THE BUSINESS REVIEW FOR PROCUREMENT LEADERS
Optimised e-sourcing is being used by companies such as Procter & Gamble, Motorola and HJ Heinz to wring greater value out of e-auction or RFQ-based tendering.
The main problem with standard e-auctions is that they invite bids on pre-determined “lots” of items. This is the buyer’s view of what he or she wants in terms of specification, etc. All the supplier can do is indicate the best price they can offer against each item. This doesn’t necessarily deliver the lowest overall cost and is therefore “sub-optimal”.
Optimised e-sourcing, by contrast, allows suppliers to bid “expressively” – indicate how they could be more competitive if the parameters were varied. Comparing different offerings of this kind is highly complex, and software that uses advanced mathematics is required to pick the optimum combination of supply options.
According to Forrester Research, there are currently two technology companies that offer sophisticated bid optimisation techniques: CombineNet and Emptoris.
The extra savings reported by companies using optimised e-sourcing are typically 5-25 per cent. It works particularly well, say experts, in large spend categories, those with extended items lists, and where usage is widely distributed.
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