SCDigest Editorial Staff

SCDigest Says:

e-Sourcing is typically not well-suited for procuring highly-customized or regulated products and services – though some argue that is changing. What do you say? Send us your comments here

While a majority of large companies and many smaller ones have started to use e-Sourcing processes and tools, the approach is still relatively immature in most procurement organizations.

Below, SCDigest offers five tips for improving results from e-Sourcing and Reverse Auction results.

Prioritize The Trinity Of Reliability, Quality And Price: The ultimate goals of e-sourcing are really no different than traditional sourcing, and that is to develop a network of reliable suppliers that provide high quality products or services at competitive rates.

To account for criteria such as quality, reliability and value-added services, buyers should move away from price-only negotiations to multi-attribute scenarios that allow suppliers and buyers to trade-off non-price variables against price. 

Buyers who determine and rank their priorities for each of these factors prior to developing purchasing specifications and keep them top-of-mind when evaluating bids will be more satisfied with the results of the e-sourcing engagement.

Use e-Sourcing Strategically: e-Sourcing is not the ideal solution for every purchasing situation.

Often, it is best suited to buying commodity products such as raw materials, manufacturing components, construction materials, and similar items.  It is typically not well-suited for procuring highly-customized or regulated products and services – though some argue that is changing.

Provide Clearly Defined And Relevant Specifications: Clear requirements and expectations ensure a true “apples-to-apples” comparison from bidding suppliers, which saves buyers’ time in evaluating proposals and helping to eliminate unqualified suppliers early in the process. It also results in a pool of best-of-breed suppliers that will participate in the e-sourcing event.

Relevancy is also critical in that buyers should carefully consider what information they really need to gather to make a sourcing decision. They should also judiciously determine minimum requirements to meet the scope of the purchase.

This level of consideration is a benefit to both buyers and suppliers. If buyers request excessive or irrelevant information, they end up wading through data that offers no real value. Conversely, suppliers will spend an inordinate amount of time providing unnecessary documentation and may potentially become disenchanted with the process and the buyer.

Focus On The Quality, Not The Quantity Of The Supplier Pool: While e-sourcing offers unlimited access to worldwide suppliers, the challenge comes in weeding out those that are not qualified or do not offer the best fit for a given sourcing situation. Therefore, suppliers must be thoroughly screened prior to the negotiation process; otherwise the buyer may choose the lowest bidder because of the promise of great cost savings.  However, on further investigation the buyer learns that the potential supplier is unable to meet other non-price criteria or contract terms.

e-Sourcing, however, is an ideal tool for bringing together groups of suppliers and evaluating them based on multiple factors, not just price.  These factors may include value-added services, years in business, revenue, references, certifications, locations, delivery options, and immediately available inventory levels.

One tactic buyers have used to incorporate non-pricing based factors into the purchasing equation is to assign numerical values to bidders’ track record for meeting deadlines, delivering quality and overall business practice integrity.

Encourage Suppliers To Participate In Shaping Negotiating Terms: While it may seem counter-intuitive to allow suppliers to weigh in on the negotiation terms, it can sometimes actually yield significant benefits to buyers.

e-Sourcing accommodates a multitude of bidding environments, from closed bids to open auctions. Encouraging suppliers to voice their preference for disclosure not only creates good  will, it also ensures a larger pool of qualified suppliers will want to participate because it allows them to feel more in control of an often intimidating situation.

For instance, utilizing “closed” or “sealed” on-line negotiations conceals suppliers’ identities and bids from other participating suppliers.  The alternative could conceivably force them to drop pricing to uncomfortable levels to stay in the auction.

A middle ground involves displaying suppliers’ ranks instead of exact bids to show them how competitive they are in the negotiation.  Conversely, if suppliers are comfortable with an “open” environment they can benefit from the competitive information they gather in the process.

This intelligence allows them to understand why they did not win the business and better position themselves for future opportunities.

Do you agree or disagree? Share your perspective by emailing us at feedback@scdigest.com