e-Sourcing Tools — Means to an End

Why process integration and usage guidelines are more important than the tools


Tip: Use this field to explain why a project is in "Yellow" or "Red" status for the Risk Indicator. This will help management to understand the specific nature of the risk and perhaps help them develop risk mitigation strategies.

10. Priority — Establishing the priority of a project helps identify areas that require enhanced management team attention. Typical designations include: "Low," "Medium," "High" or "Critical," with objective criteria that define the characteristics of a project at each level, e.g., impact on business operations, cost implications, product/service launch, regulatory/legal compliance.

Tip: The old adage "When everything is a priority, nothing is a priority" applies here. This is a subjective designation and discipline is required to produce a rough bell-shaped curve. For example, a typical target percentage of Critical/High/Medium/Low priority projects might break down as 5 percent/15 percent/70 percent/10 percent.

Online eRFx and Reverse Auctions

In addition to the project management function, process integration also plays a critical role in the successful implementation of eRFx and reverse auction functionality.

Companies can better leverage e-sourcing tool auto-scoring capabilities for vendor proposals by structuring as many requirements as possible in the form of binary (yes/no) answers, or requiring the vendor to enter a specific value, or choose from a list of multiple-choice responses. This improves evaluation process efficiency as the assignment of weights to these requirements can be built into the tool ahead of time. The tool will then apply the appropriate weights to vendor proposal responses and auto-score them without manual intervention.

Vendor training also plays a significant role in saving time and effort for both eRFx and reverse auctions. While most large vendors now have experience with e-sourcing tools in general, they may not have experience in the specific tools the company has implemented. Also, many of the smaller vendors have limited experience in using these tools at any level; therefore, not educating them places them at a competitive disadvantage and undermines the competitive process. Detailed training sessions should be conducted with vendors before any eRFx or auction event to ensure a smooth and efficient interaction. This is particularly important in auction events as they happen in a discrete, relatively brief period of time, and any errors on the part of the vendor can compromise the quality and effectiveness of the entire auction.

There are many different ways to conduct an online auction, and the sourcing team should work through and customize a number of variables to optimize each sourcing event. Some of these variables include:

  • the degree to which the auction will be solely price-based versus "handicapped" to account for variations in proposal quality on the non-pricing areas, e.g., technical, operational, legal;
  • the opportunity to auction non-pricing terms such as warranty periods and service-level agreement (SLA) performance credits;
  • time limits for the auction event;
  • rules for extending the time limit based on vendor bidding activity; and
  • the information that will be shown to vendors regarding their bids relative to competing bids.

Process integration considerations for a successful e-sourcing tool rollout may seem like a substantial amount of work (and it is), but in reality it is a small investment relative to the payoff received in the form of enhanced efficiency and effectiveness from the sourcing process. With significant dollars and time on the line, it is vital that the enterprise plans ahead and allocates sufficient priority and resources to process integration when making a decision to implement an e-sourcing tool.

About the Author Andy Sealock is a principal at Pace Harmon, an advisory and management consulting firm focused on providing business support through the entire sourcing lifecycle for large-scale technology, outsourcing, network, and other complex transactions. www.paceharmon.com.

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