Sourcing in 2020: a benchmark of manufacturing companies’ source-to-contract and electronic reverse auction practices

Abstract: Abstract Digital sourcing platforms were invented in the last decade of the 20th century and brought tools such as electronic reverse auctions (eRA) into the hands of purchasing professionals. The Trelleborg Group initiated a project to implement such a digital sourcing platform last year but the research in the field is outdated. Focus was directed to the choice of sourcing approach, i.e. either using digital sourcing processes or traditional sourcing processes, and the configuration of successful eRAs. A cross-case study was performed with five global manufacturing companies and one large construction company to update the theory. It was important that the study included manufacturing companies to increase the level of transferability between the cross-case and the Trelleborg Group. Because in parallel to the cross-case study an internal case study was performed at Trelleborg Group in the business unit Engineered Coated Fabrics. The findings in the cross-case study were contextualised and applied to the Trelleborg Group. Purpose The purpose of this research project is to develop an up-to-date framework for Trelleborg Group in regards to how they should choose among their available sourcing approaches as well as how to successfully configure their electronic reverse auctions. Conclusion The generalised findings for the study are divided into two separate parts. In the first part a decision model for choosing among available sourcing approaches is presented. It highlights the barriers preventing a purchaser from conducting competitive supply market exercises and if no barriers exist it states that digital sourcing process will always be preferred over traditional sourcing events. An eRA should always be preceded by an electronic RFQ (eRFQ) and fulfill three criterias: minimum of three suppliers, supplier bids must be comparable and not inviting or hurting strategic partnerships. The second part entails the configuration elements that affect the success of an eRA. These are classified into three tiers, with different underlying goals to each tier. The first tier is the governance structure and the underlying goal is to ensure eRA recurrence and healthy supplier relationships. The second tier is the optimisation of the competitive environment with the goal to leverage the competitive environment and enable sustained price reductions. The third tier is the strategic alignment of the eRA program with the goal to integrate the eRA process with the overall sourcing process. Contribution This thesis has been a complete elaboration between the two authors. Each author has been involved in every part of the process and contributed equally.