Archive for the ‘B2b Reverse Auction’ Category

In e-procurement, there are no Sacred Cows!

Friday, February 1st, 2013

Today’s post is from Debbie Wilcox Vice President of Marketing and Professional Services at SafeSourcing.

It wasn’t long ago that when you read an article or listened to a seminar about reverse-auctions as a procurement tool, the leader would indicate that the best items for this sourcing strategy were simple, straight-forward, commodity type products. That is no longer the case; there is no product or service that is off-limits when utilizing e-procurement and reverse-auction tools.

Much of the successful outcome of complex or service-related sourcing projects is determined by how the event is structured. Is there enough detail within the lotting structure of an auction to cover a broad range of items and service offerings? Are service level requirements and expectations spelled out and defined effectively? Are top tier national suppliers invited to participate as well as regional and local alternatives?  Are you collecting enough data to make a decision based on quality, terms and other value added services as well as overall price competitiveness?

SafeSourcing has recently conducted very successful auction events for many service related categories including professional legal services, temporary labor, security guards and janitorial cleaning services to name a few. All resulted in high double-digit savings percentages for our customers. Did we get initial push back from internal stakeholders? Yes, in many cases we did. But once we laid out the strategy, addressed concerns and completed the sourcing events, the savings results from quality supplier options equated to project success.

If you are looking for new sourcing opportunities and new categories for savings, reverse auctions can be used for procurement of all product and category types, including those that have traditionally been viewed as highly complex.

Why not reach out to a SafeSourcing Customer Services representative in order to learn more.

We look forward to and appreciate your comments.


Are you anti Social Networks? Be careful how you define yourself.

Wednesday, January 9th, 2013

For those of you that do not think that social networks have a place in the business world or in procurement in general, just remember that they are the tool of choice of the younger generations. That would be those that are coming after those of us with a few with more than a few years of experience. By the way, that includes the use of these tools in their work lives.

The blogosphere is crowed with any number of opinions on any number of subjects. As a medium it has evolved from on line dictionaries in the early to mid 1990’s. Blogs are a form of Social Media just as Wiki’s are. Forums have been around for thousands of years, it is only natural that as technology evolved to include more people that offerings such as Facebook would evolve to include many of these tool types. It is only a matter of time before the evolve to help us solve complex problems in all areas of life and that include procurement.

If you visit the SafeSourcing Sourcebook™ and become a member you can host forums on anything you wish to learn about in the procurement space and post that forum to thousands of other members. It may be something as simple as a question like this. Can anyone tell me how they are presently planning to source paper products based on the rumors of an up pulp market? How might you plan on mitigating price increases?

Job specific social communities are not the way of the future, they are here today. Visit Sourcebook™ and create your forum.

We look forward to and appreciate your comments.

When is a specification more than just a specification?

Wednesday, October 31st, 2012

A statement of work or SOW is another document that should be added to e-sourcing events in order to bring clarity to what is included in a bid. In essence the document lists the work activities to be agreed upon, the deliverables and a timeframe in which a supplier will be expected to perform against. The SOW requires agreement as do other documents prior to a supplier being allowed to place bids.  

Areas that are normally included in a Statement of work might include but are not limited to the following.

1. The actual scope of work to be completed
2. The time period in which it is to be performed
3. The location of work.
4. A list of the detailed deliverables
5. A Schedule of all deliverables
6. A standards adherence document.
7. Acceptance criteria
8. Other requirements.
9. Change request definition.

Make sure that when you are running e-sourcing events that you make sure that all of the above information is considered and captured before you approve of an event being passed on for suppliers to review. And then be prepared to make adjustments.

If you’d like to learn more about categories that absolutely require an SOW, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

Twenty steps to running high quality e-procurement events.

Tuesday, February 21st, 2012

E-Procurement events have been around since the late 1990?s and are commonly referred to as reverse auctions or events. These sessions can from time to time also run as forward auctions in order to reduce over stock conditions and reduce shrink. Regardless of the naming convention used there are certain rules which if followed will create higher quality events for the retailer and the supplier? This will result in creating better savings opportunities or cost avoidance in a tough market. The importance of focusing on a clear process will increase event participation. This focus on quality will be recognized by your existing trading partners and potential new sources of supply, and will keep them coming back in the future to compete fairly for your business.

1. Executive sponsorship is mandatory
???? a.?This is required at the CEO, CFO, CPO, CLO or head of the supply chain.
2.?Get the entire buying organization together for a kickoff session.
3.?Provide an over view of what you are going to do and the impact it can have on the company. Use company financial models.
4.?Discuss and agree on success criteria.
5.?Every event is not a homerun. Singles and doubles score runs.
6.?Create a fun environment.
7.?Consider prizes for the most creative use of an auction.
8.?Use scorecards by department with percent of savings.
9.?Discuss the meaning and importance of corporate aggregation.
10.?Hand out E-RFX templates to gather existing product specifications.
11.?Put a time requirement on data collection.
12.?Gather an accurate list of your present suppliers.
13.?Work with your sourcing company to identify a top 100 list of events.
14.?Calendar the events.
15.?Prioritize by dollar value, date and strategic value.
16.?Conduct department level discovery meetings of 30 minutes to an hour.
17.?Investigate existing contract language.
18.?Look for auto renewal (evergreen) language roadblocks.
19.?Determine alternate sources of supply with your sourcing company.
20.?Develop an E-RFX rules and instruction template and post with each event.

Although these steps are not all encompassing, they provide a format for getting started that offers the best opportunity for reduction in cost of goods, expenses and improvement in corporate earnings. Be sure to combine this with a business partner that knows your business.
We look forward to and appreciate your comments.

Strategic Sourcing Techniques Using Reverse Auctions

Thursday, February 2nd, 2012

Today’s post is by Ryan Melowic Director of Customer Services at SafeSourcing.

Strategic sourcing is critical to any business owner or buyer in today’s market.  Strategic sourcing techniques that focus on getting the best deal possible when purchasing products or services should be a part of any organizations procurement strategy.  By having suppliers competing for your business it allows an organization to discover the best terms that their particular market has to offer.  Most small to mid-sized businesses don’t have the resources or connections available to discover vendors outside of their local market place. By utilizing strategic sourcing tools like reverse auctions, your organization can more effectively control costs, achieve better terms, increase value from existing purchases all while maximizing efficiencies of your purchasing process.

Reverse auctions as a sourcing strategy can have an incredible influence on an organization’s cost of operating their business which speaks directly to the bottom line.  Taking into consideration even a small cost savings on products or services can have a value increase that can significantly impact the bottom line.  Studies show that just saving 7% – 10% on procurement costs can have a direct increase on an organizations profit margin and in some cases seeing a 30% – 50% increase.  Strategic sourcing techniques using reverse auctions can be a great strategy for increasing profit margins.

The strategic sourcing technique of using reverse auctions is just one sourcing strategy that allows organizations to feel confident that they are getting the best deal possible when purchasing products and services.  Historically reserved for large corporations and multimillion dollar purchases, today’s newer reverse auction solutions, such as the one offered by SafeSourcing, allows this technique to be available to small and mid-sized businesses and for purchases of all sizes.  Representing capitalism at its best,  reverse auctions a re a strategic sourcing tool that brings competition together to have an opportunity to bid for business they may not have otherwise gotten while at the same time putting the purchasing power of an organization in a platform where these vendors compete aggressively in a real-time environment for their business.

For more information on Strategic Sourcing Techniques Using Reverse Auctions, please contact a SafeSourcing Customer Service Representative. 

We look forward to your comments.

Reverse auctions will drive consistent results over time.

Thursday, December 22nd, 2011

To use a baseball analogy, you may not get the grand slams and homeruns typically seen during first year implementations of reverse auctions but with proper planning and execution you will at a minimum continue to beat market pricing. Think of it as singles, doubles and triples for the at bats after you have hit a home run.

In order for this to happen we have to understand how to conduct successful auctions in today?s business world and it is not the same old same old where the low bid always wins. The number one job of any business is to drive bottom line profitability. Because of this, companies that win your business during an E-RFX process need to make the business they have just won as profitable as possible. They may take your business during an auction as a loss leader in the hopes of selling you more volume at a lower margin or selling other products to you. They may take your business at a loss in a down economy to drive cash flow in order to just keep going. They also will take actions during the next year or two to drive their internal costs down. All of these circumstances and more mean that there is potentially more compression on the table the next time around. The why is actually pretty simple? Your new supplier wants to keep the business and the relationship, your old supplier wants their business back and other suppliers want new accounts.

There are many other benefits to running these auctions again and again. New products offerings with better features, new suppliers that you are not aware of, suppliers you strategically did not invite the 1st time, existing products with new technologies and quality improvements to name a few. To support this, don?t sign contracts for periods of longer than two years or you will be paying too much by contracts end.

If your e-procurement solutions provider knows what they are doing, reverse auctions can and should become a long term tool in your procurement tool box.

We all know that the consistent hitting of singles and doubles wins more games. In fact a grand slam can?t happen unless there are already runners on base.? If you want to hear more about how to succeed year in and year out with this process, please contact SafeSourcing.

We always appreciate your comments.

Part III of III. There are all types of reverse auctions.

Friday, December 16th, 2011

I like these types of words. Vickrey has a certain ring to it doesn?t it? In fact there are so many types of reverse auctions that we can?t deal with them all in a single blog. Some of the other types beyond the reserve price auction we have already discussed in this series and the Vickrey we will discuss today are English Auctions Yankee Auctions, Dutch Auctions and many more. Each type of auction evolved to be used for different type of purchasing.

I like the premise behind the Vickrey auction because of the gaming discipline that psychologically encourages bidders to keep fishing or playing. To this author what is important in today?s e-procurement platforms is that all features of all auction types ought to be available for use within a single event. By this, I mean we should be able to use all features of any auction type within a single event. An example might be using deciles, market baskets and units as a framework for a single event and have the flexibility to apply any feature such as reserves, ranking, indices, extensions and any other feature to each as well as each line item within an area. This flexibility drives the best possible savings for the host within one event.

Now back to the Vickrey.

According to Wiktionary the Vickrey reverse auction is named after a Canadian professor of economics named William Vickrey (1914-1996) who was also a Nobel laureate.? Vickrey’s paper, Counterspeculation, auctions and competitive sealed tenders, was the first of its kind using the tools of game theory to explain the dynamics of auctions. Any one that truly understand the magic of a reverse auction understands that the same type of psychology that drives gaming in a Casino drives the dynamics of a reverse auction.

Because there are so many types of reverse auctions it is important to develop an individual strategy for each category that you decide to take to market. Specifically to the opening question, a Vickrey auction allows for selling single items where the lowest bidder sells the item at the price offered by the second lowest bidder.

Now try and figure out how you would implement this strategy. Would you use ranking? If so, what impact might it have?

We look forward to and appreciate your comments.

Part II of III. There are all types of Reverse Auctions.

Thursday, December 15th, 2011

In a reserve price reverse auction, the buyer establishes a ?reserve price?, the maximum amount the buyer will pay for the goods or services being auctioned. This is also sometimes called the desired price, or a ?qualification price?. Careful thought is required on the part of the retailer in determining their reserve price. I personally have seen retailers try to just use their existing price from their last contract. This type of practice may set unreasonable expectations, particularly if the market has changed dramatically in an upward direction since the last award of business. In today?s market, fuel would be a great example of something that you would not set a reserve price based on a previous contract if you wanted incumbent or new suppliers to take you seriously.

Traditionally, if the bidding does not reach the ?reserve price?, the buyer is not obligated to award the business based on the results of the reverse auction. However once the reserve price is met, the buyer is obligated to award the business to a participating supplier or group suppliers based on previously published auction rules.

Additional pricing considerations can be given to adding other price points or qualifiers in a reserve price reverse auction such as entering a market price. In the case of fuel, this may be from a price index such as OPIS. This information can be visible or blind to the supplier, but let?s the retailer compare a suppliers mark up strategies. This also offers a nice opportunity to calculate cost avoidance during an up market.

We look forward to and appreciate your comments

Reverse and Forward Auctions are getting more attention now than any time in the last ten years.

Wednesday, December 14th, 2011

I was reading the Wall Street Journal yesterday by Francesco Guerrera titled Facebook?s $10B Question which was about their planned IPO. The article went on to discuss the possibility of using a Dutch auction for the IPO versus building a traditional book like most IPO?s. Quite franking I found it an intriguing approach and it has been used before for this purpose. I?m just not sure I would use the Dutch auction approach.

However that is for another discussion. The point of this post is that most companies using reverse and forward auctions are not even aware of the number of auction types available or how to use them for achieving specific purchasing goals. A couple of years ago I posted about the variety of auctions types and their use. I?m not even sure that most e-procurement companies could answer your question if you asked them to define the specific types and how you might use them for different situations.

There are all types of Reverse Auctions. If you check back tomorrow we?ll discuss a Reserve Price Reverse Auction which is one of the most common and how to use it.

If you can?t wait, contact a SafeSourcing Customer Services representative and they?ll be glad to discuss it with you.

We look forward to and appreciate your comments.

The Source of Internal Fear for Sourcing Projects

Tuesday, December 13th, 2011

Today?s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

Fear is the anticipation of the unknown yet assumed negative action that is about to occur.?

As it relates to sourcing, there are two very important pieces to this definition that can begin to unlock why some sourcing projects fail internally before they ever begin: the ?unknown? and the ?assumed negative.?? Today?s blog is going to focus on these two items as you begin to think about your 2012 projects.

Decision-Making Control ? One of the greatest fears procurement departments encounter from their internal customers is the fear that they will lose control of the decision making process and that price will end up being the only thing used to evaluate the final decision.? The important thing here is a kickoff meeting to discuss the project and reassure the team that every aspect of the project from the layout, to the participants, to the actual award decision will be reviewed and approved by the business owners.? Showing the clear checkpoints for evaluation will help ease the unknown of what is to come.?

Strong vendor relationships ? Vendor relationships can be the cornerstone of many companies and one that initially can create apprehension for some sourcing projects.? The key at this stage, no matter what approach is being taken (RFI, RFP, RFQ, etc.) is that the team understands that the overall goal of the project is to collect the information needed to make the decision defined in the scope.? In the process of doing this, the business must continue to operate so establishing that communication with vendors (particularly incumbents) will be handled with the upmost care..?

Sourcing something new? ? The biggest unknown and thus a big source of potential fear is the sourcing of a new item or service.? It is natural for an organization to run into some road-bumps when sourcing something new, especially a new service.? They important key here is to budget the time necessary to understand the service or item and the companies that offer it.? Many times the flow for a project like this will collect internal information through a survey, move into an RFI or RFP and if applicable wrapping up with final pricing collection.? Take it slow and you will see that new projects can actually present faster timelines and quicker final decisions.

As with any project there will always be objections and concerns from members of your organization.? Taking the time to communicate the objectives with the organization, showing them specific milestones where they will be intimately involved is the key for success as well as taking the time to gather all of the details necessary to make a final decision.? For more information on overcoming internal objections of your upcoming 2012 sourcing projects, please contact a SafeSourcing Customer Service Representative.??

We look forward to your comments.