What is eSourcing (electronic Sourcing)?
eSourcing, otherwise known as electronic sourcing describes a cloud-based digital solution for collecting and comparing information about multiple suppliers in order to help a buyer make a more informed choice.
Organisations can benefit from the technology by generating savings from their supply chains, increasing visibility of key business information, and reducing the time procurement professionals need to spend on each day-to-day task.
How does eSourcing work?
E-sourcing is a small, but crucial, component of eProcurement. Inviting potential suppliers to an RFxtender, collecting supplier information, running Sourcing eventstender processes and/or holding eAuctions, evaluating responses, and ultimately awarding them with a contract are all part of the process.
The process can include several or all the following:
Request For Information (RFI)
Before doing business with any supplier, it is important to first identify if they are suitable or not. Many organisations do this by sending the potential suppliers a Request For Information (RFI). The RFI asks the potential suppliers a series of specific questions to ascertain both their ability and suitability to be a supplier. In the public sector an RFI is called a Pre-Qualification Questionnaire (PQQ).
Procurement teams used to manually fill out these documents by hand or in software like Microsoft Word or Excel. Using electronic sourcing, suppliers can upload their answers into eSourcing software, which is returned directly to the business. A fraction of the time can be saved by collecting information from more suppliers. Moreover, it ensures consistency of information collection
Invitation To Tender
The invitation to tender (ITT) is a process for gathering competitive quotes from different suppliers. Suppliers receive an ITT after succesfully completing a PQQ and moving on to the next stage of the sourcing process.
This document outlines all the organisation’s requirements, including the goods and services it requires, as well as the information the buyer will require from the supplier organisation about its own policies, practices, and processes, as well as how the evaluation process will be conducted. In order to move forward in the procurement process, suppliers must fill out this form.
Request For Quotation (RFQ)
In this process, price is still predominately the most important factor when choosing a supplier. A buyer sends out a request for quotes to suppliers, asking them to quote the services they can provide.
In order to understand the price ranges in the market, a buyer can use RFQs before submitting an RFI or ITT.
All of the above are interchangeable.
Evaluation
Following the receipt of the requested evaluation formats, an evaluation process occurs, during which the prospective buyer evaluates whether the information provided by the supplier makes the supplier a viable candidate or not.
Prior to eSourcing, sourcing was a very manual process, sorting through large volumes of paperwork. The use of electronic sourcing changes this, as it provides sophisticated analytics, dashboards, and tools, such as automated scoring, allowing users to automate elements of the evaluation process saving both time and money.
eAuction
As with RFIs, PQQs, and RFQs, eAuctions can be run anytime during the eSourcing process. An event such as this can follow a tender, be used after a tender process, or even be run as a standalone event.
After suppliers are selected, they are invited to participate in an eAuction, in which they bid on the right to deliver the contract.
Various types of eAuction are offered by some eSourcing tools, and each offers its own benefits. The purpose of auctions is to encourage prospective suppliers to compete with one another and, as such, provide procurement professionals with the best possible price.
Contract Award
A contract is awarded to the winning supplier after the tendering processes and/or eAuctions have concluded and a buyer has been selected. This process can be automated, with the winning bidder automatically receiving a contract.
Benefits of Electronic Sourcing (eSourcing)
There are numerous benefits to businesses that can be derived from eSourcing. Below are some of the most common:
Reduces costs: eSourcing offers significant cost savings for procurement teams because it provides access to a wider range of suppliers and encourages fair competition sometimes leveraging different eAuction strategies.
Saves time and increases efficiency: Using electronic sourcing also makes it faster to award a contract. It does this by reducing the amount of time procurement specialists have to spend on the tendering process, allowing them to focus on other high value tasks.
Improves transparency: E-sourcing increases transparency between buyers and suppliers. Portals allow teams to view all tender opportunities from a supplier, including deadlines, status, and other key information.
Improves compliance and reduces risk: By centralizing the procurement process and documents, auditing is simplified – as well as compliance with regulatory procedures, with a system that transparently displays how and why suppliers were selected.