Wednesday, 18 March 2015

eSourcing4U: how to set up an eSourcing centre of excellence

Before their unfortunate demise, Phones4U were a wonderful client of our eSourcing and opportunity assessment tools.  Their procurement team was lead by the experienced Sandip Modi who had implemented a multitude of eSourcing programmes in his previous roles.  We were privileged to have been chosen as the eSourcing provider at Phones4U due to our on-demand, affordable pricing, consumerised ease of use and hands-on support.

Sandip had a very clear vision of how the eSourcing programme could be rolled out across Phones4U.  The strategy was to create an eSourcing centre of excellence whereby the individual Category Managers would package up their procurement projects to feed into the eSourcing team to conduct the online negotiation.   Once the eSourcing event was complete, the results would be handed back to the Category Manager to implement.

This is a different strategy to how we’ve seen other organisations adopt eSourcing, where many look to give each Category Manager or procurement person the ability to run their own eSourcing events.

There are of course merits and drawbacks to each approach.

Typical approach

Typically we’ve seen that each member of the central procurement team would be given full remit to run their own eSourcing events.  The licence holders could be a mix of Category Managers, Procurement Managers, Supplier Relationship Managers, Buyers, Analysts, Marketing Managers, Legal, you name it.   As well as running the eSourcing events, they would be heavily involved in all their other procurement duties from category strategy, purchase-to-pay, supplier management, evaluation and implementation, contract management and so on.  

The advantage of giving them direct access to the eSourcing tool is that it can empower the individual and raise their profile within the organisation; we’ve seen many a CEO of FTSE 500 organisations take an active interest in procurement’s eSourcing events.  The users gain additional expertise that can be called upon when needed, whether in their current role or the next.  Plus it’s a low cost way of training staff in best practice, especially if you ask your eSourcing provider to deliver this as part of their licence fee.  Lastly it means the individual has full remit across the entire procurement exercise and can use their in-depth knowledge to optimally conduct the eSourcing event without having to transfer their work to another person.

However the drawbacks do become obvious.  Since the eSourcing licence holders are so heavily involved in the myriad of other procurement duties, they quickly run out of time and capacity to administer the eSourcing events, even though the approach saves them time in the long run.  Fire-fighting becomes the order of play as opposed to strategic planning.  Fewer eSourcing opportunities arise, adoption reduces and before long the eSourcing tool is playing second-fiddle to the previous way of working.

Secondly since users dip into the tool on an ad hoc basis, they have little opportunity to become experts on the eSourcing process: be it the software, the guidance notes, the strategy or even support.  This can again inhibit the flow of the events and dry up the eSourcing pipeline, as it becomes a barrier instead of an enabler.

Recently we were talking with a FTSE 100 organisation that had purchased 40 user licences of an eSourcing tool (sadly not ours as yet!).  A year into that contract, only 1 of the 40 users regularly ran eSourcing events.  One!  I think that aptly sums up the downside of this approach.

Phones4U approach

By separating the roles of the eSourcing Managers from the rest of central procurement, it created a clear expectation that the procurement exercise would be conducted via an eSourcing event, unless there were valid exceptions.  The eSourcing Managers would proactively knock on the door of the Category Managers to ask for new projects, as this was their deliverable.  It greatly helped with adoption of the eSourcing process, and so it was no surprise that within months of our tool being taken up, all of the Category Managers were feeding their projects into it. 

The Category Managers could continue to spend 100% of their time on the strategic aspects of the procurement, such as the opportunity assessment, spend analysis, stakeholder engagement, market information, creating robust tender documentation, supplier evaluation and so on.   

The eSourcing Managers would spend 100% of their time on becoming experts with the tool, perfecting the eSourcing rules and guidelines, scoping the event strategy, managing the eSourcing events and conducting any reverse auctions.
The eSourcing team would be unencumbered by the internal politics and getting bogged down in the category strategy, project management, supplier award and implementation procedures that typically reduce the flow rate, i.e. adoption, of eSourcing.  

By doing this, it was quite realistic that a single eSourcing Manager could handle over a dozen full-scale eSourcing events a month.  We’ve heard of several FTSE 100 companies that run fewer events than this across their entire team of 20+ eSourcing users!

Naturally there are some drawbacks.  The Category Managers are responsible for the procurement yet can feel peripheral to the more enjoyable aspects of using an eSourcing tool and running reverse auctions.   However that can be mitigated by adding the Category Managers as key viewers of the eSourcing events and holding the reverse auction days with everyone present.  This would also help promote the communication between the eSourcing team and the Category Managers on important tasks like supplier Q & A.
 
Furthermore, for an organisation to justify employing people who are solely dedicated to running eSourcing events, you must have confidence in both the eSourcing process and its suitability in the organisation.  This is where an experienced procurement professional like Sandip had seen time and again that eSourcing is a vital tool to help procurement deliver optimal results.  So instead of spending a fortune on say 40 eSourcing licences, you instead employ an eSourcing expert and a single licence to channel your events through the centre of excellence.

This may well mean we as Market Dojo only sell one or two licences to a FTSE organisation instead of 40, but ultimately we want you to succeed with your eSourcing initiative rather than profit from your struggles – and we promise you won’t find many providers that share that view!

That said, once the centre of excellence was underway at Phones4U, they had Category Managers knocking on their door asking to run the next project themselves, with the eSourcing team in support.  That's the perfect next step for rolling out the process to the wider community.

Now we’ve shared our views, which approach would you take in your organisation and why?


About: Market Dojo provides accessible eSourcing software. Find out more at www.marketdojo.com.

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