Maximising Success From eAuctions                                      Maximising Success from eAuctions                  ...
Maximising Success From eAuctions           Part 1 – Introduction                 The Real World Sourcing Series is a seri...
Maximising Success From eAuctions           Agenda           1.      A Short History of eAuctions           2.      Determ...
Maximising Success From eAuctions     1998 - SmihtKline Beecham amongst the first to run eAuctions     2000 - eAuctions st...
Maximising Success From eAuctions        There are some great examples of organisations that have          extensive and e...
Maximising Success From eAuctions           What is an eAuction?           • Electronic means of sharing market informatio...
Maximising Success From eAuctions            Kraljic Matrix (adapted)               High                                  ...
Maximising Success From eAuctions           Four Criteria for Determining Suitability for eAuction           • Is the Requ...
Maximising Success From eAuctionsExercise 1- You are Invited to Take Part in a Real Auction • Increments of £5 up to £35, ...
Resistance             Maximising Success From eAuctions                                             £                    ...
Maximising Success From eAuctions           Causes of Buyer Resistance           • Intransigence           • Fear of curre...
Maximising Success From eAuctions           Impact of Poor Adoption           • Fewer eAuctions – reduced saving opportuni...
Maximising Success From eAuctions           Planning for Success           • Clear RFP and requirements           • Split ...
Maximising Success From eAuctionsExercise 2- Another £50 is up For Grabs • Increments of £5 up to £35, £1 thereafter • Pay...
Maximising Success From eAuctions           What is the Prize for Winning? A Number of Options:           • Winner takes a...
Maximising Success From eAuctions           Why eAuctions Are Good For Your Company           • Provide transparency of pr...
Maximising Success From eAuctions           Why eAuctions Are Good For Your Supply Base           • Provide transparency o...
Maximising Success From eAuctions           What you risk losing by running eAuctions           • Collaboration on jointly...
Maximising Success From eAuctions           Exercise 3 – Some Challenging Categories           • Table 1 – Shop signage fo...
Maximising Success From eAuctions    Case Study 1 - Seen from Supplier perspective           •     3 bidder auction       ...
Maximising Success From eAuctions    Case Study 2 - Seen from Supplier perspective        •       Major Procurement, 4 bid...
Maximising Success From eAuctions    Case Study 3 - Seen from Buyer perspective         •   Shop Frontage – customer facin...
Maximising Success From eAuctions           Some Final Thoughts           • Pre approve the potential bidders as far as po...
Maximising Success From eAuctions           Real World Sourcing Scholarship           • £2500 towards any procurement base...
Maximising Success From eAuctions                                               THANK YOU!                                ...
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Real World Sourcing Series - Maximising Success from eAuctions

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Real World Sourcing Series - Maximising Success from eAuctions

  1. 1. Maximising Success From eAuctions Maximising Success from eAuctions Guy Allen May 30th 2012 Spend Matters UK/Europe©ALL RIGHTS RESERVED - Confidential 1
  2. 2. Maximising Success From eAuctions Part 1 – Introduction The Real World Sourcing Series is a series of 6 sessions covering hot topics for procurement professionals. The Real World Sourcing Series is promoted and supported by BravoSolution, and developed by Peter Smith (Spend Matters) and Guy Allen (4C Associates). Guy Allen started his procurement career with Ford Motor Company, moving through IBM, SmithKline Beecham and GSK before becoming CPO for Abbey National and VP Global Sourcing at Fujitsu. He took up his current position as Managing Partner at 4C Associates at the beginning of this year©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 2
  3. 3. Maximising Success From eAuctions Agenda 1. A Short History of eAuctions 2. Determining Suitability for eAuction 3. Overcoming Internal Resistance 4. Planning and Setting up the Auction 5. Benefits of eAuctions 6. eAuction Case Studies - a View From the Sales Side©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 3
  4. 4. Maximising Success From eAuctions 1998 - SmihtKline Beecham amongst the first to run eAuctions 2000 - eAuctions start to be on conference agendas 2001 - GSK had run in the region of 100 auction on direct and indirect categories Now – Many major banks, manufacturers, government departments, IT companies etc etc have auction strategies So I’ll assume I don’t need to cover the basics©ALL RIGHTS RESERVED - Confidential 4
  5. 5. Maximising Success From eAuctions There are some great examples of organisations that have extensive and effective eAuction programmes BUT  These organisations are the exception  In general eAuctions are:  Not widely used  Where used, they are effective©ALL RIGHTS RESERVED - Confidential 5
  6. 6. Maximising Success From eAuctions What is an eAuction? • Electronic means of sharing market information to interested parties • Soliciting responses to the market information from suppliers • Typically downward bidding to win the right to supply • This session is not covering eRFXs Provides Transparency to Supply Base and Internal Customers©ALL RIGHTS RESERVED - Confidential 6
  7. 7. Maximising Success From eAuctions Kraljic Matrix (adapted) High Critical Strategic Ensure availability: Collaboration - close supplier • long-term contract management: • price indexes • detailed contract • contingency planning • collaborate Supply risk • market awareness Acquisition Leverage Minimum attention: Drive for value: • price formula • market pricing • call-off contract • aggressive approach • look to rationalise • use leverage Low Magnitude of spend High©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 7
  8. 8. Maximising Success From eAuctions Four Criteria for Determining Suitability for eAuction • Is the Requirement Definable? • Is Your Business Attractive to the Market? • Is There a Competitive Market? • Can Selection Criteria be Defined?©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 8
  9. 9. Maximising Success From eAuctionsExercise 1- You are Invited to Take Part in a Real Auction • Increments of £5 up to £35, £1 thereafter • Payment to be made immediately before lunch • £50 will be handed over once payment is made©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 9
  10. 10. Resistance Maximising Success From eAuctions £ Target Spend Suppliers©ALL RIGHTS RESERVED - Confidential 10
  11. 11. Maximising Success From eAuctions Causes of Buyer Resistance • Intransigence • Fear of current deals being made to look poor • Fear of transparency • Fear of losing their job • Fear of losing control • Devaluation of buying/negotiation skills ‘For the last ten years I’ve spent a lot of time going around meeting lots of organisations and meeting up with tons of buyers. Its often not a particularly fulfilling experience because they are mostly negative, out of the loop and have no real idea on how to contribute to their organisations’ Andy Brown – Purple Thinking©ALL RIGHTS RESERVED - Confidential 11
  12. 12. Maximising Success From eAuctions Impact of Poor Adoption • Fewer eAuctions – reduced saving opportunity • Compromised auctions reducing effectiveness • Too much collusion with internal clients/suppliers • Targets set for minimum values through eAuction • eAuction capability taken out of Procurement’s hands, placed with another department or external provider©ALL RIGHTS RESERVED - Confidential 12
  13. 13. Maximising Success From eAuctions Planning for Success • Clear RFP and requirements • Split criteria into ‘quantifiable’ or Go / No Go • Price quantifiable factors - adjust auction pricing accordingly • Get internal stakeholders on board • Do not shortlist • Choosing what the suppliers see • Clear and consistent communication to suppliers Complete Clarity on What the Winner Wins©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 13
  14. 14. Maximising Success From eAuctionsExercise 2- Another £50 is up For Grabs • Increments of £5 up to £35, £1 thereafter • Payment to be made immediately before lunch • £50 will be handed over once payment is made©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 14
  15. 15. Maximising Success From eAuctions What is the Prize for Winning? A Number of Options: • Winner takes all • Guaranteed shortlisting • First choice testing But NEVER ‘We will use the Auction price together with other factors to determine the winning bidder’©ALL RIGHTS RESERVED - Confidential 15
  16. 16. Maximising Success From eAuctions Why eAuctions Are Good For Your Company • Provide transparency of process and supplier selection • Challenges relationships that perhaps have become too ‘cosy’ • Easy identifiable success for Procurement • Solicit Senior Management Support for change • Removes the ‘nasty’ job of talking about price from the relationship©ALL RIGHTS RESERVED - Confidential 16
  17. 17. Maximising Success From eAuctions Why eAuctions Are Good For Your Supply Base • Provide transparency of process and supplier selection • Gives real feedback to suppliers on their market competitiveness • Provides opportunity on a fair and level playing field to non incumbents©ALL RIGHTS RESERVED - Confidential 17
  18. 18. Maximising Success From eAuctions What you risk losing by running eAuctions • Collaboration on jointly developed products and services • Innovation • Market Informed Sourcing©ALL RIGHTS RESERVED - Confidential 18
  19. 19. Maximising Success From eAuctions Exercise 3 – Some Challenging Categories • Table 1 – Shop signage for 750 shops across the country for properties of varying sizes • Table 2 – Legal Fees of a multi national company • Table 3 – Laptops that require 1 month of testing before they are cleared to be added to the corporate network • Table 4 – Lab Supplies, where anyone of 5000 product lines maybe required©ALL RIGHTS RESERVED - Confidential 19
  20. 20. Maximising Success From eAuctions Case Study 1 - Seen from Supplier perspective • 3 bidder auction • No commitment to what the winning bidder would actually win • 6 lots - No consolidated view of the whole bid • Able to bid higher than our original bid • Could not see the winning bid price OUTCOME • Didn’t want to win the auction, just wanted to be seen to take part • Eventually ‘won’ 3 lots, 2nd in remaining three • Received no business©ALL RIGHTS RESERVED - Confidential 20
  21. 21. Maximising Success From eAuctions Case Study 2 - Seen from Supplier perspective • Major Procurement, 4 bidders • No commitment to what the winning bidder would actually win • Not an apples to apples comparison – incumbent was bidding a different specification • 8 lots, but the distinction between them was ill defined • No consolidated view of the whole bid • Could not see the winning bid price OUTCOME • Came last • But still one of two shortlisted • Specification changed significantly twice after the auction • BAFO prices requested months after the auction took place©ALL RIGHTS RESERVED - Confidential 21
  22. 22. Maximising Success From eAuctions Case Study 3 - Seen from Buyer perspective • Shop Frontage – customer facing impact • Long running incumbent • Every shop being different – grouped into different types and size of shop • Significant resistance from internal department • Introduced and pre approved 5 new suppliers • Winner takes all auction OUTCOME • Pricing came in at 50% of budget • Incumbent reduced price by 30% • Procurement credibility greatly enhanced • Property department credibility damaged • New supplier successfully implemented signage change©ALL RIGHTS RESERVED - Confidential 22
  23. 23. Maximising Success From eAuctions Some Final Thoughts • Pre approve the potential bidders as far as possible • Define all non cost requirements a value or classify them as a hurdle – Failing a hurdle means the supplier cannot take part in the auction – Quantify other responses financially • Be clear what the winning bidder actually wins – winner takes all provides the best cost outcome©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 23
  24. 24. Maximising Success From eAuctions Real World Sourcing Scholarship • £2500 towards any procurement based training • Log on to the BravoSolution Education Network with the details you’ll receive tomorrow • Complete the certification programme • Check your ranking! • The winner will be announced at the Sourcing Experts dinner on 19 December©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 24
  25. 25. Maximising Success From eAuctions THANK YOU! Please feel free to contact me on guy.allen@4Cassociates.com©ALL RIGHTS RESERVED - Confidential Spend Matters UK/Europe 25
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