Careful selection and management of new sources of supply will sustain your e-negotiation process for the long term.

August 19th, 2009

A successful e-negotiation strategy over the long term is a growing high quality global supplier database.

A successful e-negotiation strategy over the long term is a growing high quality global supplier database.

This author believes that if you have a limited source of new suppliers, then including new blood every time you run a new event will be incredibly difficult. Resultantly your process by default ends up as just a new way to continue to award business to the same suppliers. This process may yield some productivity increases initially, but over time meaningful price compression will be difficult if not impossible.

Although the numbers quoted vary slightly by solution provider at somewhere between six and ten as to the number of suppliers required to drive optimum e-negotiation results, these data suggest that attaining sustainable results from the e-negotiation process has a direct correlation to the number of new suppliers available and willing to participate.

Let?s assume that your existing solutions provider has only a limited source of new suppliers. As an example, they can only find six suppliers to invite to an e-negotiation event. Your customer services team using their best sales skills can probably convince most if not all of these suppliers to participate. This may be fine the first time around. Although this author believes there are better sustainability strategy even given this scenario.

In the future, the suppliers that finished first or second or incumbents that were displaced may agree to participate again, but with a smaller number of suppliers and no new blood it will make the rerun of this auction less successful.

Lacking a robust source of new suppliers, and in the above case we only had a total of six available how can companies create a sustainable process.

The lack of a robust global supplier database limits future price compression at a minimum. It may also have a negative impact on quality, process and service. Particularly if history suggests a minimum of six to ten suppliers in order to drive optimum results…

Make sure to ask your e-negotiation solutions provider how many suppliers they have in their supplier database and if you can have regular access, it will determine your future success.

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