Evaluate whether the spend is commercially attractive to the target supply base. Do the lanes represent shipments that are regular and predictable? Logistics service providers may not be willing to offer long-term contractual rates for lanes that are sporadic and unpredictable. Also, explore opportunities to leverage spend from multiple business units. Larger events allow logistics service providers or carriers to compete aggressively on price by taking advantage of economies of scale as well as backhaul opportunities. Evaluate market timing and inquire if this is the right time to source this category.

Ensure that spend targeted for e-sourcing is contractually available. Understand current contractual terms regarding contract expiration, rate-adjustment clause, contract-termination clause, etc. Understand the commercial consequences of contract termination. If multiple business units are involved, make sure that you take into account each business unit's contract.

Understand the competitiveness of the target supply base. How many carriers or service providers are capable of addressing your freight needs? Are there service requirements that limit the potential supply base? Have supply and demand situations changed in the target market and can you leverage these changes to create a competitive market? Look beyond your incumbents but prequalify nonincumbents to ensure that they meet your minimum service requirements.

Availability of good data is a prerequisite to a good sourcing event. Data requirements vary by category. Determine data fields that you "must" have and data fields that are "good to have" before embarking on a data-collection mission. Outcome of competitive negotiations in transportation services to a large extent will depend on the quality of the information you share with bidders. Typical data requirement for transportation projects include information on origin/destinations, shipment volume, historic pricing and service requirements. Collect data with a focus on your future requirements and standardize requirements across business units to the extent possible.

Recognize the capabilities and limitations of the sourcing platform and formulate a strategy that is compatible with the technology. Evaluate whether the category lends itself to sourcing using the available sourcing platform. The sourcing process should detail all milestones and allow sufficient time for suppliers to review the requirements and get responses to their questions.

Commitment from stakeholders is important to the successful execution of an e-sourcing project. Spend owners should be committed to the process and consistent about messaging about the project. It should be made clear to suppliers that this is the only process by which potential suppliers could bid for the business. Any proposal by suppliers to circumvent the process should be discouraged.

Source: John Thomas, category manager for logistics at Ariba