Etiket arşivi: e-sourcing

Procurement Action Against Inflation

How purchasing managers, commodity managers , sourcing leaders are taking actions related to inflation and continued uncertainty.

Inflation is one of the important problem of all procurement professionals minds right now. US Inflation Rate is at 8.52%, compared to 9.06% last month and 5.37% last year. This is higher than the long term average of 3.26%. Euro area annual consumer inflation jumped to a new record high of 9.1% in August, according to a flash estimate from the EU’s statistical office on Wednesday. The figure was up from 8.9% in July, Eurostat data showed.

Inflation has forced purchasing managers, commodity managers , sourcing leaders to take action, What are these actions?

1.Finding new suppliers to lower costs

2. Establish price change mechanisms.

3.Renegotiating contracts with existing suppliers

4. Understand your major cost drivers like Direct material · Direct labour · Manufacturing overhead · General selling & administrative · Profit

Fighting against rising inflation is not an easy job. However, by creating risk management strategies and strong supplier relationships in place, procurement managers can minimize high Inflation rate risks.

Global or Local Sourcing

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Strategic sourcing has become an extremely important element to the growth of any company. In order to stay competitive, companies need to constantly ensure the right level of coordination between innovation, organisational efficiency, price policy and procurement.

There appears to be a growing trend towards global sourcing; companies are constantly seeking to find the next low cost procurement option in order to gain an advantage over its competitors.

However there is a second narrative; local sourcing. Recently, more and more arguments are springing up about the immense benefits associated with sourcing locally. This narrative therefore begs the question; is local sourcing not the better option?

We will take a critical look at both sourcing techniques and see which option will better serve our organization’s procurement needs

Arguments against global sourcing

  1. Transport costs

With transport costs growing and with constantly changing demand patterns, organisations need to find smarter ways to become more responsive to customer needs and in a cost effective manner.

In recent times, oil prices have seen significant rises in price; reaching an all time high of approximately US$147 per in July 2008. While the prices have recently crashed to approximately US$60, the longer term price curve is likely to continue in the upward direction and it is worthy of note that for every one dollar rise in oil, there is a corresponding increase in the costs of transportation.  Therefore, unless there are new discoveries of ways to go around this, prices of things will continue to rise.

  1. Supply chain risk

There are also several risks that are inherent in extended supply chains that are detrimental to the growth of any business. Risks such as;

  • Extended lead times
  • Exchange rate risks which affects products pricing
  • Variable lead times in the supply chain, leading to a high level of uncertainty and inconsistency.
  • Loss of control
  • Reputational risk
  1. Loss of agility

Extended supply lines usually have adverse impacts on both time-to-market for new products and the responsiveness of suppliers to customer demand changes. Organisations are unable to quickly respond to significant changes in the market due to the extended lead times. Likewise these extended lead times tend to make organizations unjustifiably exploit larger economies of scale thereby leading to overstocking of supplies which also affects their response time to market innovations.

  1. Sustainability

Global sourcing’s increased need for transport has also impacted negatively on the world’s carbon footprint. Globalization only ends up exporting domestic carbon footprint to countries elsewhere and at an increased rate

In addition

There is an increased risk in the loss of intellectual property rights as there is often less legislative protection or enforcement in developing countries

The argument for Global Sourcing

The rising trend towards global sourcing is probably an inevitable on due mostly to man’s natural instinct to trade, seek options, explore alternatives and find new ways of doing things. Coupled with recent advances in communications and technology, it appears as if global sourcing practices have only just begun to shape the procurement world.

Some of the arguments for the huge importance of global sourcing practices include;

  1. We need Global sourcing to sustain our way of life

The constant rise in world population and the diminishing rate of resources to cater for this growing population has largely impacted the need for globalization in trade (procurement) and all other aspects of human endeavor. Nations who are in deficit will continue to look to other nations where items to be procured are in surplus and are readily available.

  1. The most sustainable option may not be the obvious one

Local sourcing may appear more sustainable but there are a number of documented cases where global sourcing has been found to have less impact on the environment. Conditions such as favorable weather conditions, vegetation, technology, availability of labor and work ethics might actually have significant positive impacts on manufacturing and production thereby leading to less carbon footprints than when sparsely produced

 

  1. Innovation can provide the solution to issues arising from global trading

It is highly possible to use innovative technology to combat the environmental challenges of global trade. Significant advancements in technology in most industrialized markets have aided the creation of breakthrough energy solutions which offers a new model for bringing lasting energy solutions that are reliable, affordable and doesn’t emit greenhouse gas. This trend has facilitated the growth of global industry.

Today there are thousands of individuals and companies across the globe working hard to harvest different kinds of clean energy in order to change the way we produce goods & services and in many cases, these experiments have been very successful.

  1. Global Sourcing Promotes Peace

There is also an interesting argument that global trade promotes peace among nations. Nations that trade together are unlikely to go to war with each other.

Conclusion

In arriving at a decision on what sourcing strategy to adopt, the points listed above need to be taken into consideration when comparing between global or local sourcing strategies. Whether local or global, neither of the two are inherently right or wrong, it is only a matter of carrying out careful analysis of both sourcing techniques with respect to your company’s procurement needs and selecting that which is more suitable to meet those needs. Wrong sourcing decisions can cost you valuable time and money

E-procurement Tips

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E-procurement Tips

E-procurement constantly requires extensive strategizing and figuring out new ways to do more with less amidst intense pressure to always deliver positive results. In light of this, competition is unbelievably fierce; teams are constantly changing, and there’s increasing pressure to constantly have the upper hand.

For your organization to be successful with her e-procurement strategies, it’s helpful to adopt practices that will ensure you are always ahead.

Below are 10 winning tips to consider in order to fundamentally affect in a positive way, the success of your organisation’s e-Procurement strategy:

  1. Team work

A successful e-procurement department must never work alone. Your organisation’s e-procurement department should consist of strong teams consisting employees with defined roles and responsibilities and who will work collaboratively as a unified group towards achieving the organisation’s common objective. Each member of the team should play their individual roles to ensure the success of the team. When and if this happens, success is sure to be achieved in the company’s e-procurement strategy.

  1. Analyze Data

You have to back your strategy with meaningful numbers and data. Procurement professionals must constantly analyze data when strategizing in order to guide the decision of what strategy to adopt. Likewise, the team can also use these numbers to track trends, recognise threats, spot opportunities, alter strategies and optimize opportunities for better performance.

  1. Know Your Competition

Research and Monitor your competition so that you always know who and what you’re up against and what they are always up to.   There are many ways to go about this; follow your competitors on social media, subscribe to their marketing newsletters, and regularly check their websites for company updates. You can also encourage your procurement teams to engage in conferences, webinars and seminars to help them stay ahead of the curve,

  1. 4. Manage Relationships

Good vendor relationship is an important ingredient for sustained success in any organisation’s procurement strategy. As you get to know your vendors, engage with them more and help them participate and deliver better through your procurement chain. Define what your expectations are and give the vendor a chance to explain how it will meet those expectations. Take the time to ask for several references and make sure you understand the amount of training and support that is needed throughout the entire process.

The more complex the product or service, the more important it is to identify the competence and capacity of the vendor. Smaller companies with less complex procurement needs should however not spend too much vetting every single vendor. Gathering useful information about your vendors will help you define your vendor preferences and in the long term, help you streamline your vendor list and simplify your procurement process.

  1. Maximize time and resources

Procurers and vendors alike are extremely busy people with each trying to meet the needs of many at the same time. In order to maximize everyone’s time and resources, preparation is key. Prepare in house before meetings, perform needs assessment analysis and constantly re-evaluate your relationship with your vendors.

Meet with your vendors periodically to review pricing and working conditions to make sure that they are still meeting up with required expectations.

Have someone designated to manage all your vendor issue and keep all vendor contracts, contact information, and related documentation in a single location so that whenever an issue arises, related information is easily accessed and they are resolved quickly.

  1. Save! Save! Save!

In E-procurement, all cost savings are important. Companies are quick to target big dollar spends for e-sourcing and ignore the lower cost items. Summarily, all these costs add up into something significant in the long term and if you must get the best value in your e-sourcing activities, every category of spend must be incorporated into your e-sourcing strategy.

  1. Embrace the change

A new way of doing things can sometimes be intimidating for management and staff of a company, especially when it has the potential to uncover additional savings. E-sourcing process creates a competitive dynamic that is way above the league of traditional sourcing methods and top executive in the organisation need celebrate and promote this new way of doing things. Keeping an open mind and applying e-sourcing techniques and tools in new and creative ways will ensure your program maintains momentum and remains profitable.

  1. Vendor selection should not be based solely on price.

This is very regular practise for most e-procurers and it’s easy to understand why. However, this approach to e-sourcing is surely a recipe for disaster. There are other factors that should be considered when selecting your vendors. Factors like; experience, capacity and track record of vendors providing such services. Identifying a great price should just be one step of the entire process.

   9.  Follow up on quality control.

Make sure your vendors are supplying to specifications. It’s not enough to select the least cost provider with a good reputation on paper and then go to sleep thinking that all is well. Continuous follow up on quality control with your suppliers is key to ensuring that you get what you paid for

   10. Be consistent with your results

Procurement professionals also face a constant need to be consistent. You need to find the right tools and solutions that will work for your organization. By clearly defining the organisation’s procurement objectives, delegating specific roles and responsibilities to members of the procurement teams and making the teams see how the procurement process aligns with those objectives, you’ll be able to deliver consistent results.

 

 

Misconceptions About E-sourcing

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E-Auctions are very essential tools in a procurer’s toolbox and is capable of providing extraordinary value if appropriately applied. However, wrong implementation and sourcing strategies and a lack of the necessary expertise needed for a successful execution, oftentimes undermines the potentials and benefits that can accrue from e-sourcing practices.  This sometimes results in having disappointed and disgruntled sourcing teams that become open to myths and misconceptions about the true worth of e sourcing technology.

So with all these tales of woes hovering everywhere in the air and contaminating the minds of optimistic e-sourcing professionals, how then are we to determine what information is true and that which is a myth as far as modern sourcing techniques are concerned.

Listed below are 5 of the most popular of these false facts that are being peddled about e-sourcing

  1. E-sourcing techniques are only useful when opting for the lowest price goods or services.

This is so false! because negotiations don’t begin until at the end of a bidding process. This starts only after expected service offerings, product specifications and terms of contract has been agreed by both parties. Suppliers who then surpass these criteria are invited to participate in the negotiation process where the pricing is finally being considered.  With e-Auction, products, prices, quality and terms of purchase are clearly visible for all to see and suppliers can get involved in open competition. This process captures in a central location all the information that is needed so every player has equal opportunities to consider these factors before making business decisions.

E-Procurement has a lot more to offer than just competitive pricing – With e-sourcing you are able to get the best value that your money can buy.

  1. E-Sourcing is only used when offering commodity items and products, not services.

eSourcing techniques can be applied in numerous categories across the business world, not just with commodities and products. Services such as, cleaning, laundry and waste removal can be sourced online with significant savings to be realised at the end of the day. Sourcing experts can also identifying new online sourcing categories that might be relevant and specific to your business needs and likewise provide guidance on how best to go about it in order to receive great value for you and your business.

  1. Esourcing does not produce as much significant savings as is often described.

Regarding this particular line of thought, I can only say to you; “Why not try it out and see for yourself”. Too many companies these days no longer worry themselves about controlling her indirect spend because it is natural to regard it to be much smaller in size when compared to direct spend. However, you cannot even begin to imagine the huge amount of savings that can be realized in this category of spend, which includes; office supplies, computer equipment, floor mats,  hangers, display racks for retailers e.t.c. and any other item or supplies that your employees would ordinarily be needing. Smart procurement teams have realized this and are literarily not sparing any expense when it comes to all things procurement on behalf of their organizations. It’s time to get more creative with your company’s sourcing needs both in the direct and indirect categories of spend.

  1. eSourcing technology is a “one-size-fits-all.”
    This is so not true. Every organization’s procurement team have their own goals and tasks set out for them, and this is why a one-size-fits-all ranking being applied to all categories of suppliers is a recipe for disaster. Applying generic ratings to all service providers is usually not a fair and realistic strategy to adopt and practice in the world of esourcing technology. Different providers have their different strengths and service offerings even if they are operating in similar line of business. It is therefore important for the procurer to explicitly define expectations in each procurement exercise that he and his organization embark on. .
  1. Collaboration is not necessary when it comes to improving esourcing initiatives

Under normal circumstances, I’m sure we will all agree that collaboration breeds more creativity and innovation. So why should it be any different with esourcing practices? Decision making normally is a collaborative activity and collaboration with your procurement team and other stakeholders can help you gain tremendous insights that can enable you solve problems much faster and better. Opportunities that lie within collaboration are huge from both the supplier’s and the procurer’s end. Apart from the significant cost savings that can be obtained from economies of scale achieved through collaboration, collaborators also stand a good chance improving their current decision making process and sourcing initiatives by sharing ideas and experiences and also exchanging notes on past practices that have worked out well for them and their respective procurement teams.

Are E-Auctions too Price focused?

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Unless you are one of those who when at the point of making a purchase, especially online would settle for the first and only option you are provided without seeking alternative brands and price offerings, then I don’t think this is a fair question to ask. Given the vast and endless opportunities provided by the internet, procurers will definitely seek out the best options available to them before settling to buy. Although there is more to online procurement than just pricing, negotiating so as to get the least price possible is definitely top priority for any smart procurer.

Online auctions take advantage of the internet to allow procurers arrive at the true market prices for goods and services being sought for. Most online auctions usually go the route of the “reverse auction” whereby  suppliers in a bid to win over customers tender bids that are lower than those of her competitors and this is the practice that seems to make e auctions appear too price focused. This Increased participation for a buyer’s business would naturally drive down the price. Nevertheless, this doesn’t imply that the lowest price will automatically win the bid; modern day auction technology allows the procurer and supplier to consider factors other than pricing. Factors such as quality, brand, reliability, guarantees,  experience, delivery speed, Warranty, volume discount, technical specifications, delivery dates, shipment methods, legal conditions, customer support, financing options e.t.c. All these are additional specifications that buyers can build into their RFQs and present electronically via the internet to an endless list of suppliers.

e- Auction tools are beneficial to both sellers and buyers. In the long term sellers will benefit by seriously pruning down their sales force since most of their sales will be performed online, saving huge staff costs and other incidental costs associated with maintaining a workforce. Likewise in the short term, buyers can immediately experience reasonable savings from online procurement options.

Other Benefits of e-Auctions

The advantages are extraordinary. In spite of the fact that e-auction tools are different based on individual suppliers, e-autions normally permit purchasers to consult with a good number of suppliers and vice versa all at the same time rather than in a sequential order as in physical procurement. This tends to save the procurer and supplier a lot of time and resources. Purchasers taking an interest in the site’s offering possess the capacity to reduce negotiation periods from about two months to as little as two weeks, empowering e-procurement administrators to focus more attention on other projects and tasks rather than a staggering amount of paperwork

Similarly, there is no need any longer for e-procurement managers to spend hours and hours in one-on-one meetings with potential suppliers sometimes even travelling and arguing over contract terms and details.  Instead, a buyer is simply expected to fill an RFQ (of which several e-negotiation platforms already have templates available) that he submits online. Likewise, suppliers are also capable of replying such requests electronically by submitting online proposals that provides detailed information such as price discounts, delivery dates and shipment methods. E-Auction platforms that has e-negotiation features essentially creates a level playing field for all suppliers who are provided the opportunity to compete, as most times e-auction processes are transparent and the results are clearly visible for all to see

It’s now obvious that there are other reasons that drive the demand for e- auctions  other than significant cost-savings, hence it would not be fair to say that e-auctions are too price focused. Unlike online auctions whereby it is the person with the lowest bid that wins, e-auction activities that feature e-negotiation tools is a huge leap towards a much broader seller – buyer online collaborations. In fact there currently appears to be a shift in focus from price based bargains to quality and performance based bargains amongst procurement professionals, so the argument that e-auctions are too price focused no longer hold water.

There’s even more, e-Auction solutions also provide a fair competing ground for all suppliers to compete for business. Buyer’s can deliver RFQs electronically and can even adopt readymade templates with only a few adjustments and likewise suppliers can deliver their proposals to the buyer via the same medium saving both parties a lot of time and resources. These proposals can also be evaluated electronically based on buyer’s specification thereby easily eliminating unqualified applicants saving also time and making sure that only the exact specifications are considered for purchase.

There is no denying of the numerous impacts that e-Auction technology has had, and will continue to have, in this industry. Buyers and sellers are no longer relying on e-marketplaces to just simply play matchmaker. But with huge opportunities at significant cost and time savings, better quality, stronger collaborations, self-empowerment, more functionality, and improved supply chains, e-auctions will continue to be the way to go in the procurement industry both now and in the near future.

Indirect Spend Categories to Make Cost Reduction

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Over the past five years, purchasing/supply groups in well-managed companies have made significant progress in reducing the price of inputs. Since specific direct materials are often associated with distinct Strategic Business Units (SBUs), managing this spend is usually accomplished through center-led commodity groups, with sourcing decisions and administration occurring at the SBU. Though most companies are generally satisfied with the efforts they have made in strategically sourcing their direct goods and services, most companies are still attempting to gain comparable control and results with their indirect spend.

Indirect spend is receiving increased attention from the senior management of large corporations. On average, indirect spend equals about 50 percent of a company’s purchases. Unfortunately, a significant amount of indirect spend is not purchased using the organization’s purchasing/supply function or purchasing processes. Senior management has realized that reducing or eliminating indirect spend offers an opportunity to favourably affect a company’s cost structure. Examples of indirect spend include: professional services, utilities, company travel, office products, and waste Management, facility management e.t.c However, spend that is indirect for one company may be direct for another. Furthermore, segmenting direct and indirect spend can be very difficult, particularly for service companies.

With increased outsourcing of non-core capabilities, the growth of the service sector, and increasing cost pressure, the importance of managing indirect spend is increasing.  A recent survey conducted by The Aberdeen Group recently reported that about 70 percent of procurement executives cite indirect spend as a top focus for controlling and reducing cost. Procurement executives know that indirect category management now presents a significant opportunity for cost management, gross profit and margin growth. More procurement groups now seek to drive a larger volume of contracts through their organizations. They want to manage and negotiate better rates and achieve tighter compliance with both financial and regulatory controls. And they believe that more attention to indirect spend and the multitude of suppliers in those categories can yield savings without distracting management attention from compliance or strategy.

Some of the top 5 Categories where companies can successfully achieve significant savings in indirect spend include:

Marketing Services

Marketing spend is defined as `external expenditures on services related to marketing’. Marketing spend categories usually include printing services compatible to goods,  agency/creative services, and other non-creative services,  Buying Marketing Services is often regarded as one of the highest budget areas within an organisation, hence the role for Procurement has increased considerably in recent years focusing on improving quality, delivery times and innovation.

 

Waste Management

Waste management is the “generation, prevention, characterization, monitoring, treatment, handling, reuse and residual disposition of solid wastes”. There are various types of solid waste including municipal (residential, institutional, commercial), agricultural, and special (health care, household hazardous wastes, sewage sludge). The term usually relates to materials produced by human activity, and the process is generally undertaken to reduce their effect on health, the environment or aesthetics.

 

Professional Services

Organisations often employ professional services for assistance with strategy, management, and other functional services such as legal, Human Resources etc.  Procurement can demonstrate value by providing insight to spend, supplier sourcing, realising savings and organising efficient, economical purchasing processes.

 

Office Supplies

Office Supplies can be defined as all items which have the objective of retaining or restoring a piece of equipment or system, to a state in which it can perform its required function. These are items which are used in production but do not become part of the end product and include hand tools, spare parts, lubricants and cleaning supplies e.t.c. They are goods acquired for the purpose of current operation; items that are consumable, sometimes perishable or short lived, and are subject to material change. They could also be items of a durable nature such as wastebaskets, small tools, bookends, file cabinets, chairs, calculators.

 

Facilities Management

Procurement is often involved with many of the services bought in, to support the building and people within an organisation – often referred as Facilities management (FM). FM is a significant area of spend for most organisations, traditionally defined as soft (people focused) and hard (engineering focused). Approaches for managing FM may be centralised or decentralised, either through several direct contractors or via an integrated FM supplier which provides all services.

What Procurement Professionals want in 2017

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The New Year is here already, after the holiday season filled with lots of giving and sharing with employees, colleagues, friends and loved ones, it’s now time to implement new spending strategies to help you make the most of your 2017 budget. If your company is planning to up the ante on event spending next year, they need to be aware what procurement professionals are looking out for and be better prepared on how make the most out of its 2017 procurement teams.

It’s no longer news that procurement teams fuel the profitability and growth of some the world’s most successful companies, from aligning procurement’s deliverables with top business goals to understanding exactly what needs to change in procurement to drive financial results, there are several habits that organisations can establish to encourage effective procurement practices that result in value generation for the company as a whole.

Some of the Industry trends that procurement professionals tend to be leaning toward in the New Year include:

  1. The power of relationships

The ability to build strong relationships with suppliers, clients and stakeholders can contribute to success within service delivery, recruitment and the list goes on.

Too often we see organisations fail to manage their contracts and suppliers. An effective supplier management framework that appropriately aligns risk, effort and reward is a key enabler of ongoing sustainable value creation. The framework needs to include segmentation (i.e., strategic, operational and tactical), performance management framework(s) and a clear articulation of organisational accountability and responsibility. Procurement professionals should be looking to do more in this regard in order to provide a more personal and tailored approach towards procurement in 2017

  1. Online Platforms

A growing amount of procurement professionals are tapping into online platforms to help build these global relationships. Procurement professionals can leverage what’s happening in retail-related user experience to build commercial business cases to invest internally in great systems.  Systems that will improve productivity and allow organisations to capture data and move from spend analysis to predictive procurement. Platforms that are cost effective and allows for easier data capture at point of purchase for procurement professionals. These niche platforms offer similar functions to a social network but also much more

So what are these online platforms? They aren’t just the usual culprits of Facebook, Twitter and LinkedIn. Now there’s a new wave of social media which is tailored to professionals in specific industries – the niche online business network. As for the procurement industry, some of these platforms include; Procurious, Salesforce, Amazon, SAP e.t.c. Procurement professionals should seek to delve deeper into these platforms to see how best they can further build upon existing successes recorded.

  1. Global networking

It’s no secret the logistics, procurement and supply chain profession is global in nature and these niche networks allow procurers, buyers and suppliers to network with people from all corners of the globe.  The online space is no doubt a key channel for establishing business relationships with professionals from some of the world’s largest economies. With functions such as networking capabilities, industry specific news and discussion forums, these platforms create focused global communities. They provide opportunities for members to converse, network and share knowledge with like-minded peers across the globe.

  1. Tailored learning

Niche online networks are also hubs of knowledge which can be useful when fostering relationships with several stakeholders. For example, if procurement professionals want to do business in new locations or with a new supplier, they’ll need to understand their background, the market they play in and local industry issues. Sites and platforms should foster discussions groups which can help one learn about another culture or industry’s way of doing business before entering the market.

 

The value that the an efficient and effective procurement department brings to an organisation are huge not just in cost savings but also in terms of long term profitability of the business and also in promoting  sustainability business practises and majority of businesses are beginning to establish and encourage habits that can drive these benefits. While the outcome of alignment and transformation projects are different for every organisation, the end result creates a clear path for procurement to drive financial results, earn more internal budget and resources, and demonstrate to key stakeholders the immense value and critical nature of their program. Procurement professionals are constantly challenged to provide the latest innovations that are truly integrated, mobile and social-enabled in order to deliver productivity gains and raise employee engagement and compliance while leading to better supplier management and auditing.

Eauction Trends in Retail Businesses

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Online auctions are transactions that result from a competitive bidding process usually conducted over the Internet. Whether the sales take place between individuals, between consumers and merchants, or between businesses, online auctions have enjoyed rapid growth with the spread of Internet access. Historically, e-auctions were designed to ensure the best prices for commonly used low cost goods such as stationary or component parts. However, the practice has since evolved into an important asset in procurement’s toolset and can provide exceptional value when applied in the correct circumstances, one of which being retail businesses.

Retail markets are highly dynamic and very competitive, having to deal consistently with very tight margins due to the huge amount of resources it takes to keep product quality high. Procurement/sales teams in these sectors need to be on top of their game in order to compete and remain financially viable.

Retail Businesses today aren’t finding it easy, but in the face of all these pressures, many of them are still thriving mostly by incorporating an e-auction strategic approach to its sales/sourcing as part of her overall business strategy. Beyond driving operational efficiency and cutting costs, this approach to can help even the best-performing retail businesses enhance customer/vendor relationships, increase product and ingredient quality, reduce spending and find new sources/outlets of sales/supply, which ultimately equips them to generate more value for their organization and become more efficient and effective.

Some other notable benefits associated with e-auctions for retail businesses include:

  1. Big data. The potentials for big data have become evident in all areas of business and the case is also the same for the retail businesses. Businesses that capture and analyse the huge amounts of data generated around shipment and transport will continue to improve efficiency. Companies that take advantage of collaborative solutions to process and analyse this data will reap the benefits of cost reduction, capacity control and risk management.
  2. Responsibility and traceability. As businesses expand globally, they are realising the need for transparent and traceable sales and supply chains. Businesses will continue to put their global these chains in the hands of a safe and secure IT platform.
  3. Digitisation of the supply chain. Supply chain analytics will allow businesses to create useful key performance indicators and incubate innovative ideas to successfully manage service levels. Daily monitoring, sharing, and interpretation of analytics will help businesses plan.
  4. Product Specification: Another key benefit of e-auctions is the early focus on requirement specification. The latter forms the basis of any successfully run e-auction and ensures that suppliers are aware of exactly what they are expected to provide. This transparency is beneficial to both parties and will help ensure a sustainable client/customer relationship.

However, there are still a few specific challenges retail companies face today which include:

  1. Getting the most value out of every part of the procurement process and ensuring an alignment between the results and overall business goals
  2. Navigating mega market trends: consumer demand for product transparency, empowered and well-researched consumers, health and safety issues and supply price hikes. These market forces are putting customer loyalty and brand reputation at stake and pushing retail businesses to rethink the way they source and bring products to market.
  3. Creating an enterprise-wide sourcing program in order to create a more efficient and unified supply process
  4. Maintaining an independent self-sufficient sourcing and procurement department

HOW TO IMPROVE COMPETITION WITH FEW SUPPLIERS

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The use of on-line auctions (e-auction) has increased rapidly in the last few years. Since they came onto the purchasing scene in the late 1990’s through the development of internet-based applications but just like with every other breakthrough events and technologies, e-auctions too come with its attendant risks and it is important that buyers and suppliers understand what these risks are so as to mitigate against its effects. Some of these risks are;

  • Bids not having enough qualified and competent suppliers;
  • suppliers not being able to demonstrate the overall value of their product or service and
  • Oversimplification of requirements to ‘fit the system’.

Without effective change management expectations may never be reached and inexperienced suppliers may bid below a sustainable price which makes the entire process unattractive to qualified and competent bidders. If a supplier suffers from a bad e-auction experience, then it is likely they may be reluctant to enter into the process again. Try to make sure that before rolling out an e-auction programme, the process is as fair and transparent as possible and has been approved by a pilot group including suppliers and that feedback from the pilot process is enacted on.

Some of the reasons why suppliers may be reluctant to participate in an e-auction bidding include;

  1. Unsuitable commodity/service – this might be an item where there is no competition in the market place, or that is too complicated to specify or largely cannot be specified
  2. Lack of competitive supply base – if a product or service does not have at least three suitable suppliers, then the e-auction process is not generally suitable
  3. Poor training of buyer/supplier – getting things right first time is imperative to build trust amongst suppliers in your company’s e-auction process
  4. E-Auction timing – If you are inviting suppliers to participate from a different country and time zone, take care that if the timing chosen to run the auction is convenient to those suppliers.

So what if you are running a bidding process and there are not enough suppliers to make the process as competitive as you would want, what do you do?

Highlighted below are some of the strategies you can adopt to find your way around that problem

1.Supplier implementation

Firstly the best good advice I can give to you is that it is important to get supplier input during the pre-bid (for example through participation in building the RFx) to ensure that they feel a part of the process. One key advantage of this is that this dampens emphasis on pricing and buyers and suppliers can focus on understanding and meeting technical elements of the bid, i.e. meeting the customer’s real needs and this can help to produce the desired results even when participation is not very robust.2.

2.Getting supplier buy-in

There is more supplier acceptance of online auctions than there once was, but still you need to tread carefully to get their buy-in. Visit suppliers or invite them to briefings to explain carefully the principles not just of auctions, but more broadly of online sourcing. They will have concerns, but they will have useful input too: they know their businesses better than you do, and what they tell you will help you optimise your strategies for online bidding events. As a result of hard talking up front, online sourcing will help you to create precise and detailed RFQs that will improve communication and reduce business risks further down the road.

3. Driving Best Practise

In order to improve on the numbers and achieve a more competitive bidding process, a procurer needs to put some people, process, performance measurement and knowledge capabilities in place. The first requirement is a clear understanding of the supply base and the criticality of each supplier to the business. Typically an organisation can segment between strategic partners, value-added suppliers and commodity product suppliers. One will also need to build up market intelligence in order to gain a clear understanding of the dynamics of the market sectors and to define sector strategies – for example properly crafted online RFQs and RFPs can help expedite the communication between buyer and suppliers and can help drive a standardised sourcing process across the organisation.

4.Training

Lastly the importance training and retraining of suppliers as to the workings of your online procurement process cannot be overemphasized. Many buying organisations underestimate the amount of time it takes to educate suppliers in online auction tools. Suppliers with less tech-savvy sales teams may need some extra handholding through their first events, and here the assistance of the auction technology provider can be invaluable. Bidders need feel more comfortable about participating in the process especially when there is a limited number of them.

E-Auction in the cloud system

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E-Auction in the cloud system

Cloud computing has recently emerged as a new computing paradigm that enables prompt and on-demand access to computing resources. This is exemplified in Amazon EC2 and Microsoft Azure. Cloud providers invest substantially into their data centre infrastructure, providing a virtually unlimited “sea” of CPU, RAM and storage resources to cloud users, often assisted by virtualization technologies. The elastic and on-demand nature of cloud computing assists cloud users to meet their dynamic and fluctuating demands with minimal management overhead, while the cloud ecosystem as a whole achieves economies of scale through cost amortization.

Cloud computing is usually large-scale, distributed computing leveraging Internet-accessible data centres that provide computing resources as cloud. Modern Internet applications are designed using the virtualization technology in the cloud computing environment. Such cloud-based Internet applications are deployed on virtual machines (VMs), also called instances whose resource requirements are pre-configured.

Latest developments in cloud computing technologies have enabled a plethora of cloud based data storage services (e.g., Amazon S3 [1], Dropbox, Google Drive, SkyDrive et.c.) Cloud storage service has gained widespread recognition and adoption by Internet users, many of whom now routinely execute online storage and online backup tasks over the cloud.

In similar vein cloud based auctioning is becoming increasingly important as part of the strategic sourcing process because this allows you to track all aspects of an e-auction, including actions taken by both sellers and bidders. This automated auction processes puts companies ahead in time and also simplifies the entire cycle of activities. Some of the great features of a cloud based auction system include;

  • No investment is required for cloud based E-auction.
  • It’s a Pay per use utility
  • You can prepare, manage and end auctions on it.
  • It allows you to run an auction via the web and podium simultaneously.
  • It reports cost implications, cost reductions etc, and lots more.
  • Return on investment is high
  • Cost is based on yearly license

Usually, a cloud based auction system manages the entire auction process. This makes it simple to set up online auctions which are intuitive to use by both buyers and suppliers, meaning that little training is required. Auctions can be open to all verified suppliers or focused on specific groups. Buyers and sellers can monitor their auctions in real time via an online dashboard. This is accessible in the office and on the road via tablet and smart phone. cloud based auctions also features a bidding timer which counts down until the auction ends. All parties can see the competitive bids as they are made via graphical and tabular displays. Suppliers execute their bidding strategy online, choosing when and how much to bid in relation to their competitors, until the auction ends and closes to inputs.The system also documents the auction process and keeps an audit trail to ensure your organisation can answer any retrospective queries or challenges.

Pay per use utility in the cloud system makes it suitable for experimenting on how it can accrue benefits to the business before it is fully adopted. In most cases buyers can test the functionality through demos, which are generally free for one time e-auction, allowing users to practise creating an event prior to purchasing a license.

Despite these numerous benefits associated with cloud based auctioning, the system is still not without its shortfalls and the two most significant of these are:

  • Firstly, the storage service highly depends on centralized data centres in the cloud, accidents and natural disasters (fire, earthquake, power outage) will have significant impact on the service performance.
  • Second, the cloud storage providers face significant cost in purchasing or renting real estate, cloud infrastructures, hardware, power and network bandwidth.

CONCLUSION

Buyer-assisted cloud storage is emerging as new, exciting hybrid architecture for online storage systems that represent a potential win-win solution for both cloud storage providers and cloud users. Online procurement auction for resource pooling by the provider which serves as a financial catalyst for bringing buyer-assisted cloud storage into reality is gradually becoming the norm. Procurement organisations that want to create a structured process around eAuction must adopt this system in order to stay ahead.