), request for quote (RFQ), and request for proposal (RFP). RFI is used to obtain preliminary information on suppliers and their capabilities. It can be used in an E-sourcing process to obtain information in a very methodical and efficient way. RFP and RFQ are an invitation for providers of product or service to bid on the right to supply that product or service to the requestor. In many organizations, we still see a lot manual processes, whether using email in the process or manually consolidating and analyzing suppliers’ bids.
These are some of the benefits running those RFxs in E-Sourcing events:
- Standard and methodical process - One of the biggest time consuming hurdles for buyers is the quote comparison process, the “apples to apples” equation that sometimes is not so visible and hard to tailor. When the process is done manually, the buyer then needs to consolidate all data into one single document in order to be able to compare all bids. In the E-sourcing process the buyer builds the RFI/RFP in a platform that ensures consistent way of receiving the answers from potential vendors. There are yes/no questions, multiple choice questions with a drop down menu, open questions, and scoring capability. When bids are received and the report is generated, this in turn provides the buyer a consistent and comparable way to look at the answers side by side. The elimination process then becomes an easier and faster task which leads to a quicker decision.
- Stakeholders collaboration - Many organizations still operate in silos, meaning there is no collaboration among business units. Using the E-sourcing tool helps sharing information among stake holders. It requires some of them to contribute information along the process and allows them to review the progress. This in turn increases participation and cooperation among team members.
- Productivity increases - Sourcing cycle time is reduced, templates and past RFPs that worked well can be reused, better collaboration among project stake holders due to accessible project details, better collaboration with suppliers through standard process and Q&A capability.
- Q&A capability is priceless - When running a global RFx, suppliers from different regions participate. It is imperative to have such capability. When a question is received the buyer then can decide whether to respond collectively or individually. This capability saves a lot email trails and phone calls.
- Quality - Standardization of negotiation technique, enforcement of process consistency, traceability of all documents involved in the process and all transactions, including for example all interactions between the buying team and the suppliers; this capability may be required for legal purposes.
- Project and knowledge management - Supplier profiles, current and past projects, and best practices are stored on an easily accessible web site. It is easy to transfer projects from one team to another.
- Another advantage is training personnel & process adoption - E-Sourcing applications can easily be used as off line training tools to enable employees’ hands on friendly experience with the applications without jeopardizing the company’s actual data.
- One source exists - E-sourcing can and should be used also when only one source exists in the market. The same process should be followed. All steps are documented in one same system. In the long run, following the standard process helps both parties to learn and adopt it. It also ensures compliance.
- Thinking green - E-sourcing is the way to go. It is efficient, saves money, and it is environment friendly.
Sourcing process is a long one and could be overwhelming. However, if we as purchasing professionals leverage technology to streamline the process, we will be able to focus on more strategic activities, while delivering value and cost savings.
Erez Azaria is a Senior Consultant in Ariba’s Spend Management Services group. Erez specializes in working with clients on strategic sourcing