End-consumers have been going to online outlets to get best prices and fast shipping for quite a while. Increasingly, procurement organizations are considering e-sourcing as a way to get things done quickly and to get better deals.
These tools promise a myriad of benefits to organizations. Gartner defines the capabilities in a recent report:
The e-sourcing application, the centerpiece of the strategic sourcing application suite, enables buyers to establish sources of supply and to negotiate pricing; terms and conditions for direct materials; indirect materials; and services through events, such as online RFIs, RFPs, and reverse auctions. These applications help procurement professionals compare and evaluate bids, and notify participating suppliers of event results.
We interviewed Ed Cross, executive director of procurement and HRO at Xchanging, to get a picture of how these tools are being used today in the supply chain. Last September, Xchanging acquired MM4, a SaaS-based proprietary e-sourcing platform.
EBN: What is the competitive landscape for these solutions?
Ed Cross: The e-sourcing market is made up of a small number of large, global players and a larger number of much smaller players that specialize in particular niches, such as geographies or industries.
The vast majority of e-sourcing providers were founded prior to the dotcom bubble and many have continued to serve particular niches since then (either industries or geographies).
EBN: What are the biggest benefits to online sourcing and negotiation?
Cross: There are several. The most notable benefits are increased savings, reduced sourcing timelines, and greater market transparency. Yet, we hear of a lot of supply chain organizations — both large and small — that don't utilize e-sourcing because [they can be] unintuitive (difficult to use) software and [may] lack support. With the right solution in place, e-sourcing enables procurement professionals to determine not just how to source, but what to source, when to source, and from whom to source.
EBN: How does this type of solution change the work of the procurement professionals?
Cross: E-sourcing technology enables procurement professionals to be more informed and efficient. Even for companies with little history of experience or success with online negotiations, e-sourcing enables that company to essentially hand off all the administrative aspects of managing an online negotiation so that they can concentrate on the commercial and strategic components of the project. This lets the company focus on things like structuring the negotiation in the most optimal way, maximizing the competitive market and staying updated on the latest cost drivers that may impact the business.
Let us know how your organization is leveraging e-sourcing solutions. How did you choose a solution? What benefits or trials have you encountered? Weigh in on the comments section.