What Is eSourcing And How Can The Companies Benefit From It?
What is eSourcing?
The process of Sourcing involves looking for new suppliers, assessing their capability, comparing their products and their offerings with the demand or with the incumbent supplier’s offering, uniting with all suppliers to receive marketable bids, researching the bids, and negotiating for the optimum price & capability mix.
Depending on the strategic nature of the goods or service being sourced, some stages of the sourcing process assume more importance, say brainstorming sessions to decide on cost reduction regulators, inputs from manufacturing and quality teams on issues faced and framing an approach that addresses them.
eSourcing platform helps to digitalize the entire Sourcing process through an online platform that's penetrated by both the buying team and the suppliers.
eSourcing result generally delivers 3 functionalities viz.
1. Request for Information( RFI)
A questionnaire that suppliers respond to. Given the strategic nature of the sourced order, the questions can be weighted and the supplier responses scored across functional teams in order to arrive at a net weighted average score per supplier.
2. Request for Quote ( RFQ) or Request for Proposal ( RFP)
Then the specifications, quantity of the particulars or goods being sourced along with the terms & conditions are transferred to the suppliers. Suppliers give marketable bids for the same. Collaboration with internal stakeholders and addressing supplier queries are done online
3. Online Auctions
The 3 fundamental types of online auctions include Reverse Auction procurement, Forward Auction, and Dutch Auction. Online deals help a buyer negotiate with multiple suppliers across multiple orders in an effective manner making the negotiation process more transparent to the supplier.
What are the benefits of eSourcing?
There are 5 crucial benefits of any eSourcing solution. It's important for every association to articulate the benefits they seek or the problems they need to break and ensure the same is attainable using the result they've shortlisted.
1. Higher Compliance
Conducting the sourcing process on a common online platform rather than through emails, spreadsheets, and phone calls ensures advanced compliance. Strong inspection trails help the audit team to understand the number of suppliers participating, which suppliers declined to participate and why, who approved the award scenario, who handed what evaluation to a supplier response, etc.
2. Lower Cycle Times
There are two aspects to sourcing cycle time. One, the time is taken to produce an RFI or RFP, and two, the time is taken to award the business post-releasing the RFP. eSourcing tools allow the customers to produce and exercise templates that speed up the RFX creation process. Buyers should be able to analyze bids as soon as they're entered and connect with suppliers immediately to reduce the time to analyze and award business.
The use of templates also standardizes processes and enables sharing of best practices between buying teams spread across locations.
3. Improved Collaboration
Collaboration is important between the buyer and other internal stakeholders within the association and externally with suppliers.
4. Lower Cost
Auctions are proven to deliver 9-11% off savings for indirect spending. This is one of the best means to test good suppliers competitively.
Competitive RFPs also display the Rank/ Best Bids to suppliers, which helps get multiple bids from a supplier without any 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 results because they trust a system further than what the buyer verbally informs them. Supplier operation is easier. The result needs to be user-friendly not just for the buying teams but also for the supplier to log in and share in the sourcing event.
Original Source: What Is eSourcing?