Welcome to Thomas Insights — every day, we publish the latest news and analysis to keep our readers up to date on what’s happening in industry. Sign up here to get the day’s top stories delivered straight to your inbox.
What is Sourcing?
Before a company can procure required goods and services, it must first source the specific goods and services it’s looking to acquire. Sourcing facilitates the entire life cycle span of procurement procedures by assessing the allocation of funds to the required assets.
The main aim of sourcing is to evaluate market trends and the company needs to identify opportunities for the reduction of costs related to obtaining goods. Sourcing involves management skills, knowledge of contracts, and negotiation tactics to gain the desired results.
What is E-sourcing?
E-sourcing takes the method of sourcing up a notch by undertaking all the steps involved in a single centralized online location. E-sourcing employs the use of a virtual platform for screening suppliers and connecting different companies, regardless of location constraints.
There are several e-sourcing software tools available to improve procurement strategies by managing them from inception to completion. E-sourcing platforms outline spend-analysis options, creating opportunities to enhance spending habits and allowing for the assessments of suppliers’ capabilities. The evaluation of project metrics is another benefit of using e-sourcing tools.
The E-Sourcing Process
Typically, the process of e-sourcing involves the following steps:
- Development of a tender document or specification that intended suppliers can easily understand.
- Undertaking a market assessment to evaluate a supplier’s capabilities and fit for your project through a pre-purchase questionnaire or request for information (RFI).
- Invitation to tender in which bidders receive the previously prepared specifications for use in developing their strategy.
- Request for quote from suppliers in which they outline a cost estimate for delivering the project.
- Evaluation of the tenders received to determine which bidding supplier best satisfies the required criteria.
- Negotiation and contract award.
Benefits of E-Sourcing
The benefits associated with e-sourcing have resulted in its predominant usage in the procurement industry. These include:
Reduction of Cost
This is one of the main benefits of e-sourcing. The platform allows for greater access to a range of suppliers who utilize different methods of bidding. Businesses can choose the most cost-effective and qualified suppliers from this pool.
Through the implementation of e-sourcing, there is a significant reduction in procurement time investment and associated time and financial costs. Savings also arise in the form of lowered printing and paper costs.
Improvement in Supplier Relations
Communication and coordination with suppliers are enhanced by the implementation of an e-sourcing platform. Through the portal, suppliers review requests for proposals, associated deadlines, and the status and outcome of bids. This system ensures that the procurement process is transparent at all stages.
Through feedback provided by the client, suppliers can be privy to client expectations when bidding on future projects. This information helps a supplier enhance their competitive edge through the understanding of competing companies’ offers.
E-sourcing also opens the market up to companies outside the confines of geographical locations, allowing for increased opportunities for both buyers and suppliers.
Improvement in Compliance and Reduction of Risks
E-sourcing encourages a seamless audit process since all required documents are stored in one location. The system outlines each step taken in selecting a successful proponent, ensuring regulatory compliance.
Image Credit: NicoElNino / Shutterstock
