Improved negotiation outcomes: Negotiating in person or by phone is both time-consuming and limiting. Negotiation is a tricky process and generally, even the most aggressive buyers only push a vendor to improve their pricing up to two or three times before submitting.
With eSourcing, buyers can utilise the online auction tool to negotiate and obtain the most competitive pricing for the contract. Online auctioning fosters a more competitive environment among short-listed vendors, therefore yielding a more competitive price to win the bid. This not only simplifies the negotiation process for the buyer but also generates better commercial outcomes.
Better decision-making: eSourcing provides a central platform that contains all vendor information in a standardised format, making information synthesis and analysis easier for buyers. By using best-in-class eSourcing technology buyers can apply scoring and weighting capabilities to answers, and provide scenario analysis —all of which contribute to optimising procurement decisions.
Greater transparency: In these days of heightened corporate governance, procurement practitioners need to be able to justify the decisions they are making regarding the allocation of company funds. eSourcing technology provides an audit trail of all respondents' information and the criteria used to make decisions. This helps procurement professionals justify buying decisions, even long after they have been made.
Reduction in cycle time: All of this automation through internet-based systems massively reduces the time and effort required in conducting sourcing projects. The overall time invested in the sourcing cycle is reduced by as much as 70 percent in some cases.
So overall, e-enablement of the sourcing process offers a myriad of benefits to procurement departments, from drastically reducing the cycle time for conducting the sourcing process, to significantly improving the suitability of the vendor base. But most importantly, commercial terms can be notably improved--with companies frequently reporting average savings of 7-10 percent, going up to 30 percent in some exceptional cases.
Going forward, I expect to see eSourcing extend beyond its original remit to provide further services such as business analytics to enabling enhanced supplier management for companies, among many other benefits.
The author is Executive Director, Procurement Services, Xchanging.
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