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- March 09, 2017
For buyers, the benefits of e-sourcing are clear, but suppliers aren’t always fans of reverse auctions, which are a core component of e-sourcing.
However, when done right, e-sourcing can be valuable to suppliers as well. It may take some convincing to get them to participate, but once they do many will become regular--and possibly enthusiastic--participants. By explaining the benefits you can get them on board to at least try it. These include:
1. Unparalleled competitive intelligence
One of the benefits suppliers find most compelling is that they can see for themselves how they compare to the competition. Even though they can’t see the names of the other bidders, or their bids, they can see how their own bids rank in comparison. It’s competitive intelligence they can’t get any other way, and far more credible than hearing about it from the buyer, or even from a third party. They can learn a lot and maybe win some business in the process.
2. Level playing field
Most suppliers have experienced the frustration of a buyer going through the motions by requesting them to bid against an incumbent they intended to award the business to all along. E-sourcing presents a transparent playing field, with open message boards that let all suppliers have access to the same information from the buyer at the same time. Everyone sees all the questions and answers, so they can see everyone is being treated fairly.
And, there’s no playing field more level than electronic reverse auction. Every bidder can see the bidding and decide how far they’re willing to go to get the business. If they see themselves ranking near the bottom in the bidding, it should not be a big surprise to them if they don’t win the business.
3. Increased trust and improved relationships
With Excel and e-mail based sourcing, there are lots of emails and phone calls that go back and forth. The buyer talks to supplier B and says, “Hey, supplier A offered me this. What can you do?” Then they turn right around and tell supplier A, “Here’s what vendor B is willing to do.”
Not only does that take up a lot of everyone’s time, it sets up an adversarial situation with the buyer in the middle pitting vendors against one another. And at the end of the negotiation, there can be bad feelings. Losing vendors suspect the game was rigged and may not want to bid on your RFPs again. The winning vendor suspects that maybe they gave up more than necessary to get the business. That’s not a great way to start a relationship.
With e-sourcing, you let the reverse auction software handle the price negotiation. The market drives the price, and it’s all out in the open. That goes a long way towards alleviating the mistrust that often characterizes buyer-supplier relationships.
4. Saves them time
Having standard templates and a central repository for all the information related to an event saves buyers time, and it also saves suppliers time. Formulating a big response to RFIs and RFPs, and waiting for the buyer to analyze everything and respond used to take weeks; now it’s a scalable, repeatable process that can be done in a fraction of the time.
5. More business opportunity
Once suppliers learn the tool and the process, they can participate in more of your events. Sourcing organizations that use e-sourcing are much more efficient and they tend to run far more events than companies that source manually. Because of that, there’s a lot more business opportunity for suppliers who are e-sourcing savvy.
Run a good event
Even though suppliers may initially be hesitant to participate, once they get the hang of it they usually realize that well-run e-sourcing events are good for them too.
To make sure your event is well-run, always be upfront with all the rules. Explain each stage of the process clearly. Then, follow through consistently. If an event is going to be decided on price, say so. If you're not consistent word will get out and suppliers will stop participating in your events.
By educating suppliers, and providing a clear and consistent process and a level playing field, they’ll quickly develop a positive view of your organization. You’ll have plenty of suppliers bidding for your business and there will be more opportunity for everyone.