Delegation through e-Marketplaces

The concept of "free markets" – that is, operating in an environment free of intervention – is the ideal route envisioned by business leaders worldwide. Realistically, however, private and government enterprises embark on procedures for appropriate check and balance to ensure transactions are done in the most transparent manner. Contract evaluations begin from evaluation of requisitions, supplier selection via outlined accreditation procedures, method of negotiation and concessions, awarding of contracts, and monitoring supplier performance toward payment progression. In effect, purchasing managers do more than merely negotiate contracts given their indirect involvement in related areas in production, engineering, inventory planning and monitoring, quality assurance and financials, among others. These tasks are necessary to avoid potential areas of conflict, especially in spotting flaws internally or externally, when a counter party to a transaction "underperform" based on identified terms and conditions.

Would awarding criteria rest on lowest price and compensate for all other variables that go with reduced offers? Or, are there alternative "value-added considerations" that may be considered when awarding at prices higher than market? These are just some of the gray areas that need to be evaluated to ensure that negotiated deals have been fair for the participating parties concerned.

Most enterprises have embarked on matrices to properly identify procedures that would cater to pre-defined objectives and create effective delegation in the process. For example, people resources from production get indirectly involved in the accreditation route, to help justify awarding measures. Negotiation on the merits of balancing budgets relative to price and volume are tossed to the purchasing team, given their proficiency on the matter. Meanwhile, those comprising compliance are there to cross-check efficient implementation. Once the transaction loop is consummated as soon as full payment is made, an enterprise’s designated auditing team can readily re-check procedures that have been carried out for proper flaw detection, and rectify these the soonest time possible. Yet, given an increasingly competitive business environment, however, not all enterprises could afford hiring too many resources to specialize in these functions. Some resort to outsourcing their respective competencies to agencies that have established a niche to ensure that deals are done appropriately within an acceptable timeframe.

Let’s first cover accreditation. How do enterprises level the playing field by soliciting bids on an "apples-to-apples" basis? What if there are no parallel counterparts available to match X company’s 20 years of existence in the business? Does this bode well for emerging players who are willing to prove themselves?

When investing in equities, investors get to know more about the companies floating part of their capital structure to the public via prospectuses. Requirements for disclosure have been strongly underscored as part of world markets’ improved corporate governance procedures through this medium, to make sure investors fully realize prospective risks and merits before buying into any stock. Within purchasing, not all enterprises have all the information they need. At most, company descriptions are sought, alongside background of owners and plant visits, while some weed through outdated financial statements that do not reflect up-to-date details on the firms they’re working with.

e-Marketplaces simplify evaluation functions by virtue of market intelligence features and cross-rating from other participants in an exchange. In fact, firms that have taken an e-Marketplace route have become more adept and share the clerical load tied to purchasing and supply chain management. Scorecard features, for example, allow enterprises to cross-examine internal systems of accreditation by browsing through other companies’ objective performance rankings. Since exchanges complement (and not replace) internal evaluations, information flow becomes faster as procedures are streamlined.

Overall, e-Marketplaces have effectively brought multiplier results to an enterprise’s growth objective. More can be done when decision-makers are able to share the load via a neutral-centric exchange. More than tangibles of savings and/or cost-avoidance, time gaps in making a decision is handled well, especially when volatile market conditions exist.

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Grace Crisostomo-Cerdenia is the general manager of SourcePilipinas.com. For comments or queries, e-mail her at [email protected].