December2018

Digital Excellence

Reverse E-Auction

Strategies:

Maximizing Savings

Foreword

Have you engaged in digitizing your sourcingprocess and would you like to outperform

your savings indicators?

Are you consolidating your supplier base orwant to source your backup supplier online?

E-Auctions are among your last levers in thesourcing negotiation. Let’s see how tomaximize their output so you get acompetitive edge in purchasing efficiency.

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#1

Auction planning

When and Why?

This is important to plan allnegotiation rounds that willhappen before or after thisauction. Does it follow an RFI,RFI+RFP, is it a two-roundauction with supplierelimination in between?

Equally important is the awardstructure and timeline.

- Structure: is this businessgoing to be fully awarded toone supplier, do you knowin advance you need one ormore backup suppliers atnegotiated and guaranteedpricing?

- Timeline: When aresuppliers going to knowthat they got the businessor not, when is the contractexpected signature date,when is the service ordelivery starting?

Don’t

- Go for a last minute auction

- Change timing rules withoutsufficient notice

- Forget to communicate

Instead, do

- Announce the online eventahead of time

- Stick to the scheduled day,time and duration

- Organize one-on-one openquestion sessions plus supplieronboarding and training

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By the way, why an eAuction?- Market fairness- Common comparison criteria

across all bidders- Margin compression

#2

Target Savings

Who and What?

You want your savings to bebold and ambitious.

But yet, this is a negotiationthat will happen online. Sobetter prepare and know yourcards.

Who is invited to the auction

Sufficient audience

They can all supply thequality and quantityyou need

Know your audience

When was the contractlast renegotiated?

What is the financialhealth of your suppliers,are they recentlyprofitable?

Collect these answersthrough RFI, and RFPquestions.

What are you sourcing?

Is the scope identical comparedto the last time you sourced?What are the previous contractterms? Is there an existingcontract?

Ultimately, the business needsto be significant to triggerinvited vendors’ interest.

Aggregate spend to createappeal and ensure competition.

Aim for Total Cost ofOwnership (TCO) in your costterm structure by including:

- A switching cost from yourincumbent supplier(s)

- Shipping costs, servicing andmaintenance for the contractduration

- End-of-life costs: return,waste or recycling costs

Payment terms can also beincluded as part of the coststructure

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#3

Auction settings

Tweaking your eAuction

1. Keep it short & simple

An E-Auction should not lastlonger than an hour, focus on asmall number of items.

3. Bid Decrement

Ensure that the competition ismeaningful by imposing a biddecrement that is significant toyou.

Questions are for RFIs and RFPs.

You should have 10 or less itemsin the auction. Bundle or basketif you have numerous items.

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2. Market confidentiality

Rank only, sealed bid, dutch,envelope bidding … there is awide variety of settings that canbe leverage to address eachbusiness case.

4. Bidding Extension

Competition usually picks upmomentum in the last minutesof an auction. Short biddingextensions help you capture thebottom market price and maxyour savings

eAuctions are not a one-size-fits-all kind of event.Test different scenarios andcost structures prior tolaunching training auctions.

Don’t overlook the Bid Buffervalue to enforce properspacing between bids

It happens that extensions takeup to 30 minutes. Be sure towarn your participants toremain connected to the eventuntil it is closed.

#4

The untold

Secret spice

Your E-Auction is an event.Treat it as such and give yoursavings some visibility:

- Book a room

- Screen the bidding console

- Bring some popcorn

- Report globally about theauction results and positiveimpacts

- Analyze any shortcomingswith honesty. If any to takecorrective actions

- Publicize eAuctions in theorganization

- Communicate on the resultsand savings

- Create emulation within thecompany to use eAuctions

It’s time to embark on theeSourcing journey.

Ensure supplier satisfaction

- Organize a training and testevent

- Be ready to answer anyquestions: involve buyers andstakeholders during the event

- Provide phone support forsuppliers

- Train an online sourcingchampion, or get help froman external company

- By using online sourcing,suppliers save on travel costsand negotiation time

Learn from your past events

- Lessons learned sessions

- Collect feedback: post-eventinternal and supplier surveys

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Use Forward Auctions to extract value from your inventorysurplus or industrial scrap.You may turn a cost into a profit.

Conclusion

Digitizing Strategic Sourcing

Remember that if yoursuppliers are not familarwith online sourcing and E-Auctions, if they need to beassisted and supportedduring their onboarding, itprobably means that youare doing it right.

Leveraging online tools toget additional savings isthe competitive edge youneed today.

Yet this is not a silver bulletthat will yield savingsunder any condition.

Be prepared to use onlinesourcing as a tool in yourstrategic sourcing process.

Get in touch now to knowhow Certified Consultantsfrom our Sourcing Deskcan assist you leverageyour SAP Ariba sourcingplatform to generatesavings.

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On average, eAuctions yield close to 10% savings.

A short and efficient negotiation, saving time for both buyers and

suppliers.

Digital ExcellenceGenerate savings through SAP Ariba

www.digital-excellence.fr

info@digital-excellence.fr0033 783 240 880