eSourcing – The Electronic Procurement
04 Apr. 2011 e-Commerce Development
Today, cost rationalization is at the forefront of agenda for every organization. Efforts are channelized towards developing a system which lays a platform for long term benefits. On the organizational level, departments face the issue of adopting modern approaches. The test is to balance new methods vis-a-vis traditional procedures on one hand and human inertia on the other. The challenge also rests with identifying and implementing newer methods without hampering the normal operational proceedings.
A more detailed analysis reveals that these challenges are industry specific and are also influenced by geographic, demographic and social dynamics. All in all, organizations are looking for perpetual system that helps them in seamless switch from one level to the other.
For their central role in the determining the quality of end product, the procurement department is under the scanner for the material sourced. The sourcing personnel are under constant pressure to procure best quality material at an optimal value.
They operate under several constraints of time, location; delivery, logistics, and fulfillment so on and so forth. Moreover, the quality of direct raw materials defines the quality of end product. Hence, it becomes all the more imperative to have the right option and adopt the right approach for sourcing.
The latest innovation in the sourcing process comes in the form of eSourcing or The Electronic Procurement! It is a reverse auction process for buying items where prices go down as the auction progresses. It leverages the power of internet and Software as a Service (SaaS) model, brings the bidders (suppliers) on a common platform.
How does eSourcing work?
In a controlled ambience the buyer invites its shortlisted (selected) suppliers who are at technically at par with each other. The buyer also reserves the right to craft the strategy for the reverse auction based on his or her organizational policies. An ideal reverse auction platform is one in which the buyers operational process is exactly replicated without any deviation.
Once the auction event commences, the bidders (suppliers) bid against each other for definite period. They are able to see the corresponding bids by other bidders and in a competitive scenario are forced to shrink their profit margins passing on the benefits to the buyers. This also saves substantial time for the buyers as they now no longer wait for E-mails from suppliers about quotes, no longer do they negotiate on phone and is independent of availability of suppliers for discussion.
The suppliers on the other hand are happy that system is transparent and their chances of winning the contract are in their own hands.
It’s a collaborative process of negotiation and is also called as a ‘Negotiation Tool’ in loose sense. The science of negotiation is ideally aims at a win-win situation, but if you are a buyer, you will never mind a (you) win and (supplier) lose situation, will you?