Why use E-Negotiation, e-Procurement or Strategic Sourcing tools?

February 16th, 2010

The best procurement professionals or knowledge workers already know that their job is the most important job in retail. Or at least it should be.

This author has discussed on many occasions the various benefits to retailers of using e-negotiation tools. Not the least of which is significant profit improvement. Simply put if a retailer were seriously to assign twenty percent of their above the gross margin line spend to these types of tools, they could increase their net earnings by up to 100%. In addition, much of the following would also happen.

1. They would continue to source high quality products.
2. They would continue to have great supplier relationships.
3. They would free up time to do other tasks.
4. They would improve their company’s net earnings by up to 100%.
5. They would support our fragile environment.
6. They would support global food and product safety initiatives.
7. They would have a larger audience of piers to converse with daily.
8. They would have a single source of information about their profession.
9. They would be instantly alerted to product recalls.
10. They would support a traceable supply chain.
11. They would have an endless source of new suppliers to review easily.
12. They would have product specifications at their finger tips.

If you are wondering why most companies are not enjoying these benefits, the following are the objections we to often hear during initial discovery meetings with managers that have not been exposed to e-negotiation tools in the past.

1. I already get the best cost.
2. We’ve done business with this supplier for years.
3. I don’t have product specifications.
4. I don’t have time for this.
5. Switching costs will be too high.
6. I can’t insure the same quality.
7. We need to adhere to certain standards.
8. What about my relationships.

One thing you may notice is that the companies almost always include me or I and almost never we. To much individual emphasis is not a good thing. Healthy skepticism is. If you have an objection that is not listed above, or they pretty much fit your thinking, please review the dozen benefits above and weigh your objections against them.

As always, we look forward to and appreciate your comments

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