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Why 2020 is the Year to Roll out an E-Sourcing Strategy

Jan. 13, 2020
A look at the impact that e-sourcing has on procurement and why companies should make 2020 the year to roll out a new—or upgrade an existing—e-sourcing strategy.

As procurement departments nail down their digital transformation strategies for the year ahead, e-sourcing is likely to come into the conversation for many organizations. Consolidating the sourcing process into a single, centralized location, e-sourcing systems obtain bids from different suppliers via a single online portal, according to Next Level Purchasing.

In return for their investment in e-sourcing, procurement departments get a more streamlined sourcing process; cost savings (e.g., by maximizing supplier competition), and a repository of sourcing information to work from. “Even companies with 10, 20, or fewer procurement professionals can begin to institutionalize and manage their knowledge of the sourcing category in one place,” Azul Partners’ Jason Busch told Next Level Purchasing.

E-Procurement: A Growing Market

With the global procurement software market posting compound annual growth rates (CAGRs) of 10%, the market is expected to reach $9.9 billion by 2023. E-procurement, which is also known as “electronic procurement” or “supplier exchange”, falls into this category.

The platforms also outline spend-analysis options, create opportunities to enhance spending habits, and enable assessments of suppliers’ capabilities. “The evaluation of project metrics is another benefit of using e-sourcing tools,” ThomasNet explains in How Can You Use E-Sourcing to Improve Your Company's Procurement Strategy?”, noting that the e-sourcing process involves these steps:

  1. Development of a tender document or specification that suppliers can easily understand.
  2. Undertaking a market assessment to evaluate a supplier’s capabilities and fit for your project through a pre-purchase questionnaire or request for information (RFI).
  3. Invitation to tender, in which bidders receive the previously prepared specifications for use in developing their strategy.
  4. Request for quote from suppliers in which they outline a cost estimate for delivering the project.
  5. Evaluation of the tenders received to determine which bidding supplier best satisfies the required criteria.
  6. Negotiation and contract award.

According to ThomasNet, the key benefits of using e-sourcing include cost reductions (due to greater access to a broad range of suppliers); improved supplier relations (through enhanced communication and coordination with suppliers via the portal); better compliance; and reduced supply chain risks.

“E-sourcing encourages a seamless audit process since all required documents are stored in one location,” the company adds. “The system outlines each step taken in selecting a successful proponent, ensuring regulatory compliance.”

But Wait, There’s More

In 4 Reasons Why eSourcing Should Be Your Top Priority”, David Wadler outlines some of the top arguments in favor of e-sourcing. Pointing out that saving money is an important key performance indicator (KPI) of efficient procurement processes, he says Aberdeen’s research shows that companies report an annual average savings of 16% from their use of e-sourcing.

“In addition, procurement teams are able to access a broad range of suppliers and review numerous bids in a streamlined and centralized way,” Wadler writes. “This guarantees favorable results for businesses as it allows them to connect, screen, review, and shortlist suppliers efficiently.”

E-procurement also makes the bidding process more efficient for suppliers, he adds, and enables a more centralized, streamlined procurement approach. “Suppliers can receive detailed requirements in a single platform, as well as communicate and coordinate throughout the bidding process seamlessly,” he writes. “All information can also be easily accessed if necessary, reducing or eliminating protracted email chains and lengthy conference calls.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.