5. Auction implementation Best Practice

Step by step guide ( 6 mins video)

In the past few years, we have been invited by many professional organizations and universities in Hong Kong and Mainland China to present e-Sourcing best practices and share our experience with large buying organizations in the region. Here we are sharing with you some important best practices about e-Sourcing. If you cannot find any eSourcing related information you want, you are welcome to contact us at  Support@TacticaCommerce.com

1 Saving Opportunity Analysis

  • Online Bidding (Auction) is not a replacement for a strategic sourcing process - sourcing strategy becomes more important
  • Is now the time to hit the market? Is it a buyer’s or seller’s market? What is driving the suppliers?
  • Challenge your “strategic supplier” relationships – Are you really benefiting? Are they competitive? To what part of your business strategy do they contribute? How?
  • Use of a reverse auction is not necessarily an alternative to catalog buying or strategic relationships; it may be a precursor.
  • Online auction may be a transitioning device for a relationship commodity – from one relationship (from which you may not be benefiting) to one with greater benefit for you.
  •  Use online auction to test the competitiveness of long-term supplier (make sure that there is competition and excess capacity in the market)

2 Supplier Analysis 

  • Start immediately gathering information on potential suppliers, & on their qualificati Scrub supplier list ahead of the auction
  • Think how online auction will integrate with requisition process
  • Determine level of supplier qualification & make sure all suppliers meet that requirement prior to auction
  • Craft an enticing invitation message to suppliers, focused on the opportunity for them to gain business. Consider sending it to top sales management or even to CEO

3 Request For Quotation (RFQ)

  • Group parts, but only similar ones; not too few, not too many
  • Think like a supplier – what would make the package more attractive to them, without increasing your cost or the difficulty to run the event?
  • Make sure all invited suppliers can provide all parts in a lot bid
  • Remember: order frequency, quantity and value are drivers
  • Make sure to set “Reserve” price at a level above which you will not place the business
  • Set the “Target” price at a level below the “Reserve”, and at a level you really would like to obtain
  • Tell suppliers what type of pricing they are to submit: individual item prices or lot prices
  • Load data well in advance; account for time necessary to revise

4 Online Bidding Preparation

  • Give suppliers adequate time to prepare for an event; first ones require more
  • Avoid Mondays; Thursday pm is best
  • Post all information 4-5 days ahead, so suppliers can gain connectivity and review data
  • Supplier must see your approach,event and actions as consistent,open and fair
  • Post FAQs to address usual questions
  • Tell suppliers to know their costs ahead of time - total cost and incremental cost
  •  And to have their decision-maker available during the auction. Most companies would rather retain business at a slightly lower margin, than lose it. If you are auctioning a large package, remind the suppliers that your business can positively change their cost structure (overhead costs spread over a larger volume).
  • Make sure new suppliers have gone through training; hold practice session for new suppliers, or do an RFI
  • Have suppliers use same computer/browser in training & mock auction as for when a real auction
  • Some international suppliers must sign terms, in order to be bound
  • If less than 50% of your invited suppliers accept your invitation, your online auction has a greater chance of failure - consider revising your event or question your choice of suppliers

5 Online Bidding

  • Starting price: Avoid both “too low” (excluding potential viable bids and market Intel) and “too high” (signaling the incumbent’s price is low)
  • Choose decrement to allow significant price savings without slowing auction too much
  • Schedule the offerings so that bidders are not overwhelmed or confused
  • Be available to answer supplier questions
  • Ensure I.T. is available if technical problems occur
  • Consider time zones when setting auction time

6 After the Auction

  • Feedback to non-awardees on what they can do to win
  • Suppliers must ultimately get the business they earned through bringing attractive prices to the e-auction
  • After each e-auction, summarize your lessons learned. Search for root causes to issues
  • Don’t permit stakeholders to pose objections based on success factors or supplier criteria not initially disclosed
  • Realizing the savings that were negotiated – that’s the key task


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