e-Sourcing for Purchasing Interim Managers
What is e-Sourcing ?
e-Sourcing has become synonymous with reverse e-Auctions. In fact, its a series of web based purchasing technologies; typically comprised at its core by three major elements:
Providers typically offer additional bolt-ons which are arguably non-core, such as sourcing project management capability, contracts management tools etc.
The Advantages of e-Sourcing
Interim purchasing managers who haven't used e-Sourcing, often take the view that its a tool which is useful in specific circumstances. By that they usually mean that e-Auctions are useful in specific circumstances, which is true. Auctions deliver ~10% more than traditional purchasing, but benefit from higher numbers of competing suppliers. However, because e-Auctions represent a relatively small (albeit important) part of the e-Sourcing process it considerably underestimates the impacts that the consistent use of the broader process delivers.
Companies that are less mature in using e-Sourcing technologies, tend to focus on reverse auctions as the be-all and end-all and typically continue to obtain Requests for Information and Requests for Quotation by email using Excel spreadsheets. As such, auctions remain rare "significant emotional events" for both buyers and suppliers, and often need to be supported by costly consultants; who are arguably not always incentivised to transfer their knowledge.
The most sustainable and most substantial benefits are delivered when a comprehensive e-Sourcing approach is used consistently by a purchasing team. If, instead of using Excel spreadsheets buyers are trained and encouraged to configure their own e-RFQs on the platform and obtain e-quotes from as many suppliers as is reasonably possible, then there are substantial advantages.
Unlike Excel based Requests for Quotations, e-RFQs can't be modified by suppliers and are unlikely to be substituted by Excel quotations. Suppliers provide their quotations in exactly the format requested by the buyer, and so are more likely to give more readily comparable cost-breakdown information. Furthermore, by quoting through the e-RFQ process (which is usually simple enough not to require any training) suppliers become familiar with using the e-Sourcing platform, and more confident about doing so.
After an e-RFQ, if significant pricing differences remain evident between suppliers, it becomes easier for a buyer to explain that it would be in everybodys' best interests to (flick the reverse e-Auction switch and) "make the extent of the competition more transparent to all participants". This gives suppliers feedback about the relative competitiveness of their offerings and maximises competition for the buyer.
Using this approach, instead of auctions being rare high-profile significant emotional events supported by costly consultants, they become regular, low-cost events more of which become auctions and more of which deliver substantially more savings.
Nevertheless, one of the most overlooked benefits of a comprehensive e-Sourcing process is the knowledge management solution that it offers, almost as a by-product. As the information acquired through an e-Sourcing platform grows over the years; e.g. e-Requests for Information (e-RFIs), e-Requests for Quotation (e-RFQs) and reverse e-Auctions, it's all retained and available in a central repository for sharing amongst the team. So the category expertise which is obtained through an e-RFI can be shared for years to come. The downside to this is that to maintain the availability of this information tends to lock a company into it's e-Sourcing platform provider.
The knowledge management capability is particularly useful if clients of purchasing interim managers are concerned about the quality of handover at the end of an interim management purchasing assignment.
What e-Sourcing is Not
e-Sourcing is not (yet) a substitute for a well structured strategic sourcing process.
The Cost of e-Sourcing Technology
The cost of e-Sourcing platforms has reduced substantially as the number of new entrants has climbed. The advent of "on-demand" e-Sourcing where an external e-Sourcing platform is hosted centrally by the provider on behalf of many clients, who then share the resource (not unlike say e-Bay) has virtually eliminated the barriers to entry that once existed. As such, access to on demand e-Sourcing platforms can now be bought "off the shelf".
e-Sourcing Return on Investment
In a medium to large company, as the costs of accessing the technology falls this is usually a no-brainer. Indeed e-Sourcing is increasingly becoming a realistic option for even smaller businesses.
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