eSourcing consists of using software to manage and collect suppliers across a variety of projects. But what does that mean for you and your department?
The Difference Between Sourcing and Procurement
Procurement is the sourcing, purchasing, negotiating and acquisition process but also includes risk management and sustainability. Sourcing is the component of the procurement process that deals with supplier selection and management.
eSourcing software will not solve your negotiation problems, your acquisition problems, or some of your more complicated contractual issues. It will, however, make it easier to coordinate suppliers.
So we have established that sourcing software will help you coordinate suppliers, but how does that translate into actual business advantages?
A good sourcing software solution will provide:
Direct cost savings by improving the competitive process of supplier selection. Instead of being limited to two suppliers simply because your infrastructure can’t handle more communication, you will now be able to have a dozen (or more) suppliers competing for the same contract.
Greatly reduce cycle time by streamlining communication through visible dashboards, timely notifications, and contained file sharing to keep all relevant communications in the same place.because the pricing, timeliness and other attributes of suppliers are saved and easily accessible for number crunching. Organizations can create evaluations of supplier performance and identify areas for improvement going forward.
because the pricing, timeliness and other attributes of suppliers are saved and easily accessible for number crunching. Organizations can create evaluations of supplier performance and identify areas for improvement going forward.
But is eSourcing right for my business?
Switching to using a software solution may seem painful, but a company should use a rigorous sourcing process whenever the cost of making a poor sourcing decision is likely to exceed the cost of the sourcing process.
Here is a thought exercise: If you owned a small Mom and Pop book store and you needed to buy paper, the cost of choosing the wrong paper would not be anywhere near the cost of investing in a software solution. But, if you were in charge of sourcing paper for a Fortune 500 company, purchasing the wrong paper could have massive ramifications across the corporation that would far outweigh the relatively low cost of the software. Of course, this is an extreme example and most companies will fall somewhere in between, but the point is that the majority of businesses will be impacted by the savings derived by using sourcing software.
If your company runs many purchasing and sourcing projects, the costs of small mistakes would quickly add up to the cost of the software. Sure, there are rigorous sourcing processes that are manual and would help reduce the risk of a large purchasing error, but the lower cost of running a rigorous process through sourcing software would increase the number of sourcing projects that could benefit from this process.
But if sourcing software has clear benefits, why are companies still using manual processes?
Hesitations to switching to sourcing management software generally fall into three categories:
The cost of changing our existing processes is too high
A good solution should be designed to fit right into your existing processes. The software should not be designed to create a whole new strategy for your team, but instead developed to replace the manual tasks that rob your time such as team coordination, supplier communication, and document collation.
It is too difficult to train all potential stakeholders
If you choose the right software, sourcing solutions should be as easy to use as any of the other applications we use in our daily professional lives. An intuitive software product is designed to simplify, not complicate the sourcing process. A good solution would consolidate and streamline the many manual processes that you and your team already undertake.
My sourcing is too specialized for sourcing software
This is a common concern when contemplating eSourcing and it is best addressed with more questions. Would a mistake in your sourcing be expensive? Do you have manual tasks in your process that need little mental effort but require too much time? Are you limited to non-competitive suppliers because sourcing other suppliers seems like a monumental task? If your answer to any of these questions is yes, then it would be worth a small amount of your time to investigate possible sourcing software solutions.
eSourcing isn’t for every company… but it should be used by most companies. Bulky sourcing processes can affect the whole company. If you want to see an example of how easy it would be to implement a time-saving and intuitive software solution, sign up for Vendorful’s RFP Management Software.