How to Optimize Your eSourcing Award Strategy
Sourcing is one of the most important foundations of procurement—if you’re not able to find the right suppliers you need and source goods from them, procurement cannot occur, and the entire supply chain, in essence, crumbles apart. Before the Internet, sourcing was one of the most arduous and lengthy processes of procurement.
The back-and-forth process of finding the right supplier, the long drawn-out manual strategic sourcing process—these could take weeks. However, eSourcing has changed all that and wholly streamlined the procurement process. This doesn’t mean that sourcing can’t be further optimized, especially when it comes to the award part of eSourcing, which is the final decision before establishing the contract.
Read on to learn about some ways to optimize your sourcing process further to make procurement management easier.
What Are Sourcing Steps?
Every company or organization’s process will look a little differently, but the general sourcing steps will look something like this:
- Conduct an internal needs assessment
- Study the suppliers’ market
- Collect information about the suppliers
- Develop a sourcing/strategic sourcing strategy
- Negotiate and select the winning bid
- Implement a transition plan
Negotiating with suppliers can sometimes be the most intricate part of sourcing, often taking the longest. The internal process that envelopes this negotiation is the RFP, or request for proposal. When you’re working with many suppliers, this process may often begin with an RFI, or request for information, so you can get to know more about each company, particularly if you have no prior experience with them.
Next comes the RFP itself, which is full of further questions to identify if the company is a good fit. As you further vet vendors during sourcing, the next step would be an RFQ, or request for a quote, also known as an invitation to bid. This allows the company to bid.
Different Types of RFP’s in eSourcing
Unless you’re still processing RFPs the manual way, there are several different ways you can handle RFPs and RFQs. The most common is to use an electronic RFP on an RFP platform. Using a digital method speeds up the process and allows you to contact a wider range of suppliers.
Assuming you and your team are all using the same eProcurement software, this also allows you to be more collaborative because your team can see where every bid and quote is because of the visibility of eSourcing software. You can also opt for management RFP services, where you have an outside firm manage your eSourcing processes. If you sometimes balk at making decisions or have a tough time with these processes, having outside professionals help with eSourcing isn’t a bad idea.
Optimizing eSourcing and the Award Process
If you have many RFPs and RFQs on your plate, eSourcing can get complicated, and trying to optimize it can feel hectic. Also, if you have many bids or many buying locations, finding the best award mix among suppliers can be daunting. This assumes that you are not going to award to one supplier. One supplier awards are easier and can be done without software in many cases. The best way to optimize sourcing is to use software that offers analytics for your bidding and sourcing processes.
Sourcing Optimization vs. Spreadsheets
Spreadsheets are viable, but using them to make complex awards as defined above can take even the most advanced spreadsheet users days or weeks. To fully optimize the award, you need to use newer solutions to analyze hundreds or thousands of inputs against your operational rules to find the most optimal award scenario. These solutions require a full set of clean data, defined operational rules, such as fewer than five suppliers, and only one per location in the award to determine the best award mix for you.
An eSourcing suite that allows you to run several award scenarios in minutes can help to streamline your sourcing process even more than your typical electronic RFP or RFQ that you analyze in a spreadsheet after the bids are received.
Award optimization isn’t for everyone and isn’t needed when you will be awarding to one supplier. However, if you are awarding to more than one supplier and are trying to find the right balance between savings, incumbency, and the number of suppliers—either in total or per location, eSourcing Optimization might be the answer you’ve been looking for.
To learn more about eSourcing optimization or any other services, contact EC Sourcing to schedule a demo today at 973-936-9672.
We want to help you re-imagine procurement and optimization.