Sourcing

Sourcing

Sourcing includes electronic enquiries, tenders and auctions. Key items are most often purchased using these methods. For these items, there is a market with multiple alternative suppliers who are interchangeable from a purchasing perspective and who compete at a similar level.

Traditionally, a sourcing project consists of the following steps:

Generating a Request for Information (RFI) that is directed to selected, approved suppliers.

It consists of:

• details of the purchasing organisation (contact details and persons)
• a description of the items requested and their quantity
• delivery terms, time data, etc.

Requests are sent to selected suppliers by e-mail.

Suppliers respond with offers. Their responses are not uniformly formatted, so the evaluation has to be done manually, which is time-consuming.

Generating a new enquiry in Promitea can save time:

• data can be taken from existing requests
• the request is made on the basis of existing templates
• item descriptions are transferred from ERP to Promitea

A similar process is followed when selecting a supplier and when setting up the electronic sending of requests for quotations.

After receiving an request for quotation, suppliers enter their quotation in their browser in the Promitea system - this is limited to entering the price per item.

This means that the time required to process the request on the purchasing side and on the supplier side is minimal, it is only a matter of minutes

Promitea will evaluate the offers received automatically.

In simple cases, the contract may be awarded on the basis of the best tender. Otherwise, it is worthwhile to follow an electronic tender (RFQ, Request for Quotation) based on an evaluation of the request.

RFQ-purchasing must perform the following steps:

• shortlist the best suppliers
• add non-monetary criteria (delivery time, maturity, quality criteria) for multi-criteria evaluation of the tender
• to complete other documents requested from the supplier
• Determine the purchasing strategy (cherry-picking vs. full bid, sealed bid, multi-criteria evaluation of bids, price-only evaluation)

We know from experience that the additional cost of an electronic RFQ is well worth it, improving the best bids by up to about 10%. The same applies for evaluation as for RFQs.

Note: It is possible to skip the enquiry phase and proceed directly to the selection procedure only.

The project may be terminated by a selection procedure. However, we recommend moving to an electronic auction.

Here are some more settings:

• further narrowing of the number of suppliers
• adding additional criteria for evaluating tenders
• use of other functions (Cost Break Down, TCO)

Suppliers are invited to the auction. A fixed time point is given for the start of the auction. Suppliers have the possibility to improve their bid online. They can also see the parameters of the best bid so far. This gives them the chance to submit a more interesting bid and win the contract.

The duration of the online auction is usually set at 30 minutes with the possibility of extension.

A typical auction flow is shown in the following screen:

This description refers to the so-called English Reverse Auction (ERA).In addition to this most common method, Promitea offers two other ticker auction methods.

• DRA (Dutch Reverse Auction)
• JRA (Japan Reverse Auction).

Please contact us if you are interested in more details or for advice on how best to strategically combine different forms of auctions.

The auction brings additional price improvements of around 5% on top of the savings made through electronic tendering.

In addition to the processes described above, Promitea offers additional features:

• reports complete monitoring of all steps (log) that have been performed by all users, which can be used to verify that everything has been done according to the company's purchasing rules

Summary:

Sourcing is the most effective method to ensure prices fall, while significantly reducing costs. After one day of training, buyers are able to fully operate the system and achieve an ROI of over 100% in a short period of time.