When t use a Reverse Auctin r ther erfx surcing tactic Evaluating cmmdity characteristics t determine prject strategy by Iasta Overview Each erfx has a unique and primary gal. Typically, the primary gal f an erfi/survey is t maximize ptential decisin pints while keeping supplier evaluatin csts lw. The end gal f an erfp is t determine a set f ptential suppliers that are the mst capable f meeting the rganizatin s needs and t identify thse suppliers that can actually submit bids. And the final gal f an erfq/auctin is t make the final award decisin. The numerus benefits f erfx include: Efficiency thrugh surcing cycle time reductins Accuracy and cnsistency thrugh standardizatin cllabratin Knwledge transfer erfx Prject Strategy Selectin A spend analysis initiative identifies cmmdities, cmpnents and categries that are ptential pprtunities fr cst savings / avidance. Surcing teams can use these tw key factrs t help priritize prjects and select the mst apprpriate surcing strategy. 1. Cntract Status review spend status based n whether: a. Currently under cntract (unavailable fr bid) Shuld a cmmdity be under cntract, surcing can still psitively impact the rganizatin thrugh varius initiatives and tactics. - Spend cmpliance tracking: User adptin and educatin campaign Supplier perfrmance imprvement Cntract terminatin - Supplier cllabratin: Cntract renegtiatin Jint initiatives Surce: www.nextlevelsupply.cm 1
Figure 1: Initiatives fr spend under cntact b. N current cntract in place (available fr bidding) If available fr bid, review the cmmdity characteristics t determine the best erfx strategy. 2. Cmmdity Characteristics scre available spend based n: a. Cmmercial attractiveness (t ptential suppliers) Is there market capacity? Is the buying cmpany a marquee custmer? Range: attractive fr suppliers (+) t unattractive fr suppliers (-) b. Definable requirements Can the requirements be precisely described? Range: well-defined and available specificatins (+) t unknwn (-) c. Cmpetitive supply base Hw many ptential suppliers are there? Range: numerus, high quality suppliers (+) t ne supplier (-) d. Savings pprtunities Has it been bid befre? Is there cmpressible margin? Range: cmpressible pricing (+) t rising market (-) e. Inherent risk If smething ges wrng, hw bad will the prblem be? Range: lw (+) t high (-) Only fr the inherent risk metric, a lw scre is cnsidered psitive as it means there is minimal impact t the cmpany if smething ges wrng. An experienced surcing prfessinal can quickly evaluate the cmmdity and scre each f the five characteristics as either psitive (+), neutral (l) r negative (-). Surce: www.nextlevelsupply.cm 2
The cllectin f scres will indicate whether the prject shuld use a reverse auctin, sealed bid, erfi/survey r an erfp. An nline sealed bid is managed just like a manual sealed bid. Suppliers invited t participate in an nline sealed bid submit best and final ffers thrugh the erfx technlgy. An erfq with a reverse auctin is nt always the tactic f chice. Figure 2 lists pssible scres relevant t the characteristics and which bidding tactic r negtiatin strategy might wrk best depending n hw the scres align themselves. Cmmdities with mstly psitive scres are gd fits fr auctins while thse with mstly negative scres are better ff using an erfp. An experienced surcing prfessinal can easily determine thse that fall in between. Figure 2: Scring categries t select erfx type Surce: www.nextlevelsupply.cm 3
Fr example, a surcing prfessinal might scre a ptential pallet prject in the fllwing manner. Ptential prject: Pallets Cmmercially attractive It is a high dllar amunt t suppliers Definable requirements Current specificatins are available Cmpetitive supply base There are ver 20 quality suppliers Savings pprtunities Pallets have never been cmpetitively surced Inherent risk There is very little risk t the manufacturer r custmer Based n the cllected set f scres, this cmmdity wuld be a gd fit fr an nline reverse auctin. erfx Technical Requirements Centralized Repsitry One f the mst significant benefits f an erfx slutin is the centralized data repsitry. A centeralized repsitry allws the rganizatin s supplier and surcing-related infrmatin t be stred in ne cmmn lcatin that can be accessed by all relevant stakehlders. This nt nly helps t streamline the surcing prcess, but als assists in the determinatin f whether all required infrmatin has been cllected and whether the surcing team has fllwed all apprpriate prcesses t meet crprate cmpliance requirements. Templates Wrld-class erfx tls allw fr the creatin, editing and strage f prject templates. Reusable templates allw fr cntinual prcess imprvements and cycle time reductins fr surcing prjects. Templates can be custmized and / r lcalized acrss the glbal rganizatin. When the use f templates is cmbined with a centralized repsitry, categry managers are free t be mre strategic and fcus n glbal categry surcing strategies. Additinally, less experienced surcing prfessinals can be mre effective thrugh use f templates. Surce: www.nextlevelsupply.cm 4
Frmatting It is very imprtant that a chsen erfx platfrm is highly custmizable and allws users t make frmat changes easily. Functinality such as text changes by fnt, clr, style, size, hyperlinks, bullets, embedded images, fields and spell checking shuld exist in rich frmat withut the added burden f scripting language skills. Respnse and Evaluatr Scring Other critical functinality fr effective design and usage f erfx include the ability t use custm weight and scre criteria fr respnses and evaluatrs. Administratrs shuld be able t weigh sectins, questins and internal stakehlders and use an apprpriate pint system fr a particular prject and supplier review. Wrkflw Capability Mdern erfx tls usually cme with integrated task tracking and wrkflw management tls. At any given pint in time, any member f the surcing team can determine precisely the current stage f the selected erfx prcess and which suppliers have respnded. An erfx can be created fr later, r even partially created, saved, and finished at a later time. Additinally, an erfx tl shuld supprt integrated email management which streamlines the cmmunicatin prcess with suppliers after the apprved dcument is ready t be published. Once published, administratrs shuld have the capability f alerts and triggers that ntify bth the buyers and respndents f changes t the erfx and any cmmunicatin frm suppliers. Data Imprt/Exprtatin Existing supplier data is ften cntained in a SRM (Supplier Relatinship Management) system. Cmmdity data is usually fund in an ERP (Enterprise Resurce Planning) system. Thus, it is imprtant that the erfx tl make it easy t imprt r exprt data and reprts frm ther applicatins. A simple actin such as, exprting the resulting final scres frm an evaluatin team can be used as supprting dcumentatin fr a PO entry. Security, Access Cntrl and Cllabratin An erfx engine shuld supprt secure lg in, encryptin fr passwrds and ther sensitive data. It shuld als prvide access cntrl acrss grups and individuals t ensure that the varius stakehlders can nly access data they are allwed t see. Additinally, it shuld ensure that master data and master templates are nly changed by authrized persnnel. Mre imprtantly, the erfx technlgy shuld supprt cllabratin between users whether they are internal stakehlders, suppliers r the Surcing team. Fr mre infrmatin, please visit www.iasta.cm r ur nline white paper library, the esurcing wiki, www.esurcingwiki.cm. Surce: www.nextlevelsupply.cm 5