Special thanks to Source One Management Services for this guest post
When it comes to running competitive events and soliciting suppliers, electronic sourcing (e-sourcing) tools can be a procurement professional’s best friend. With so many e-sourcing tools on the market, selecting the right tool can be a challenge and requires a firm definition of what your company is looking to get out of its e-sourcing tool. For example, there are a variety of tools on the market that range from relatively simple bid collection systems to fairly complex embedded solutions that extend far beyond the core sourcing process. As a general rule of thumb, the more features a tool has, the more costly the tool will be, and the more time and effort it will take to integrate the tool into your daily sourcing practices.
At their core, e-sourcing tools are intended to facilitate the distribution of product and/or service quote requests from the buying entity and the collection of bid responses from suppliers or vendors. Some tools consist of a portal where the buying entity can upload bid packages for suppliers to view, download, and respond to. Other tools have features such as reverse auctions, where vendors compete against each other during a set period of time to drive down the price of the auctioned items, and Japanese auctions, where vendors accept or reject product/service cost reductions over successive rounds of bid decrements. Many tools on the market have features beyond the core distribution and collection functions. Some tools have the ability to load contracts and track when they are ripe for sourcing, other tools can be integrated into your financial systems to streamline service and goods purchase authorization, invoice payments, and cost center tracking.
One of the key benefits of e-sourcing tools is the institutionalization of sourcing knowledge for future sourcing activities. By utilizing an e-sourcing tool over the long-term, organizations can realize centralized sourcing documents, bid requirements, specifications, and other information crucial to a successful sourcing engagement, so that your sourcing team is not sifting through disorganized, mislabeled, or partial files when contracts expire. Another key benefit to e-sourcing tools is they can be a safeguard against talent shifts. Whenever there is sourcing staff turnover, knowledge is lost. By implementing an e-sourcing tool, you can capture important, category-specific data for replacement talent to access and learn from.
If the point hasn’t been stressed enough, e-sourcing tools benefit business by creating a central repository for historic sourcing projects for your organization to draw from. While there are numerous benefits to leveraging e-sourcing tools, most tools on the market are targeted at attracting large firms with high dollar spend and teams to manage the sourcing process and integration of such e-sourcing tools. There are not many sourcing solutions to meet the needs of small to medium sized businesses.
Small and medium-sized businesses do not always invest in procurement talent because with comparatively low spend, there is little to leverage to realize the type of savings opportunities that exist for firms with large spend across many direct and indirect categories. Without an investment in sourcing personnel, e-sourcing tools are unlikely to be utilized because most of the market solutions are complex and require some kind of system integration. These implementations can be costly and time consuming for any end user. Regardless of organizational size, firms should be concerned with procurement activities and plan for future growth. Luckily, some e-sourcing firms are rising to the challenge and offering low-cost, simplified, standalone e-sourcing tools FOR FREE! These market solutions are ideal for small and medium sized businesses to begin to institutionalize knowledge and prepare for procurement maturation.
Small and medium-sized businesses can make the most of their purchasing habits and vendor relationships by leveraging low-cost e-sourcing tools. Beyond the institutionalization of procurement knowledge, many tools also offer subject matter expertise support for a wide variety of sourcing categories. By building up organizational knowledge and supplementing procurement staff for key sourcing projects with experts, small and medium-sized businesses can maximize their purchasing dollars and keep their sourcing staff level low.