Adriaan `t Gilde, Head of Corporate Purchasing … Speaker... · Adriaan `t Gilde, Head of Corporate Purchasing ... • Injection moulding machines • Copper fittings (in China)

Stories from the Game Park Solving dilemmas in the sanitary industry

Presentation for CIPS Switzerland, Zürich, 25.01.2017

Adriaan `t Gilde, Head of Corporate Purchasing

31.01.2017

About Geberit

• Since 1874

• European leader in sanitary products

• Shares listed on Zurich Stock Exchange (SMI)

• Turnover 2016: 2’809 Mio. CHF

• Employees: 12’000

• Factories: 31, in 14 countries

• Strategic buyers: 98

• Purchasing volume 2016: > 1’100 Mio. CHF

(direct & indirect spend)

Game Theory @ Geberit

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Geberit AquaClean shower toilet

Experience with Game Theory

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• First auction with Game Theory: 2007

• Total auctions/tenders with Game Theory: 26 (5 with TWS)

• Material Categories included:

• Metal fittings from brass and bronze

• Flexible hoses

• Carbon steel and Aluminium coils

• Cardboards

• Pressing tools

• Zinc diecasts

• Injection moulding machines

• Copper fittings (in China)

• Building & Construction

• 2 «monopolists» cracked


Why Game Theory?

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• Culture of Innovation, also in Purchasing

• Wish to enlarge / leverage competition at Supply side

• Intransparency about real manufacturing costs

• Monopolistic behaviour and subsequent frustration


Creative frustration..............

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Case 1: Zinc Die Casted Parts (2013)

PRODUCTS (13)

Die Casted Parts

SITUATION

• Annual volume 4.14 mio. EUR

• 2 suppliers delivering over 10 years

(~ 50% share each)

• No significant savings in last years

• Several potential challengers identified

OBJECTIVES

• Negotiation of a 3 to 5 years contract

• Dual sourcing to be retained

• ”Phase-out“ plan defined in case

business lost by current supplier

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The negotiation process consisted of 3 phases

Phase II:

Awarding Large Share

Phase III:

Awarding Small Share

Phase I:

Challenger Qualification

Current suppliers &

challengers:

1) Auction on large share

2) Exclusive negotiation of

additional business

Losing suppliers of phase II:

Sequential negotiations with

increasing prices

Both shares won by existing suppliers

Price reductions of 45% on added value (~ 17% on total)

NEGOTIATION OUTCOME 1

2

Price

Time

Qualification price

Price

Time

#1 #2

1st offer

2nd

offer

#1 #2

3rd offer

#1 #2

Challengers only:

1) Preselection & audit

2) English Auction to qualify

best challenger

Zinc die casted parts

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Case 2: construction project in Ukraine (2016)

THE PROJECT

• Building a new hall for assembly, packing,

warehousing and delivery

• Builder-owner: Geberit Group

• Contracted volume: 2 mio. CHF

• Number of bidders invited: 9

• Number of bidders after risk screening: 7

THE TENDER PROCESS

• Split responsibilities between Local and

Corporate Purchasing

• Lead in the hands of Corporate

• Internal and external Ukrainian lawyers involved

• Tender done in business hotel in Kiew

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Conditions for participation in tender

Bidder must:

• Sign the Compliance Agreement

• Pre-sign the Construction Contract (without the amount in UAH and Works Terms)

• Accept the rules of the tender, that Geberit will communicate beforehand

• If winner of the Tender, sign the Construction Contract immediately after the tender

• Confirm to understand and fully accept the Technical Specifications (version of

dd.mm.2016), as discussed in technical meetings of dd.mm.2016

• Refrain from any reopening of technical or commercial negotiations after the tender

Construction Project Ukraine

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Overview of Tender process

10

Phase 1

Contract Agreement

14. + 15. November,

Kiew

• Signing of Compliance

Commitment

• Agreement on content of

Construction Contract

• Agreement on (handling of)

interpretation of technical

specifications

• At the end of this Phase,

each Bidder will be informed

about his participation in

Phase 2

Phase 2

Qualification Price

• At the end of Phase 1 each

Bidder receives a

Qualification Price sheet

• All Bidders that accept the

Qualification Price will

participate in Phase 3

• At least 4 bidders will be in

last round (ranking based on

bonus/penalty total „value“)

• Bidders will be informed

about participation in Phase

3 between 19:00 – 19:30

Phase 3

Reverse Dutch Auction

• In Phase 3 Geberit will make

Bidders a counter offer,

based on ranking after

Phase 2

• The first Bidder accepting

the counter offer wins the

tender

• No more negotiations!

• The Construction Contract to

be signed by both parties

15. November until

18:00, per Email / Tel.

16. November

09:00, Kiew

7 meetings, 90 min. each Bye-bye to «losers»

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Evaluation matrix


Some numbers

Number of invited constructors 7


Range of first quotes (TUAH) 47‘500 - 57‘800

Range of bonus - penalties (TUAH) 0 - 10‘000

Number of invited bidders for Phase 3 4

Best quoted value after Phase 2 (TUAH) 51‘800

First counter offer by Geberit (TUAH) - accepted- 48‘000


Difference to 2nd best 12%

Preferred and best constructor as winner

Price reduction of 9,7%

NEGOTIATION OUTCOME 1

2

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Lessons learned

• All internal stakeholders must be „in the boat“

• Do all homework before starting the final negotiation

(technical specs, contracts, define variable parameters)

• Objectification by expressing „feelings & beliefs“ in monetary value,

enhancing Transparency (and avoiding emotional negotation styles)

• Execute the designed tender process / rules with consequent

discipline – and commitment

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Q & A


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Documents

Adriaan `t Gilde, Head of Corporate Purchasing … Speaker... · Adriaan `t Gilde, Head of Corporate Purchasing ... • Injection moulding machines • Copper fittings (in China)