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Why Use eSourcing solutions?
Amid the turbulence, industry leaders are holding sourcing events more regularly to deal with fluctuating demand and availability. To deal with the complexities, organizations should invest in strategic sourcing technology that allows teams to put their best foot forward in both conventional and complicated sourcing events. This is especially true when the need to take into account non-cost objectives like sustainability, delivery speed, and more, grows.
As a result, businesses are changing their sourcing strategies and expanding their sourcing technology solution package to enables buying teams to cover a broader range of sourcing requirements while also centralizing more data and insights, improving sourcing outcomes, addressing new priorities, and responding more quickly to disruptions.
The Problem With "Old Reliable" eSourcing Solutions
Depending on legacy software or old esourcing solutions is no longer a strategy for professionals who want to get ahead. The speed and flexibility of creating a bid sheet in Excel create the illusion of progress, but that pace grinds to a halt when this practice is applied to many suppliers who then introduce data that is “unclean” or introduce conditionality in their bids that Excel is not able to interpret and defend against.
This problem snowballs into an even bigger issue when buyers choose to limit the type of data they collect in their RFPs to avoid dealing with the analytical complexity that results, meaning savings and other areas of value are being sacrificed for simplicity. In short, a conservative choice as to how to configure the requirements can dramatically alter the outcomes when it comes to seeking an optimal solution when elements beyond cheapest and fastest need to be considered.
That’s not to say do away with Excel and legacy tools entirely - there’s a time and a place for spreadsheets in sourcing. But esourcing technology should progress to meet the needs of the time, and sometimes that requires more than just incremental feature additions or minor improvements here and there.
Which Sourcing Technology: Basic eSourcing or Sourcing Optimization?
The answer is both: basic eSourcing tools and sourcing optimization are complementary technologies that may be used in tandem to meet various sourcing requirements. The main difference between the two is the amount of decision help and the enhanced analysis speed.
E-auctions are a basic e-sourcing method that is well-suited to award circumstances favoring lower cost over other considerations. For example, when a company has to purchase a large quantity of an indirect product from a single source (think office furniture or IT), this technology can help buyers quickly make a selection based on the best offer out there.
On the other hand, these solutions cannot take into account the extra considerations that complicated situations or competing business priorities entail. A basic e-sourcing tool won't suffice in today's market when freight container and fuel rates are skyrocketing, shipment delays are shattering records, and customer demand is constantly fluctuating. When you include other stakeholder ambitions such as factoring in sustainable sourcing to award decisions, buyers will have even more considerations to make. And that's when sourcing optimization takes precedence.
Sourcing optimization allows teams to move beyond the traditional "lowest-cost-wins-all" award decision-making. Instead, buyers can gather a variety of price and non-price bid information from suppliers and then evaluate alternative awarding scenarios that take those criteria and other limitations into account. This approach is also proven to yield some of the most significant ROI paybacks in procurement as it enables users to elicit savings that are hard to unlock with more basic approaches.
Two Technologies, One Goal
Given the ongoing flux in the market, a combination of both standard eSourcing technologies and sourcing optimization is optimal in helping businesses adapt and evolve. Combining technologies that function well together allows sourcing teams to manage diverse forms of spend in the same environment. But knowing when to utilize each is crucial.
For example, sourcing optimization was once reserved for annual RFPs. And while sourcing optimization is best suited for these larger, more infrequent events, there is a strong case for using it more often as the complexity of sourcing events sourcing teams need to run increases.
Additionally, buyers today must make award selections based on more than simply the lowest price. Failure to consider factors such as limited capacity, CO2 emissions, longer shipping times, and increased turbulence in the market are all concerns that can impact the buyer and their company. Making a strategic award selection means taking into account all of the variables in the equation, such as:
- How socially responsible is this supplier?
- How fast will they be able to deliver?
- Do they have any pricing packages?
- And much more…
Sourcing optimization provides answers to these and other issues, allowing your business to see all of the cards on the table and build a winning hand. By automating data validation, you'll be saving yourself and your team plenty of time and effort.
Whereas simple eSourcing solutions are highly effective, for example, when renewing a contract with a long-term supplier. But sourcing optimization is needed for making business decisions where there’s more at stake and where there may be various new options to consider. Such strategic spending necessitates greater transparency and knowledge, and in these instances, sourcing optimization is the right tool for the job.
The Issue of eSourcing Solution Adoption
Picture this: A sourcing need arises, but instead of configuring the requirements in the company’s eSourcing software, the buyer opens up a spreadsheet and follows a more manual, email-based collection of supplier bids and analysis.
Does it sound familiar? That workaround has the perception of being the quick and easy option for sourcing employees who feel more comfortable using Excel, but the reality is there are shortcomings and consequences of that choice that may be dismissed in the interest of convenience and familiarity. Unfortunately, this scenario of overlooking modern e-sourcing tools in favor of the use of old reliable basic spreadsheets sourcing methods is not as uncommon in global sourcing functions as we would hope.
But as highlighted in Keelvar’s Voices of Sourcing Report, failure to more widely adopt modern e-sourcing tools isn’t due to a lack of willingness on the part of employees to work with the more advanced tools available to them – just 9% of respondents to our survey cited this as the number one challenge. And it also doesn’t appear to rest on a lack of top-level support (11.5%) either. Instead, the biggest barrier to adoption appears to be a result of reasons related to their current e-sourcing tool being inefficient or too complicated to use (23%).
So while our survey findings show that more organizations than ever are willing to look beyond old sourcing software towards more modern sourcing solutions, one in three sourcing professionals still admit to only using such technology for a small percentage (around 10%) of RFPs, or not leveraging eSourcing tech at all:
Summary
When it comes to running a standard bidding event, basic sourcing technology might be the right option for getting quick and straightforward results. But when making high-stakes sourcing decisions, you need optimization on your side.To ‘crack the nut’ on modern e-sourcing software adoption, it's down to technology vendors to make the solutions more user-friendly, less costly, and to automate more processes that would otherwise take up valuable sourcing practitioner time.
For example, modern sourcing optimization solutions such as Keelvar’s Sourcing Optimizer allow teams to drive a lot more efficiency across the entirety of the sourcing lifecycle, with some customers reporting as much as 100% ROI in their first event.
In these challenging times, procurement personnel need every edge they can, and a dual sourcing strategy provides them that. Finding much-needed resilience may be as simple as two strategic sourcing solutions cooperating to achieve your goal.
