For any new system roll-out, user acceptance is always the key. When it comes to eSourcing system, the supplier adoption is critical. Here are some tips that would help you achieve supplier adoption success:
1. Roll-out in phases
Plan the roll-out in phases. You may want to start one of your teams or tier-1 suppliers first to gain some initial success and momentum.
Communication is always the key to success in implementing changes. Make sure the suppliers fully understand the time line, the objective and the benefits the eSourcing system could bring to the table. Communication is not a one time thing. Consistency and continuity need to be maintained.
3. Effective support
To achieve a smooth and efficient transition, handholding with the suppliers is crucial. You need to provide various channels to assist suppliers to adopt the system. Helpdesk, email support, interactive self-training demo, periodic webinars and online user-guidelines are the most popular tools that you should consider.
To find out more how Tactica can help you roll-out eSourcing system, request a demo today.
Many enterprises adopt a two-envelope approach in tendering: the technical proposal and the commercial proposal to be evaluated by different teams to ensure a fair evaluation of the proposal. The technical proposal would be evaluated purely on its technical merits and its ability to meet the requirements without being affected by the commercial proposal. Tactica eTendering system has embedded this two-envelope process: – Suppliers submit technical proposals and submit bidding prices using simple bidding page or complex Excel templates. – Bidding prices are not visible to the buyer until the tender is closed and the buyer has to click to unveil them. The system will generate bidding price comparison report for the buyer – Internal end users (Technical viewers) can only read the technical proposals and do the scoring without the right to see the prices. – With user-definable price-to-technical weighting (e.g. 60:40), the system calculates the combined scores of the suppliers and their ranks and generates summary report.
In Reverse Auction, there is normally a Bid Decrement policy. Bid Decrement is the MINIMUM difference between the bidder's new bidding price and previous bidding price. The bidder can always lower their bids by larger amount if desired. The Bid Decrement policy can be applied to bidder’s own bid or applied to the current best bid.
If the Bid Decrement is too small, the auction event may become very long as the bidding price will drop very slowly. If too large, there may be savings left on the table. According to our best practice, the bid decrement is generally between 0.25% and 0.5% of the historical price or market price. For example, if the market price of item A is $1000, the bid decrement amount is between $1000 *0.25% and $1000 *0.5%, i.e $2.5 to $5. You can select a user-friendly value within this range.
“Total Best Value” is the ideal result of strategic sourcing which does not necessarily focus on the lowest price. If a buyer fails to weigh non-price factors carefully, both suppliers and end users will soon jump to the conclusion that the purchasing department is interested only in awarding business to the lowest bidder. A good sourcing process should include quality and performance factors, so buyers aren’t making price-only decisions and are predictably delivering an optimal mix of global suppliers, products and services.
A short 5-10 minute phone call to key suppliers is a great way to gain full support. It’s important to make suppliers feel comfortable in the process. Listed below are some key discussion points for eliminating any supplier hesitation in participating in an event. This information should be reiterated in the Event Invitation Letter included with the event.
1. Briefly communicate company background; event goals; potential value of deal; and event timing
2. Describe the Process
• The sourcing process remains the same but is digitized through Tactica’s eSourcing Tool.
• Cost data will be collected via a online bidding event, and will then be incorporated into a best value decision.
• Suppliers need to register and are recommended to take the interactive self-paced online demo on Tactica.
• Suppliers receive access to the event posted by the buyer. Only qualified suppliers are asked to participate.
• Suppliers who do not register will not be able to participate.
3. Reasons for the new process
• Improves the efficiency of the sourcing process – online Q&A, central data repository, evaluation and bidding tools.
• Enhances communication and collaboration.
4. Participation Guidelines
• Suppliers are chosen to participate based on their ability to meet a common set of service and quality standards.
• Only a selected group of qualified vendors will be invited to participate in the actual bid event.
5. Supplier Benefits
• By competing in an open bid environment suppliers will understand why they won or lost, and where they stand in relationship to their competition. Note that suppliers will not see who they are competing against for the business – confidentiality is maintained throughout the process.
• Contracts can be awarded much more quickly.
When deploying eSourcing system, educate your suppliers on the potential benefits and how best to use your new system. Inform your suppliers of the rules of engagement for online reverse auction, your selection criteria, and award strategy. The more comfortable suppliers feel about the eSourcing system and process, the more competitive and realistic their offers would be.
Before running the e-Auction , remember to ask your suppliers to complete a detailed pre-bid RFP response. This guarantees that suppliers fully understand your requirements. It also serves as an early indication of the auction results.
When you start transforming your supply management, pick those high-impact, low-friction areas like strategic sourcing which could deliver measurable savings without the need of multiple functions. This allows you to show the value of your initiative and fund additional improvement programs.
To determine whether it is suitable to run a reverse auction on your spend categories, ask yourself four questions: Can you define clear specifications for the category? Is there a competitive supplier pool? Is the spending or unit volume significant enough to attract suppliers? Are you prepared to change suppliers based upon the auction results? If yes, then auction it.
When negotiating new business, be sure to give “credit” to preferred suppliers with good performance history. This will motivate them to continue to keep up the good work and will signal that new suppliers will need to work harder to win such preferred status.
For indirect procurement, we do not make purchase decision on prices alone. We always consider both the technical score and commercial score of each supplier. But, how do you accommodate that in an reverse auction?
The answer is Scoring Auction. Before the auction begins, you can set price to non-price ratio (e.g. 70:30) and assign technical (i.e. non-price) score for each bidder. The weighted score is calculated based on the formula shown. When the bidding starts, the system will automatically calculate each bidder's weighted score and display their score rank in real time. Suppliers reduce their prices in order to fight for a better rank.
Our customers are using scoring auction a lot in purchasing marketing services, logistics services, machinery, construction and engineering services. For details on those showcases, please visit: Tactica eSourcing Case Studies
The advantages of Reverse Auction to suppliers:
When competing with others based on pricing, suppliers can collect valuable market intelligence and understand their own competitiveness
Obtain real time market feedback
Get more business opportunities because buyers can now invite more suppliers to bid
Reduce time on face-to-face price negotiation, lowering the cost of sales
Negotiation cycle shortened and thus expediting the purchasing and award process
By negotiation through a third party platform, process transparency is thus increased