When using eAuction platforms, the buyer has all the information gathered in one place and can negotiate with several suppliers at the same time, regardless of whether the supplier is in India, US or Germany. The amount of time a buyer normally allocates in sending out tender material and product specifications as well as receiving quotations, followed by individual negotiations with the suppliers is greatly reduced, if he decides to run an eAuction.
“Scanmarket users confirm that they save up to 40 % on time alone compared to traditional paper based sourcing. Furthermore our statistics show that the savings obtained in eAuctions are between 15-18 % in relation to current prices”, explains Betina Nygaard, CEO at Scanmarket.
What are suitable areas for eAuctions?
When Scanmarket’s consultants are demonstrating the platform to potential customers or guiding the implementation of the system into a new organization, the most frequently asked question is: What are suitable areas for eAuctions?
In the procurement industry, it is a common perception that only certain products can be negotiated via eAuctions – for example commodities such as office supplies, printer paper, IT-equipment, components for production etc.
But in real-life, there are no limitations when it comes to the kind of product areas are negotiable via eAuctions. However it is crucial that the purchasing value is attractive to suppliers and that there is good competition in the market. If these conditions are fulfilled, you can definitely run an eAuction for any product!
The volume of product areas being negotiated via eAuctions is immense. The product areas concerned are: various groceries and non-food for sales in supermarkets, marketing materials, diverse consultancy and service agreements, packaging, ingredients for food production, iron and metals, freight and much more.
Furthermore it is a fact that eAuctions are conducted on many exciting product areas where some people would rule out eAuction as a negotiation option. When taking a look at Scanmarket’s statistics and the eAuctions being conducted throughout any given year, the decision NOT to use eAuction can very quickly be proven to be the wrong choice.
What are the conditions for a successful result?
If the market is competitive and the product area is attractive to the suppliers, the most important conditions are met. The next step is to specify the product, so suppliers know exactly what they are bidding for and on what terms – that so to speak is comparing apples with apples.
Furthermore, it is important to communicate the entire process out to your suppliers. Documented experience shows that it is a significant advantage for the buyer, if suppliers are informed about all steps in the process: deadline for submitting offers, time and date for eAuction, how long the buyer needs to evaluate the results after the auction, before the winning supplier is notified, etc…
Involving the suppliers in the process will also give you a chance to resolve problems and doubts during the process. In addition, we always recommend that the buyer runs a test auction before the real auction takes place. Most often supplier training is organized by Scanmarket. This gives an opportunity to clarify any queries and break down possible barriers raised by suppliers who are reluctant to participate in the auction. Suppliers have the possibility of seeing how a live eAuction works, so they know what to expect and you get
a chance to conquer the fear of the unknown.
What do eSourcing users says?
When asking Scanmarket users, you will find a broad range of positive experiences when using eAuctions. One of our clients, a brewery, conducts several eAuctions a week. In these auctions they mainly negotiate marketing materials – for example beer coasters, key chains and umbrellas with logos, TV spots, posters, POS material and other printed marketing materials. The company has huge success with eAuctions in these product areas. The company actually gains significant savings every single time.
Another example is a shipping company, which in the second half of 2011 conducted an eAuction via Scanmarket’s platform. The buyer considers itself a small player in a large global market and therefore faced a great challenge in even getting the potential suppliers interested in taking part in online negotiations. By investing substantial time in preparing the auction, having a flexible auction set up and thereby a very attractive purchase value for the suppliers, very satisfactory results were achieved in the auction. 4 out of 5 suppliers participated and in particular 3 out of 4 fought really hard to win the contract. The auction
lasted almost 3 hours and resulted in savings of 9% in relation to current prices. Possibilities rather than limitations.
Do not hesitate to run eAuctions on product areas, just because no one else in your company has done this before. Analyze the market, especially in terms of market prices and purchasing value. If the purchase value is attractive to suppliers and there is competition in the market, everything is up for online negotiation!
Written by:
June Sejrup, eSourcing Consultant and Marketing Communications Coordinator at Scanmarket A/S
http://en.negosmart.com
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