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Exploring the E-Sourcing Advantage

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.

8 comments on “Exploring the E-Sourcing Advantage

  1. t.alex
    January 23, 2014

    I believe e-sourcing will grow much more if there are more and more low-cost providers of the solutions on cloud. Small companies can easily participate with lower entry barrier.

  2. FLYINGSCOT
    January 23, 2014

    Is Esourceing a simple way to cut out the middle man in the chain and therefore secure lower pricing?  If so it might place the larger burden of supplier who now has to deal with many more small customers.

  3. Daniel
    January 23, 2014

    “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.”

    You are right Hailey. When information's are available with figure tips, why to waste time and extra money for traditional way of purchase? All the necessary items can be selected and purchased at a special discount with few mouse clicks.

  4. Daniel
    January 23, 2014

    “Is Esourceing a simple way to cut out the middle man in the chain and therefore secure lower pricing?  If so it might place the larger burden of supplier who now has to deal with many more small customers.”

    Flying scot, when the inventory passes to each layer of middle man a certain percentage of margins are getting adding over the final price. This margin is accounted for middle mans their profit and inventory expenses. So if the dealings are directly between companies and customers, such expenses can be reduce to an extent

  5. Houngbo_Hospice
    January 24, 2014

    @t.alex: E-sourcing can be a more profitable business tool for both the suppliers and vendors when it is well adopted. It can reduce prices by maximizing supplier competition. “Small companies with 10, 20 or fewer professionals can easily manage their knowledge of the sourcing category in one place”. http://www.nextlevelpurchasing.com/articles/what-is-esourcing.html

  6. Houngbo_Hospice
    January 24, 2014

    The benefits of e-sourcing include: – Time saving – Provides a simple format for submitting data online – Faster evaluation process – Clearly defined requirements – More transparent negotiation – Competition for global business…

  7. Hailey Lynne McKeefry
    January 24, 2014

    @t.alex, i agree that small and mid-sized businesses are a good audience for these kinds of services, as well as larger organizations. The problem is that there is a chicken/egg problem–to get the lower price you need enough customers to make it work. But it's hard to get customers unless its a low price.

  8. _hm
    January 25, 2014

    Quality Department must agree to this. They may have very tough time ensuring product quality.

    Also one must also consider many other hidden cost as they many time are significant. Wavering mind of just for just few dollars may also consume precious human resource of supply chain and quality department.

     

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