Product design, R&D, IT, marketing, logistics providers, suppliers… the list can go on. In one way or another, Procurement touches them all. As a function spanning multiple activities and communication points, there are many opportunities for risk to enter the procurement process.
An e-sourcing solution helps mitigate these risks by providing procurement leaders with a central platform for managing supplier relationships, communicating with internal and external customers, and obtaining a high-level overview of all the steps in the process.
Here’s how an e-sourcing solution reduces both internal and external procurement risks:
Risks over which your organization has direct control.
Whether you’ve strategically chosen a single source supplier or you’ve been forced into a sole supplier contract by the market, it can leave the organization vulnerable should there be quality and delivery issues, supplier-side financial problems or factory shutdowns for reasons beyond your control. An e-sourcing solution gives procurement leaders the ability to monitor supplier selection and dependency levels. By keeping a close eye on suppliers, Procurement can maintain a certain amount of flexibility and react more quickly to changing situations.
In addition to keeping track of your suppliers, you also need to the buyer side during supplier selection. This is especially important in terms of avoiding procurement corruption and fraud. Monitoring buyer-supplier interactions with an e-sourcing tool works as a strong preventative measure and should be best practice in all procurement departments.
Procurement risk doesn’t just come from within Procurement; it can stem from any function within an organization, and it’s most frequently caused by lack of communication. E-sourcing tools mitigate this risk by streamlining the communication process and giving internal stakeholders a portal where they can view and manage the procurement process.
Process inefficiencies are one of the inherent risks within the procurement process. For example, if your procurement process still relies on outdated technology, like email or snail mail, your organization is exposed to risk due to limited process visibility or the possibility of losing important files. An e-sourcing platform helps securely protect and store important information. Plus, a more efficient sourcing process means a decreased lead time and a boost to the bottom line.
Risks over which your organization has little to no control.
Changes in consumption and consumer demand
Procurement is one of the primary players responsible for a supply chain that’s able to respond to demands from the end consumer. For example, if demand for one of your products suddenly increases, an e-sourcing tool can allow you to quickly communicate with suppliers to increase orders. Additionally, an e-sourcing platform with strong SRM capabilities allows for greater supplier-enabled innovation, so you can stay one step ahead of your competitors when it comes to meeting consumers’ needs.
Most organizations are never 100% immune from risk caused by macroenvironmental factors like political unrest, natural disasters, or trade restrictions. For example, your organization may be exposed to increased risk when sourcing from countries where corruption or child labor is common or there’s frequent civil unrest or flooding.
While these instances are out of your control and, in some cases, unexpected, an e-sourcing solution can help in multiple ways. First, it allows flexibility should a core supplier be out of commision. If you’ve qualified a back-up supplier and onboarded them onto your e-sourcing platform, you’ll be able to respond to the crisis much more quickly. Secondly, it creates security and mitigates risk by providing a transparent, auditable record of each step in the procurement process. Additionally, an e-sourcing solution allows you to use sourcing techniques which add an extra layer of protection, like sealed bidding.
While risk can never fully be eliminated, an e-sourcing solution allows organizations to become proactive and effectively react in the face of risk. By adding transparency, communication, security, and the ability to analyze, e-sourcing tools help mitigate risk throughout the procurement process.
Interested in seeing how an e-sourcing tool would work at your organization? Start a DeltaBid trial.