For a long time, procurement managers were focused on one thing—reducing costs.
Through the years, however, business needs have evolved such that cost efficiency, while still important, is now joined by a whole new list of concerns that can similarly impact a company’s bottom line.
Given this, procurement teams are now seeing their roles expand beyond simply finding the most affordable sources for materials or services. Procurement teams must also consider the broader relationship, including whether their chosen supplier reflects their own organization’s brand values and whether it’s a working relationship that will spur innovation or yield other less tangible benefits for the company.
Fortunately, eSourcing has proven to be an effective tool to help manage these concerns. eSourcing software offers robust tools and applications that facilitate traditional procurement processes with more efficiency. Still, to truly maximize what it can do for your organization, the following challenges should be addressed:
1. Declining value of cost-savings
Cost reduction has long been the primary driver of eSourcing. But often, focusing too much on affordability – especially after significant savings have already been achieved – leads to declines in quality or in service level, leaving businesses feeling unsatisfied with their suppliers despite achieving excellent pricing.
Of course, the ability of eSourcing to deliver cost efficiencies for businesses still remains very relevant, no matter how significant the gains made in the past. However, communicating to suppliers and upper management the importance of other factors in supplier selection is just as critical. At some point, this requires a significant shift from a business’ tendency to focus on year-over-year savings to instead considering the annuity value of past savings achievements..
2. Lack of support for eSourcing’s other benefits
This is the corollary to the declining value of cost-savings outlined above. In order to maximize the benefits of eSourcing, management and procurement teams must fully buy in to the idea that there is much more to strategic sourcing than simply gathering the lowest bids for a project.
Ideally, eSourcing is designed to deliver high quality and relevant proposals for a particular project. This means bids must strike a good balance between cost and quality. Often, upper management is unable to recognize the relevance that quality plays into the whole procurement process—they’re too focused on the costs. Ultimately, this can serve to be detrimental to the success of any project, but especially when savings have already been achieved and the company is enjoying the ongoing dividends of those savings.
3. Insufficient understanding of objectives
With an eSourcing platform, it’s easy to host bidding events and send out requests for proposals (RFPs). However, to attract the attention of quality suppliers and ensure quality bids from them, you need to give them something solid to work on.
Knowing how to create an effective RFP and sending it out means understanding the reasons why you need to do it in the first place. This goes back to your objectives. If the team behind the whole initiative is not provided a clear understanding of what they’re looking for, it will ultimately lead to poor results.
4. Lack of insight into effective decision-making
Related to the previous point, an underappreciated aspect of finding the right suppliers is proper evaluation of proposals. If procurement teams don’t fully understand their objectives, this also means they won’t be able to create reliable criteria for evaluation. This could result in a business basing their decisions on something that might not be completely relevant or sustainable for a long-term working relationship.
Having identified these challenges, you can take a closer look at your procurement process and reassess how you can maximize your eSourcing platform to deliver the best results.
If you want to learn more about how Vendorful can help address these challenges to improve your procurement process, get in touch with us today.