Archive for the ‘Reverse Auction Procurement’ Category
Monday, April 12th, 2010
Historically this author has heard the buzz phrase that this is a” win win situation” far too often because far to little thought is put in to what it should really mean. As such when I do hear it, it makes me want to puke. What we should be doing is focusing on win-win-win relationship in the supplier-buyer-consumer supply chain model.
E-negotiation tools offer benefits to both suppliers and hosting retail companies which should also provide a benefit to consumers if the retailer and supplier are savvy enough to figure it out. Some but not all to consider follow.
1. Suppliers have an opportunity to bid on business they might otherwise not know about.
2. Forces retailers to formalize their specifications for further use.
3. Retailers are exposed to far more sources of supply than they were previously aware of.
4. Focuses the buyer-seller relationship on a fair trade approach to conducting business
5. The best total solution based on more than just price generally rises to the top.
6. Focuses both suppliers and buyers on reducing their net landed costs for products and services.
7. Unbundles costs to reveal and eliminate hidden costs that provide little or no value
8. Creates a competitive and balanced marketplace.
9. Offers a lesson that in cost cutting those suppliers should use with their raw material suppliers.
10. Collectively provides an opportunity for improved margins and earnings
11. Provides a tool to offer products to consumers that are of better quality, safer and at a lower price.
If this is not win-win-win, someone is not paying attention. Even though I still don’t like the buzz word.
We look forward to and appreciate your comments.
Posted in B2b Reverse Auction, B2b Supply Chain, E-procurement, E-procurement Solutions, E-procurement Tools, Eprocurement Auction, Reverse Auction Procurement, Sourcing Strategy, Strategic Sourcing
Tuesday, April 6th, 2010
At any rate and regardless of the specific naming convention used there are certain rules which when followed will create higher quality e-procurement events for the retailer as well as the supplier? Following these steps will result in maximizing savings opportunities or cost avoidance in tough markets
The importance of focusing on a clear process will also increase event participation. As a result of paying attention to quality and detail your existing trading partners and potential new sources of supply will respect your process and will keep them coming back in the future to compete for your business.
1. Executive sponsorship is mandatory from the C- Suite.
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 event 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 event 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.
Posted in B2b Reverse Auction, Business Sourcing, E-procurement, E-procurement Solutions, Reverse Auction Procurement
Friday, April 2nd, 2010
Continuing from Part I of II Is critical thinking in supplier selection a key to quality and sustainable retail reverse auctions?
The following scenario offers one example as to how the careful management of your suppliers and a little strategic thinking can drive the type of results you desire as well as a long term sustainable process.
Suppliers will almost always not be of the same size. This does not mean however that they are not of the same quality. Smaller vendors that have accepted your invitation will most likely bid early during your event and then drop out after the early rounds. These suppliers will most likely not agree to participate in the future as they consider their chances of winning the business unrealistic. This too is manageable however back to our first premise. Suppliers that finish first or second or your incumbent that may have been replaced will in most cases agree to participate again, but a lack of new competition will make the auctions less successful.
Thinking more strategically, an apparently logical question might be… If we only have six suppliers available how many should we invite to participate the first time and is more always better over the long run? Should we invite them all? Every company will answer this question differently. When considering the future, do we want successful early events or would we like a continual process improvement that drives continuous savings?
There are several possible solutions to consider. One scenario might be to only invite four participants to your first event. This will create a competitive environment for your reverse auction. After all it only takes two suppliers both interested in your business to drive quality results. Now back to our story. Let’s make the assumption that in twelve months or in the next purchasing cycle when you wish to repeat this auction that the two largest suppliers from the previous event agree to return. You could now invite supplier’s number five and six that were not included in the original auction. You have now created a competitive auction for the second year or purchasing cycle. An additional thought might be to not invite all of the largest suppliers to your first reverse auction, in order to manage the quality of your suppliers for future auctions. This type of critical thinking supports continual process improvement in e-procurement implementations.
We look forward to and appreciate your comments.
Posted in B2b Reverse Auction, B2b Supply Chain, E-supply Chain, Online Reverse Auction, Retail Supply Chain, Reverse Auction, Reverse Auction Procurement, Sourcing Strategy, Strategic Sourcing, Supply Chain Procurement
Thursday, April 1st, 2010
I was speaking to a senior vice president and head of a procurement organization yesterday that said what SafeSourcing really offers us is access to suppliers that we do not know exist or where to find them. He went on to say that his team and himself personally spend all day negotiating contracts and there are just many projects that they do not have the time to conduct the necessary research or solicitation of all the information including bids that SafeSourcing has ready access to.
A logical focal point for hosting a competitive reverse auction is to assemble all of your present vendors for a particular category that you hold in good standing. These would be suppliers from whom you have historically sourced products using traditional means. In general the principal is that the more vendors or suppliers you have participate, the greater your potential results.
However the above does also require strategic thinking because your company is beginning a process that you wish to use on a recurring basis. As such inviting the same suppliers again and again may initially seem to make sense. However this may not encourage the long term results you are looking for; and is a critical reason why it is important to have the most robust supplier data possible available for your regular review.
By way of an example to support the above let’s suppose you can only find six local suppliers for a particular category you wish to take to reverse auction. For the most part they will all show interest in participating in your auction the first time around. However a key issue to consider is what will encourage them to participate the next time and the time after that?
Please check back tomorrow for Part II of Is critical thinking in supplier selection a key to quality and sustainable retail reverse auctions?
We look forward to and appreciate your comments
Posted in B2b Reverse Auction, B2b Supply Chain, E-supply Chain, Online Reverse Auction, Procurement Auctioning, Retail Supply Chain, Reverse Auction, Reverse Auction Procurement, Sourcing Strategy, Strategic Sourcing, Supply Chain Procurement
Wednesday, March 24th, 2010
Posted in B2b Reverse Auction, B2b Supply Chain, Business Sourcing, E-procurement, E-procurement Solutions, E-procurement Tools, E-supply Chain, Eprocurement Auction, Global E-procurement, Green eProcurement Practices, Online Procurement, Online Reverse Auction, Procurement Auctioning, Procurement Company, Procurement Outsourcing, Procurement Purchasing, Procurement Solutions, Procurement Tool, Product Procurement, Retail Supply Chain, Reverse Auction, Reverse Auction Procurement, Sourcing Safe Foods, Sourcing Safe Products, Sourcing Strategy, Strategic Sourcing, Supply Chain Procurement
Thursday, March 18th, 2010
From a simplistic perspective an index is a system used to make finding information easier. There are any numbers of indexes or indices available to help procurement knowledge workers insure they are sourcing products at the best possible pricing. The key word here is price as what we will be discussing are specifically price indices.
According to Wikipedia a price index (plural: “price indices” or “price indexes”) is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations.
Price indices have several potential uses. For particularly broad indices, the index can be said to measure the economy’s price level or a cost of living. More narrow price indices can help producers with business plans and pricing. Sometimes, they can be useful in helping to guide investment.
Normally an index reflects the current and historical price of a variety of commodities ranging from metals to grain. A common index used in sourcing petroleum products is OPIS or the Oil Price Information Service which you can learn more about by visiting www.opisnet.com. However in order to drive the best possible fuel pricing there are other dependencies such as whether you are doing spot buys or bulk purchases and these strategies will determine what specific index you would want to review as well as it’s relation to other product information sources such as Platts or the Gulf Coast spot assessments. This will put you in a better position to determine how to bid the product and also earn a discount relative to the lowest common denominator.
All other commodities have similar sourcing issues dependant on what the highest cost item is in their product makeup. An example here might be the cost of grain in the feeding of cattle or poultry.
Ask you solution provider to explain these tools to you and to recommend how you might use them toward the best outcome.
We look forward to and appreciate your comments
Posted in B2b Supply Chain, Business Sourcing, E-procurement, E-procurement Solutions, E-procurement Tools, Eprocurement Auction, Global E-procurement, Online Procurement, Online Reverse Auction, Reverse Auction, Reverse Auction Procurement, Strategic Sourcing
Wednesday, March 10th, 2010
The business of e-negotiation and in particular reverse auctions has many benefits for retailers that support their business strategies.
According to Wikipedia, a business model is a framework for creating economic, social, and/or other forms of value. The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.
Often times during this author’s discussion with retailers the question comes up as to the benefits of the reverse auction business model or that of other e-procurement events such as Requests for Information or RFI’S.
I have never spoken to a retail executive that does not have as a significant pillar of their business strategy to increase profitability even if it takes reducing losses in the early stages of a turn around. Reverse auctions if run properly can reduce the cost of goods category, the expense category and hired services that impact both areas. They can also continue to reduce the same year after year and the savings are predictable.
This author will make the assumption that there is common agreement that price compression in today’s world is critical and that the reduction in cost of goods and services is the largest area of opportunity on a retail P&L. As such, there are a number of reasons that the reverse auction business model works well within organizations that should drive the strategic growth in utilization of this business model within retail.
A few and certainly not all are listed below in no particular order…
1. A larger number of suppliers: Because of an increased number of suppliers bidding for a retailers business, getting a relatively low price is a given. The suppliers benefit because of the potential reduction is selling costs and easy access to new sources of business which encourages them to lower their pricing.
2. Location, Location, Location: In this case, location no longer matters. A supplier can participate from wherever they happen to be located. This opens up new potential markets for the supplier and new sources of supply for retailers.
3. It’s like a game: Participating suppliers wait to see if their price is the lowest much the same way a gambler would wait to see the turn of the next card when playing blackjack or poker. This is a social interaction and dynamic that builds on itself and can drive a larger number of bids and extensions while ultimately leading to lower pricing.
4. Early success drives a virtual circle for retailers and suppliers: The more a retailer uses the tool and the more success suppliers have with securing new business resulting from this process, the more the process will drive retailers to host new events and suppliers to participate in them again and again. Independent departmental successes can spread quickly within a retail company such that other departments not using the process do not want to be left out of potential savings opportunities and notoriety.
As always, we look forward to and appreciate your comments.
Posted in B2b Reverse Auction, E-procurement, Global E-procurement, Online Procurement, Online Reverse Auction, Reverse Auction, Reverse Auction Procurement, Strategic Sourcing
Monday, February 22nd, 2010
According to the king of all wikis, Wikipedia; a wiki is a collection of web pages designed to enable anyone who accesses it to contribute or modify content, using a simplified markup language. Wikis are often used to create collaborative websites and to power community websites. For example, the collaborative encyclopedia Wikipedia is one of the best-known wikis. Wikis are used in businesses to provide affordable and effective intranets and for knowledge management. Ward Cunningham, developer of the first wiki, originally described it as “the simplest online database that could possibly work”.
“Wiki” is a reduplication of “wiki”, a Hawaiian word for “fast”. It has been suggested that “wiki” means “What I Know Is”.
So, what is the SafeSourcing Wiki and why is it any different? SafeSourcing is a company dedicated to procurement, to retail and to e-negotiation while also supporting a supply chain that is safe and environmentally sound. It makes sense that the SafeSourcing Wiki would be referred to as a specialized wiki (in this case retail e-procurement) that concentrates at a minimum on any or all of the following.
1. Retail procurement terms and links.
2. Safety standards and definitions and links.
3. Environmental certifications and definitions and links.
4. Educational content for procurement and supply chain professionals.
5. Procurement templates for commonly sourced products and services.
The nice thing about wikis is that the definitions are not static. Authorized users or members can add to definitions or create new definitions and terms as well as rate site content. In this way a body of work can grow from the collaborative contribution of all users and visitors and assist in to providing a reliable source of data for professionals in a specialized field.
Please visit the Safesourcing wiki regularly and add your comments, terms, definitions and suggestions. This section of the SafeSourcing website is free tool, and it is for your use as a retail procurement and supply chain professional, the most difficult job in retail.
We look forward to and appreciate your comments.
Posted in E-procurement, E-procurement Solutions, E-procurement Tools, Retail Supply Chain, Reverse Auction, Reverse Auction Procurement
Friday, January 29th, 2010
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.net spot fuel or rack rate updates.. 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
Posted in B2b Reverse Auction, Eprocurement Auction, Online Reverse Auction, Reverse Auction, Reverse Auction Procurement
Tuesday, January 19th, 2010
These sessions can from time to time also run as forward auctions in order to reduce over stock conditions and reduce shrink or event to discard of old properties. Regardless of the naming convention used there are certain rules which if followed will create higher quality E-RFX’s for the retailer and their suppliers? 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 E-RFX 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.
Here are twenty to begin with. I’m sure you can add others or refine these for your use.
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 this list is not all encompassing, it provides 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 understands your business.
We appreciate and look forward to you comments.
Posted in B2b Reverse Auction, Online Reverse Auction, Reverse Auction, Reverse Auction Procurement
