1. What Are the 3 Types of Sourcing Processes?
2. What is eSourcing & How Does it Affect Contract Management?
3. Your Sourcing Process: eSourcing vs eProcurement
4. The 8 Powerful Benefits of Choosing & Using Superior eSourcing Software
5. Your eSourcing Process + DeepStream = More Quality Prospective Suppliers
Sourcing forms an important part of the overall procurement process for any organization looking to purchase high-volume or high-value commodities, materials, goods, products, or services. But it can be a cumbersome process, which can cause additional stress and overwhelm in what may already be a high-stakes situation.
There are lots of moving parts and steps involved in the sourcing process, from starting your initial search for a suitable solution, and vetting appropriate proposals, to finally settling on your ideal supplier.
This guide highlights how superior eSourcing software can help you secure the best value products and services from the right supplier to optimally meet your company’s needs, with less stress and strain.
Before we look at the benefits of adding quality software to the mix, we first need to define the sourcing process and how it fits within a larger procurement framework. We’ll also consider typical sourcing practices and clarify the difference between eSourcing and eProcurement.
What Are the 3 Types of Sourcing Processes?
A buyer needs to engage in two different but related activities when looking to secure products and services from a supplier or vendor. The first step is to source a suitable supplier and the second step is to buy (aka procure) from that supplier.
So sourcing happens before any purchases are made. The sourcing process involves finding potential suppliers, and gathering quotes and information about them, to determine their suitability. This evaluation phase enables us to narrow down the suppliers to a shortlist of those who are the best fit for our requirements.
The procurement phase is where the contract management happens, but the initial sourcing steps support this process by helping us to find the best qualified suppliers to engage with to meet our needs.
The sourcing process helps us to make sound decisions based on relevant data and reduces the potential costs and risks of making an uninformed selection, before we start spending money.
There are three common sourcing strategies so let’s take a look.
1. Sole Supplier Sourcing
The buyer has no choice but to buy from a sole source if this supplier is the only company who can provide the products or services required by the buyer.
2. Single Supplier Sourcing
When a buyer engages in single source purchasing, they elect to buy from one specific supplier for various business reasons, even though other suppliers can provide similar products.
3. Multiple Supplier Sourcing
A many-supplier strategy enables companies to share their needs with multiple competing suppliers to find the best fit. This motivates suppliers to improve their costs and offers to win the work, which benefits the buyer as they get better value for their money. This type of sourcing is commonly used for purchasing commodities and products, where pricing is the key component, but it has application and benefits in all purchasing arenas.
While sole or single supplier sourcing practices can offer benefits, such as building trusted, long-standing relationships that are simpler to implement, they can also put you at significant risk.
A greater dependency on one supplier can expose you to vulnerabilities if they suddenly cannot meet your requirements because unforeseen events or delays affect their capacity, production, or supply.
If you become over-reliant on a single supplier, the lack of competition may cause higher procurement costs and curtail your buying power.
A multiple-supplier strategy provides a safety net against these risks. Having many different suppliers to select from reduces your reliance on a sole source. It offers you more flexibility, improves your bargaining power and protects against supply chain vulnerabilities.
What is eSourcing & How Does it Affect Contract Management?
It is becoming common practice to use software to source suppliers online and manage the associated paperwork required to assess their suitability.
The term eSourcing simply means sourcing and evaluating suppliers using electronic tools.
Sourcing online opens up opportunities to access and vet a global vendor market, offering you more choice, better quality options and more competitive pricing.
eSourcing software helps you to store and manage the information and communications relating to the elements which form part of the sourcing process, such as tender invitations, quotes and bids.
Using any eSourcing platform helps you streamline your contract management process. But top quality software can also save you time and money and improve the transparency and compliance of your process. We’ll be covering eight specific benefits of superior eSourcing software in more detail below.
But first, let’s look at the process…
Your Sourcing Process: eSourcing vs eProcurement
The sourcing process is pivotal in helping your company to minimize procurement costs.
eSourcing provides us with the tools to evaluate and shortlist preferred suppliers or vendors based on competitive variables, before we initiate the contract stage.
As mentioned previously, the next phase of the process is procurement, where we decide on, order and buy the needed goods and services.
Similar to eSourcing, eProcurement happens electronically. It involves online software and payment systems to help us order from our selected supplier, manage the contract and supplier relationship, and process payment to that supplier.
Before we can get to that point, there are a series of steps in the eSourcing process that happen first, which revolve around the submission of information using tools that follow a Request for x (RFx) format.
Step 1: Request for Information
A Request for Information (RFI), also known as a Pre-Purchase Questionnaire (PPQ), is a preliminary document which identifies and assesses potential suppliers. This template ensures that the information-gathering process is consistent across suppliers to support the initial part of the vetting process.
With eSourcing software, this can happen efficiently in real time.
Step 2: Invitation to Tender (ITT) aka RFP & RFQ
Based on information received, a buyer selects and invites the most suitable suppliers to take part in the tender process. There are two tools that come into play at this stage.
- A Request for Proposal (RFP) specifies the buyer’s needs and guides potential suppliers to submit a tender which proposes how and what they would deliver to match the buyer’s requirements.
- A Request for Quotation (RFQ) can be used in two ways. An RFQ helps the buyer to negotiate the terms of the contract, such as quantity, materials, price and discounts. The buyer can also use it before sending an RFP, if they need to gauge the general market price for the goods or services they need, before they can stipulate their requirements.
This tender process encourages competition among suppliers and helps you to determine the best value and price for the goods or services you need.
Step 3: Tender Evaluation & Shortlist
The next phase is to assess the proposals and/or quotes. From this review step, the buyer shortlists the most suitable tender candidates and invites them to participate in an eAuction.
Step 4: eAuction Bidding Process
Before the buyer can award a contract, they need to finalize the best fitting supplier out of their shortlisted candidates, based specifically on cost. In an eAuction, preferred suppliers bid against each other to offer the most competitive pricing to win the contract.
Common ways to run an eAuction:
- Dutch Auction - The buyer starts by setting a price that is too low, increasing the price in marginal increments over a set time period. The bidding cycle continues until one bidder accepts the next set price level.
- Japanese Auction - A reverse of the Dutch auction format. Prices start too high and all suppliers must bid to match that price within a set time period. The buyer then sets a lower price and time frame. This continues until only one bidder remains.
- Reverse Auction - The buyer suggests a preset starting price. All bidders compete to offer the lowest rate comparable to the set price. Suppliers bow out as the price becomes too low and the last remaining supplier wins the bid.
Step 5: Award Contract
When a supplier wins the auction, they are selected by the buyer as their preferred supplier. The last step is to award the contract to them, which can be an automated process using an eSourcing platform.
This step concludes the eSourcing process and starts the eProcurement process.
The 8 Powerful Benefits of Choosing & Using Superior eSourcing Software
eSourcing platforms offer versatile, efficient tools to help you source and buy your goods and services, but the procurement software market is highly competitive.
Investing in eSourcing software, such as SAP Ariba, Coupa, Jaggaer, or our own simple, automated and visible platform, offers several benefits.
Let’s look specifically at eight ways our intelligent plug-and-play RFx software makes a big difference to your overall procurement experience.
1. Increased Supplier Bids + Reduced Cost
Our RFx tools support cost effective spend management and analysis for all aspects of your sourcing and procurement processes. DeepStream’s software can help you reduce vendor spend and increase the volume of competitive supplier bids you receive.
2. Manage Risk With Top Cybersecurity
Purchasing security and risk management are important when you are dealing with a multitude of global suppliers, sensitive data and vast amounts of money. Our state-of-the-art cyber security helps reduce potential risks.
3. Simple Supplier Compliance = Clean Regulatory Procedures
Our procurement compliance matrix ensures that you and your suppliers can adhere to relevant policies, procedures and regulations at every step. All data and communications are stored centrally, maximizing transparency, reducing compliance risk and improving auditability.
4. User Friendly = The Way eSourcing Software Should Be
We are proud of the fact that DeepStream is super user friendly. It is quick to implement and easy to use. Our software helps you manage all aspects of your procurement simpler and faster, allowing you to seamlessly align your purchasing strategy with your business goals.
5. Agile Software = Improved Procurement Processes
We have intentionally developed our software with a proprietary blank canvas approach, so you can customize every part of it to support your agile procurement needs. Whether your focus is on purchasing services based on outcomes, or you are seeking solutions that are product based, DeepStream offers a more flexible, collaborative and adaptable experience.
6. Fast Implementation = Faster RFP Timeline
Getting your users up and running on our eSourcing system is speedy. This reduces the time it takes for them to respond to your RFPs, supporting more efficient proposal timelines and turnarounds.
7. Customer Support = Happier Procurement Professionals
We want to ensure that buyers and suppliers feel at home using our software. Our customer success team is available to offer sourcing support to your procurement team via phone, email or the ever-present Help button that sits on every page of the DeepStream platform.
8. Eliminate Manual Tasks/Communication = Speedy Contract Lifecycle Management
Our automated eSourcing software eliminates all of those clunky email communications and decentralized data storage issues that can slow down the e-sourcing process. An efficient contract lifecycle means you get what you need faster.
Your eSourcing Process + DeepStream = More Quality Prospective Suppliers
eSourcing software helps you find the best value products and services from the right supplier to best meet your company’s needs. Our AI-powered software supports all aspects of your eSourcing process, flexibly and swiftly.
From helping you to simply manage all of your sourcing needs, and speeding up each step of the eSourcing process, to increasing your opportunities to engage with more of the best suppliers, DeepStream’s eSourcing solution marks the spot for your RFx need.