E-Sourcing

Modern companies are constrained by their sourcing decisions. According to Pierson and Shih, these decisions are reflected in the organization’s capabilities, which are embodied in its processes and routines for getting work done.

Companies use various strategies and attempts to utilize strategy sourcing as a vehicle to optimize efficiency and lower costs. For example, offshoring is the practice of basing some of a company's processes or services overseas. It fits well with operations strategies that emphasize low costs. However, offshore sources can be publicly detrimental, because it implies that the company does not value its relationship with the community.

Technology is becoming an increasing important component in a company’s macroeconomic environment. Pierson and Shih stress the importance of technology that “increases the speed and lowers the cost of transporting physical goods and information.” For example, the Internet enables doctors in New Zealand to read medical X-rays taken in the United States, which makes medical opinions a tradable commodity. Additionally, most medical transcripts have been outsourced to India and the Philippines, as digitized voice recordings and he resulting text transcriptions are readily transportable.

To me, it seems that in this era dominated rapidly changing technology, the concept of “e-sources” introduces the potential to streamline many significant sourcing strategies. In fact, e-sourcing is emerging as one of the quickest ways for companies to boost their bottom lines in an increasingly competitive economy. It involves electronic cataloging, online auctioning, or virtual buying communities.

E-sourcing solutions create value by:

1)    Lowering spending costs

2)    Streamlining processes

3)    Enabling new business development

In fact, some companies have developed an “e-supply chain:”

This differs from a regular supply chain, because it allows for easy connections on a global basis, the low cost of deployment and low cost of use for customers, customer interactivity, rich multimedia environment, and an extensive information source. In fact, customer participation in the supply chain will only to help it to run more smoothly, as they are more invested in the successful running of the chain as a whole.

Further, E-sourcing involves a range of degrees of interaction. Specifically, static product cataloging content is static, and has to be updated on a regular basis by a vendor. It involves a predetermined price, agreed upon by both the seller and buyer. Conversely, dynamic product cataloging involves cataloging content from multiple vendors, and is generated at the same moment as the user accesses the catalog. Here, the price is dependent of the availability of the product/service. More specifically:

Successful utilization of e-sourcing requires companies to have a strong understanding of the nature of their company, and which degree of interaction will work best with the size and future of their organization.

However, e-sourcing comes with its own set of challenges. Specifically, if companies fail to evaluate the likely impact of implementing an e-source program, they will not be able to manage the implementation process properly. Companies should consider carefully the total scope of their buy and long-term profitability, not just what can be procured cheaply in the immediate term.

At this juncture, it seems important to not overlook the political aspect of strategic sourcing. E-sourcing facilitates the easy interaction of companies across states and countries. Similar to outsourcing, it allows organizations to increase their flexibility and responsiveness to changing markets. Effectively using technology will definitely increase a companies competitiveness. However, I wonder how a company can successfully transition to an age of technology and e-sourcing, without loosing touch with customers and maintaining personal relationships with clients.

References:

http://www.boozallen.com/media/file/80568.pdf

http://www.intesource.com/What-is-e-sourcing.aspx