How can an eSourcing program be planned to help your company achieve significant bottom-line benefits? That’s the question this guide answers, starting with an overview of what eSourcing is and how it works, and then moving on to explain why companies would want to use eSourcing in the first place. This article will walk you through the process of planning an eSourcing program, including how to reach out to suppliers, when you should make the move from manual sourcing to automated eSourcing, and more.
What is eSourcing?
eSourcing is a process for sourcing goods and services that uses a combination of technology and traditional procurement methods to effectively solicit and evaluate proposals from suppliers. The goal of eSourcing is to ensure an organization obtains the best value in goods and services while minimizing costs.
eSourcing utilizes a variety of methods, including Request for Information (RFI), Request for Proposal (RFP), Request for Quote (RFQ) and Online Auctions. Each method has its own unique advantages and disadvantages and can be used alone or in combination to achieve the desired results.
When planning to buy an eSourcing solution, it is important to consider the organization’s needs and objectives. The selection of the appropriate tool will depend on the specific requirements of the project. After selecting the method or methods, the next step is to craft the appropriate documents and send them out to potential suppliers. Suppliers will then provide bids and proposal documents, which must then be evaluated to select the most qualified vendor.
In evaluating supplier bids, organizations can use side-by-side bid analysis or more sophisticated supplier bid analysis. This process will analyze different criteria such as price, delivery time, quality, and others to ensure that the selected vendor provides the best overall value.
By utilizing eSourcing, organizations can save time, resources, and money while ensuring they receive the best value in goods and services.
How does it work?
eSourcing is an online process of sourcing and procurement that enables organizations to leverage the power of the internet to find the best suppliers and get the best value for their money. Through eSourcing, businesses can find new suppliers, receive competitive bids from multiple suppliers, and ultimately choose the one that offers the best deal.
At its core, eSourcing solutions typically deliver 3 functionalities viz.:
1. Request for Information (RFI)
A questionnaire that suppliers respond to. If the sourced category is strategic, the questions can be weighted and the supplier responses scored by a cross-functional team in order to derive an accurate net weighted average score for each supplier.
2. Request for Quote (RFQ) or Request for Proposal (RFP)
An RFP outlines the specifications, quantity of the items or goods being sourced along with the terms & conditions are sent to the suppliers. Suppliers provide commercial bids for the same. Collaboration with internal stakeholders and addressing supplier queries are done online
3. Online Auctions
The 3 basic types of online auctions include Reverse Auction, Forward Auction and Dutch Auction. Online auctions help a buyer negotiate with multiple suppliers across multiple categories in an effective manner making the negotiation process more transparent to the supplier.
By utilizing RFPs, RFIs, RFQs, and Auctions, businesses can quickly find new suppliers, receive competitive bids from multiple suppliers, and analyze those bids side-by-side to identify the one that provides the best value. With an effective eSourcing program in place, businesses can easily save time and money on their purchasing costs.
What are the benefits of eSourcing?
There are 5 key benefits of any eSourcing solution. It is important for every organization to articulate the benefits they seek or the problems they need to solve and ensure the same is achievable using the solution they have shortlisted.
1. Higher COMPLIANCE
Higher compliance is ensured when the sourcing process is carried out on a shared, collaborative platform as opposed to emails, spreadsheets, and phone conversations. Strong audit trails help audit teams to understand how many suppliers participated, which supplier declined to participate and why, who approved the award scenario, who provided what evaluation to a supplier response, etc.
2. Lower CYCLE TIMES
The cycle time of sourcing has two components. First, the time it takes to create an RFI or RFP, and second, the time it takes to award the business after the RFP has been published. The creation and reuse of templates is made possible by eSourcing tools, which expedites the RFX creation process. To shorten the time needed to review and award the business, buyers should be able to examine bids as soon as they are received and provide immediate feedback.
Additionally, templates standardize processes and facilitate the sharing of best practices among buying teams.
3. Improved COLLABORATION
Collaboration is important between the buyer and other internal stakeholders within the organization and externally with suppliers.
4. Lower COST
Auctions are proven to deliver 9-11% of savings for indirect spend. This is one of the best means to test qualified suppliers competitively.
Competitive RFPs also display the Rank/Best Bid to suppliers, which helps get multiple bids from a supplier without much effort. The time assigned to all suppliers to respond to the RFP, say 3 days or 10 days, is more productive for the buyer.
From a supplier’s perspective, they tend to respond better to eSourcing solutions because they trust a system more than what the buyer verbally informs them. Supplier management is easier. The solution needs to be user-friendly not just for the buying team but also for the supplier, to log in and participate in the sourcing event.
About Krinati Sourcing
Krinati Sourcing is an innovative solution that delivers the above benefits. Our solution is used by marquee companies globally across multiple industries. What makes us stand out from the competition is the ease of creating complex pricing sheets – be it Activity Based Cost Models or Total Cost of Ownership models. The ease of use ensures high adoption and our vaunted support services ensure every customer is successful.