Is it time to revisit the eSourcing value proposition?

eSourcing has been in play globally for more than 2 decades now. In India too, though it has and continues to be largely restricted to the use of online auctions. No doubt, online auctions deliver quick, tangible savings but there is a growing awareness that it does not really address several 'real' issues of sourcing teams.

Over the last 6 months, I have reached out to scores of CPOs to get them to talk about their day-day challenges. I got qualified responses from 48 CPOs, 36 of who manage teams that use an eSourcing solution currently or have used one in the past. Used one in the past? Interesting...a bit on this at the end of this article.

Here are the top 3 challenges which CPOs feel ‘eSourcing solutions’ should address, but do not.

1. Improve compliance and audit trails across the sourcing cycle

Easily the top issue. Auctions provide transparency to the final negotiation process, but the entire supplier qualification process and RFP process were left to spreadsheets, email and phone. Also note that auctions are not conducted for all categories and the direct / strategic categories are usually the ones that are left out.

Considering that the sourcing process is where companies spend 50-70% of their revenue, it is one of the most audited processes. Auditors wish to know how many suppliers were invited to the event? Was the 3-bid process followed? Who approved the shortlisting of suppliers at each stage and the eventual award?

2. Enhance team productivity

Sourcing teams are always expected to deliver more with less. CPOs wished that teams spend less time recreating content like RFIs and RFPs, and instead focus on understanding internal customer needs and identifying better suppliers. The necessary due diligence, when multiple sourcing events are executed in parallel, is difficult to accomplish. This also results in longer sourcing lead times.

The larger the company or greater the number of buying locations, more pronounced is this issue.

3. Better collaboration among cross-functional teams

How can multiple stakeholders who need to weigh in on the supplier selection process participate seamlessly in the sourcing process? This was critical while sourcing direct materials.

And what about the teams that used eSourcing solutions in the past?

Apparently, doing mere auctions wasn’t sustainable beyond 2-3 years. The incremental savings weren’t justifying the continued investment in the solution. The option then was to look for a cheaper solution or go back to manual negotiation.

"If an eSourcing solution addressed the above problems, then 'auction savings' wouldn’t be the only measure of success for such an initiative."

Companies would see greater value by automating the entire sourcing cycle including the collaboration with suppliers and internal stakeholders.

What do you guys think? Is it time to revisit the eSourcing value proposition? If yes, how would you go about it?