E Sourcing – The Ultimate Guide for 2022

E sourcing is often called the procurement of the future. And it is rightly so because this is literally how most procurement professionals are working on their procurement process as of today!

For this article, we are going to do a deep dive into the world of e sourcing. We will define what e sourcing is, what it can do for your company, and how to pick the right procurement software for all your procurement needs.

After reading this article, you should be a master of e sourcing by now and you’re on your way to picking the right procurement software!

E Sourcing – The Future of Procurement?

While e sourcing is now being called the future of procurement, there is still more about the process than meets the eye. No, we are not going to transform e sourcing into some procurement magic formula, but rather we at Procurement Tactics like to explain about e sourcing a little bit more to educate our readers.

E sourcing is pretty much a shortened nickname for electronic sourcing. We all know what sourcing is; it’s the process of searching for the right suppliers of the materials that a company or procurement team needs to buy or procure. We’ve already established that definition thanks to our article on sourcing from our Negotiation Gamechanger Course.

The only difference between traditional sourcing and electronic sourcing is the method and the length of time needed for the actual sourcing to be successful. For traditional sourcing, it’s going to take days, weeks, or even months before the procurement team can find a reliable source for the materials. But with electronic sourcing, the programs use an algorithm that’s been pre-programmed into the sourcing program to help the user in finding the right supplier for the job. Traditional procurement is all about individually checking each supplier, while e sourcing allows the user to take their pick on which supplier has the best products available in a matter of seconds.

Editor's note:

Hi there! My name is Marijn Overvest, I'm the founder of Procurement Tactics.
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The E Sourcing Process

For this section, we are going to check each of the steps of the e sourcing process.

The process is as follows:

1. Request for Information

This is the part where your e sourcing program asks for information from the potential sellers/suppliers. Information is exchanged about the products, such as price, quality, number of stocks available, and others.

2. Tender Invitation

Once information from the supplier is received, the program then presents all data collated to the procurement/sourcing team for discussion. 

3. Evaluate Tender

This is where the sourcing team picks which of the potential suppliers can handle the actual project/procurement. The ones picked will then be sent an invitation for the upcoming auction bidding.

4. eAuction Bidding

This is the part of the process where the suppliers gather and try to win the bidding against the other suppliers. More about E-auctions here

And since we are talking about bidding, there seem to be three types that are consistently being used:

  • Reverse Auction – here, bidders compete to offer the lowest, acceptable price against a pre-set starting price. The auction ends when only one bidder is left with the lowest offered price.
  • Dutch Auction – The start of this auction has prices so low that it would not be acceptable to any bidders. At set intervals, the price is increased marginally for bidders to accept. This cycle continues until there is only one bidder who has accepted the new price. At this point, the auction is over for the other invited suppliers.
  • Japanese Auction – This is a reverse of the Dutch auction, where the buyer’s starting price is so high that all participants accept it. A time frame is set for each bidder to accept the price and once this time has passed, a new price is set, which is usually lower. Again, the bidders are given time to accept the new price. The cycle repeats until there is only one bidder left who has accepted the new lower price at which point the auction is closed.

5. Award Contract

Once the winner is declared after the bidding, the sourcing team then awards the supplier and discusses further the procurement/project.

Software for e sourcing and e-procurement

As mentioned earlier, e sourcing is sourcing done electronically through the use of software, since it obviously saves time and money. As such, we’ve also decided to bring out some of the best software tools available for e-sourcing:

Zycus

Zycus can help buyers reduce costs by 15-45%. Its custom-built RFX templates save time for buyers, by speeding up the process of creating and sending RFXs to suppliers.   Zycus also helps buyers plan for the future with what-if scenarios.  This is important for supplier analysis as it is not based on opinions, which can be biased.

GEP Smart

GEP Smart, which is cloud-based, easily provides real-time data on spending habits by analyzing all the available information. It also offers various RFx tools, with an interface that is simple to use while providing in-depth functionality.

Ivalua

The features of Ivalua’s project management software are known as one of the best in the industry.  Multiple users can input their requirements during the initial phase of RFI, which ensures no details or requirements are forgotten. Ivalua can also be configured to support existing workflows.

Coupa

Coupa offers both e sourcing and e procurement tools to help you from your initial spend analysis to contract management. The spend analysis feature has built-in report templates, but users can also create custom reports easily with its user-friendly interface.

FAQs

What is e sourcing?

E sourcing is the online equivalent of the actual sourcing process.

What is the difference between e sourcing and e procurement?

E sourcing is all about trying to locate the right supplier for the supplies needed while e procurement is all about completing the procurement process.

Why is e sourcing important?

E sourcing is important because you will need to find a reliable supplier for the development of your products.

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