E-Sourcing Forum » Optimized e-Sourcing Strategies

Optimized e-Sourcing Strategies

October 13th, 2006 at 06:51am David Bush - Iasta

The European Leaders Network recently ran the article Optimized E-Sourcing Strategies and, being an eSourcing provider, I just couldn’t resist commenting on it. Succinctly, it’s a good article. Consider the following excerpt:

Nuanced best-value approaches were utilized by the buyer and suppliers throughout the project to guide their strategic decision making. The sourcing team considered product and service quality, switching costs, qualification costs, supply risk factors and product cost during the RFP, negotiation and analysis processes. The suppliers considered their cost of goods sold, the opportunity cost of their production resources, economies of scale, the reference value of the account, and their points of competitive differentiation and weakness.

Though complex, this type of sourcing project does not depend on unfamiliar or exotic technologies. Rather, it is made possible by the convergence of the electronic RFP, reverse auction and optimization-based scenario analysis software. By combining these technologies with best-in-class sourcing processes and expert resources, the sourcing organization was able to generate a huge number of award scenarios with similar value profiles. This enabled their stakeholders to consider more objectives and enjoy substantial total cost savings without unnecessarily sacrificing quality or supply chain stability.

The key technical ingredients to best-value electronic negotiation are transparent feedback, dynamic bidding, expressive bidding and scenario analysis.

In other words, as the marketplace is starting to realize, eSourcing is more than just the reverse auction - it’s the entire process from spend analysis, through need identification, through eRFX, bidding (possibly, but not necessarily, through an eAuction), decision optimization, contract management, and compliance monitoring - and any on-demand eSourcing provider worth their salt should understand this, and provide you with a solution that covers this entire cycle. Unfortunately, most eSourcing providers, like many early adopters, were stuck in the “eSourcing is eAuction” for too long, and not all providers will be capable of providing you with the complete end-to-end solution that you need to excel at your sourcing efforts - it’s buyer beware. Choose wisely when making a decision - and see my recent post on “Software Vendor Selection” for additional guidance.

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Entry Filed under: Functionality, General, Optimization, Technology / SaaS

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