Inherent to strategic sourcing management is the handling of activities and transactions that can be perceived as cumbersome. The handling of order requests, budget allocations, approvals, releases, legalization of contractual documents, policies, among others, mean that for many people our management as buyers is defined as "a brick". However, for us, as it is part of our day-to-day work, this "brick" becomes the means for executing and develop our strategic sourcing managementwhich impacts business results at a high level.
Within the framework of daily management, electronic auctions emerge as a task that can be included as a type of negotiation. It is clear that not all goods and services are susceptible to be handled as a reverse or downward auction; however, it has been demonstrated that a well-executed electronic auction can bring very good returns. An example of this is summarized in how the citizens of Bogota achieved savings of close to USD 1,000,000 during less than 60 minutes of execution of an electronic auction.
Structuring an electronic auction is less complicated than any sourcing professional or user area might initially imagine. However, it is key to comply with specific steps to maximize the probability of success in its execution. Key chronological stages are listed below:
1.Define the good or service to be auctioned.
According to the Kraljic matrix, the ideal quadrant for conducting e-auctions is the leveraged goods and services quadrant, in which we have an attractive volume of expenditure in monetary terms and low risk/impact for the operation.
However, it is not unreasonable to think about auctions of routine items with the premise of aggregating demand and maximizing purchasing volume. For example, why not think about a long term contract for stationery supplies? Auctioning a 5+ year contract for this type of supplies results in a drastic decrease in transactionality and makes an auction attractive to suppliers, since it is a long term business.
The strategic quadrant can be taken into account for electronic auctions.without jeopardizing the availability of supply or strategic alliances with suppliers. While the quadrant of "bottleneck" items does not normally apply to auctions, until the category can be strategically relocated to another quadrant, given that due to the risk of supply this type of negotiations are not beneficial.
2.To carry out a rigorous pre-selection process for bidders.
It is essential to realize an analysis of suppliers at the legal, financial and technical levels. Some essential steps to define qualified bidders that can participate in the electronic auction are to carry out a pre-qualification of suppliers, a previous RFI to analyze the market and the suitability of bidders, as well as to understand the technical and economic aspects of the process.
At auction the key factor is priceOnce we execute it, it becomes the decisive element. Except for logistical factors to match offers in terms of Incoterms, or quality factors, which must be handled with extreme objectivity so as not to affect the transparency of the process under any circumstances.
Analyze the applicable auction rate
There are different types of electronic auctions and rules applicable to them: extensions, open envelopes, closed envelopes, factors, etc.. This analysis depends on each case, the competitiveness and the buyer's objectives. Choosing the best strategy is a key success factor.
4.Train suppliers
Suppliers should be given space to learn the rules of the game, become familiar with the system and the concept of electronic auctions and clarify any doubts they may have. Mock auctions are essential to accomplish this step, as well as to provide peace of mind and a sense of total transparency in the process.
Monitor the electronic auction
It is key and absolutely necessary to be able to see the auction. The buyer defines which roles can monitor the auction to keep real time control of its progress and to have total certainty of the minute by minute of the same.
An auction does not guarantee immediate savings, but if well structured and executed, it maximizes the likelihood of savings. It is clear that electronic auctions are the means, however, the strategy and work of the strategic buyer is an essential factor. to bring the process to a successful conclusion. In addition, auctions must be structured at a strategic level and executed with a system that meets all standards to maximize savings and ensure the transparency of the process.
