A strategic guide to eSourcing - difference between eRFI, eRFQ and eAuction
If you set up your sourcing process right, it can be a powerful strategic tool that gives your business a competitive advantage. In this blog post, we find out what’s sourcing, what’s eSourcing and how to pick and set up the right sourcing event for your unique needs.
Sourcing process generally means finding and evaluating potential suppliers, as well as picking the supplier who offers the best value. Sourcing paves the way for procurement. Whilst sourcing and procurement are often used interchangeably (as many other terms in this field), they are two halves of a whole. Both of them should help keep costs low, orders fulfilled and suppliers happy.
Sourcing is more strategic, as procurement is more tactical. In the sourcing phase, you ensure that you get the best terms for price and value. This is also the phase where you can analyze your company’s spend and reduce it. Procurement deals with the flow of goods and services based on that contract.
But what’s the difference between sourcing and eSourcing? You probably guessed it, but in eSourcing you do most of the process digitally. This can make the process much more efficient and transparent. You use digital tools to consolidate proposals, quotes, and bids from various suppliers.
The main benefits of eSourcing
- Increase efficiency: eSourcing helps you find, contact and evaluate a large number of suppliers. You can also keep the competition going throughout the process without additional manual labour. All in all, it can result in serious cost savings.
- Increase procurement value add: as previously noted, digital tools help reduce manual labour of the procurement team. This way they’ll have more time for refining their other tasks, e.g. bringing more spend under management and increase internal customer satisfaction.
- Transparency: eSourcing typically uses a central portal that is an open playground for buyers and suppliers. It shows professionalism and trust of fair game. Suppliers can keep an eye on the key information, e.g. deadlines, statuses, etc.
- Compliance: eSourcing tools consolidate all relevant documentation, making it easier to track back or necessarily audit in the future. You can also validate suppliers’ compliance with relevant criteria, such as health or safety guidelines right at the beginning. Suppliers’ compliance is one important reason for adopting eSourcing software in the first place.
Should you use regular sourcing or eSourcing?
Using eSourcing may indicate mature spend management but bear in mind, it’s not a guaranteed goldmine and doesn’t work for anyone. It’s biggest benefits are 1) significantly reducing results’ analysis time and 2) keeping all the information in one place.
Depending on the number of suppliers participating in a sourcing event, results analysis can take several hours or even days. In that case, using an eSourcing event might be the best option. However, when things are time-critical and the number of items and suppliers involved are minimal, an email query or eRFI and eRFQ gives good results.
Here’s an overview of your best options based on the number of suppliers, your team’s expertise and other criteria.
4 main sourcing types compared
ProcurementFlow eSourcing and eRFI solution
ProcurementFlow.com allows you to hold both regular sourcing events with an eRFI and eSourcing events with eRFP / eRFQ.
This covers an estimated 85% of sourcing needs across industries. It’s most effective for companies who don’t just manufacture standardised products but have a manufactured-to-order (MTO) or engineered-to-order (ETO) type of production, where the final design is not definitive from the beginning. Quick eRFI allows to scan through the market and get quick responses from multiple suppliers. After suppliers have confirmed their interest and willingness to participate, then it is easy to move forward with eSourcing event and send out a request to participate either on eRFP or eRFQ. Biggest benefits for using eRFP and eRFQ compared to traditional email queries is automated offers comparison - this saves time for buyers.
eSourcing process in ProcurementFlow
6-step eSourcing method
In ProcurementFlow, everything starts with a request which can come to the platform either through a requester portal or just by a plain email sent to firstname.lastname@example.org. Procurement can also add requests by themselves.
Our simple ProcurementFlow 6-step process makes it possible to release an eRFQ in just 10-15 minutes.
- Upload BoM from the request. Define additional fields if needed (project, cost centre, etc). In case there are questions to the requester, they can be sent out directly from the system and requester replies sent by email also land up in ProcurementFlow. This keeps communication and process in sync.
- By using the BoM Grinder, split and bundle requested items into the same material/category groups which can then be assigned to the category responsible. They will receive a notification about their new task.
- Set up either an eRFI or an eSourcing event and select suppliers who should be involved. The suppliers can be added from an SRM or simply by adding their emails and creating new supplier entries on the go.
- Prepare your message and include relevant documents, such as specifications, terms and conditions, drawings etc.
- Start an eSourcing event or an eRFI and wait for responses. In ProcurementFlow, the buyers receive notifications once the suppliers respond. Replies to the suppliers can be sent directly from the system.
- Pick the best suppliers and award them with the contract or simply release a PO. On the background, an automated SRM has captured all the relevant information and added it next to the supplier card, including all the emails that have been exchanged with the supplier.
Our aim in ProcurementFlow has always been to offer the best possible user experience in procurement and reduce the time spent on the process. Time to market is a critical parameter for business, but especially the industries that we work with. We do our best to give our customers the competitive angle of agile procurement.
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