eSourcing & Supplier Relationships, Part II

PurchTips - Edition # 62 November 16, 2004

By Charles Dominick, C.P.M., SPSM

Do You Know How To Save eSourcing?

In the last resource, you learned about a growing trend - suppliers once again refusing to participate in eSourcing. One seller recently told me: "We've decided not to participate in reverse auctions any more. We don't want to commoditize ourselves."

So, some suppliers would rather decline an opportunity to earn business than to deviate from their business model. That concerns buyers who realize that, generally, the more competition there is, the lower prices will be.

Currently, eSourcing is suffering from a negative perception in the supplier community. The emerging resistance requires that buyers make eSourcing events as attractive as possible to suppliers. Otherwise, the buyer-friendly eSourcing process could face limited applicability - even obsolescence - in the near term.

Every buyer conducting eSourcing events has the ability to reverse its negative perception. In order for eSourcing to survive, you need to incorporate the highest levels of integrity in eSourcing processes. Here are five tips for promoting integrity in eSourcing:

1. Do not display only prices to suppliers when there are other criteria involved in the
   selection process.
2. Do not select a supplier other than the low bidder (in a price-only auction) nor a
   supplier other than the highest scorer (in a multi-variable eSourcing event).
3. Do not determine the supplier you will select in advance of the eSourcing event thereby
   "using" the other suppliers simply to drive down the preferred supplier's price.
4. Do not negotiate price after the eSourcing event has already determined the
   lowest price available in the marketplace.
5. Do not invite certain suppliers to participate if those suppliers have no chance of winning.

If you avoid making these mistakes, you will be able to maximize the applicability of the valuable eSourcing process. Until the next resource, I wish you the best...

Charles Dominick SPSM, C.P.M.
President, Next Level Purchasing, Inc.

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