Importance of Local Supplier Awareness
Importance of Local Supplier Awareness
Technology is continuously advancing, and as a result e-procurement solutions such as SourceSuite are coming to the forefront of local strategic sourcing. An efficient purchasing process not only provides resource and time savings for the buying organization, it also emphasizes the benefits of increased vendor outreach. Though today we tend to hear more about the shift to procurement outsourcing by way of international markets, there are significant benefits associated with sourcing locally. Increasing local supplier awareness through e-procurement has become both a solution to drive down purchasing prices as well as an effective method to support regional communities.
Why Target Local Vendor Competition?
From a pure cost cutting standpoint, sourcing from local vendors is advantageous to buyers. Face-to-face meetings offer purchasing departments the opportunity to effectively evaluate potential suppliers which can’t be done at a reasonable price if a vendor is located across the country. From a logistical standpoint, close geographic proximity means shorter supply chains, improved reliability of delivery times and lower transportation costs. Regional vendors also have a better understanding of local markets, and have likely developed a reputation (good or bad) within the area. Randy Barker, Internal Services Manager for the City of Hutto, Texas has seen firsthand the cost-cutting benefits realized through increased local supplier outreach on SourceSuite’s Texas Purchasing Group. “Vendor reach and contact is much greater than before, response has increased and pricing obtained has been consistently below budgeted amounts since joining the Texas Purchasing Group," Barker said.
Socially, promoting local suppliers demonstrates support for the community, resulting in good PR and improved relationships for the buying organization. According to a 2007 study conducted by Civic Economics titled Procurement Matters: The Economic Impact of Local Suppliers, locally-owned vendors generate three times the economic impact in their local community versus national suppliers. Just last month, the City of El Paso, Texas sponsored a cooperative purchasing forum to increase awareness and opportunities for local vendors. The City Mayor, Oscar Leeser, was quoted by Newspaper Tree on his efforts to bring its purchasing revenue back into the community. “I would love to see that money stay here locally and help our economy,” said Leeser said.
Within municipalities and county purchasing organizations, local vendor participation is especially important. From a sales tax standpoint, local suppliers make sales without any tax generated from their county or city purchasing, as the government buying organization would be taxing itself. SourceSuite local government buying organizations often explain that it's in the organizations’ interest that local vendors succeed as part of the overall local economy. The long term effect on the economy in the region is very important. Although some “big box” suppliers have a slight advantage on pricing on commodities, local government across the country are awarding local vendors awarded opportunities and helping the community succeed overall.
The Transition to Online Supplier Notification
With the introduction of e-procurement systems, the manual notification process has transitioned to an instant, online process. Through the use of a software-as-a-service procurement platform, purchasing departments can increase local awareness by posting open bid opportunities in a centralized, cloud based location, reaching thousands of suppliers. More specifically, e-procurement providers like SourceSuite offer the ability for buying organizations to implement invitational bidding. This allows the organization to select a specific group of suppliers to be contacted about an open solicitation. Pre-qualifications for notification can be automated based on vendor characteristics, including geographic location and specialization. On average, local suppliers using SourceSuite Purchasing Groups make up over 50 percent of each bid system’s total vendor database. SourceSuite’s MITN Purchasing Group, a Michigan regional bid system for local agencies, maintains an even higher number of local vendors for its 122 local government buying organizations, at 65 percent.
The e-procurement onboarding process can assist with initial local outreach efforts. SourceSuite offers its clients the opportunity to alert local suppliers of its joining of the regional purchasing group through vendor mailings, a press release, and the publishing of a link to the organization’s website.
The Future of Procurement
Increasing local supplier awareness and competition is one way that cloud based procurement provides significant cost savings for organizations, improving bottom line and aiding the local economy. With technical advancements continuing to evolve at a rapid rate, configurable e-procurement solutions are the future of local sourcing success. Regional supplier outreach is just one of the many solutions offered by SourceSuite to streamline the purchasing process.
Mike Nolan | sourcesuite.com