Archive for August, 2008
More Reverse Auction momentum
Some more recent reverse auction stories that popped into my Google Reader:
Using Reverse Auctions to buy advertising spots on Radio. A quote:
Bid4Spots allows the media buyers (that’s us) to set a maximum bid and allow stations to bid ever-lower media prices. After all, the stations are selling next week’s leftover airtime.
The real power of Bid4Spots is the steadily lessening of price rather than the gradual increase. In a Bear economy, when most businesses are cutting their media spend, there exists a real opportunity for small and medium-sized businesses to get a lot of airtime for their money.
City of Waco uses a reverse auction to buy electricity. There seems to be a lot of interest in running reverse auctions for electricity these days. A quote:
“We’ve been wanting to try a reverse auction for some time, as we believed the process could significantly benefit the City and, ultimately, our taxpayers,” said Danny Jackson, Administrative Engineer, City of Waco. “I can’t say enough about how great World Energy’s people were throughout the process. The market directors were extremely knowledgeable about the industry and helped us make key decisions regarding structuring the auctions to ensure we had significant supplier participation. We were particularly pleased that World Energy was able to drum up supplier interest for the auction, even though we used our own paper for awarding the contract.”
2 points on this:
- The Bid4Spots story is spot on in linking an upswing in reverse auction interest to the current downwards trajectory in the economy. This is what happened last time round in 2002.
- The Waco story is spot on in highlighting the importance of market making support in running a successful auction. It’s no good these days for software companies to sell only software and/or software integration/implementation services. These days successful technology delivery revolves around what What Max Bleyleben (Disclosure: he works for Kennet, an investor in TradingPartners) calls software/services/content convergence.
Add comment August 21, 2008
An honest, open and transparent approach to supplier selection
I was doing some googling recently about Japanese auctions to see if there is anyone out there apart from TradingPartners who has anything useful to say about them in a procurement space. Turns out there doesn’t seem to be. But in the process I stumbled across this entertaining old article from the NY Times:
Takashi Hashiyama, president of Maspro Denkoh Corporation, an electronics company based outside of Nagoya, Japan, could not decide whether Christie’s or Sotheby’s should sell the company’s art collection, which is worth more than $20 million, at next week’s auctions in New York.
He did not split the collection – which includes an important Cézanne landscape, an early Picasso street scene and a rare van Gogh view from the artist’s Paris apartment – between the two houses, as sometimes happens. Nor did he decide to abandon the auction process and sell the paintings through a private dealer.Instead, he resorted to an ancient method of decision-making that has been time-tested on playgrounds around the world: rock breaks scissors, scissors cuts paper, paper smothers rock.
In Japan, resorting to such games of chance is not unusual. “I sometimes use such methods when I cannot make a decision,” Mr. Hashiyama said in a telephone interview. “As both companies were equally good and I just could not choose one, I asked them to please decide between themselves and suggested to use such methods as rock, paper, scissors.”
Well as a process it’s certainly honest, open and transparent.
Add comment August 18, 2008
Better procurement and integrated design
I read a good feature in my old university magazine with Prof Ann Dowling from Cambridge University’s Engineering Department who is working with MIT to come up with a very quiet plane: the SAX-40 (Silent Aircraft eXperimental).
But what stood out from a procurement perspective was not all the clever stuff that goes into designing a near-silent aircraft (if you are interested it might be ready by about 2040). What stood out was the design process:
Dowling’s team designed the whole plane as a single, integrated piece of work, including the engines, and built a sufficiently complex computer model of how it would fly to enable them to design out the noise – a far cry from the conventional approach in almost all walks of engineering life. Cars, for example, are currently drawn by graphic designers, handed off to engineers to build, and then handed off again to an engine specialist tasked with making a propulsion unit to fit in a pre-ordained space.
The trouble with this conventional approach (and plane design is essentially no different) is that noise is very ‘cheap’ in efficiency terms: it’s easy to design a lot of noise into a blueprint for a machine without even noticing. That’s because, as Dowling explains, ‘the energy in sound is trifling. An entire Cup Final crowd, cheering and shouting for ninety minutes, generates about enough energy to boil a kettle.’ But integrated design can take accidental noise into account, and car manufacturers are starting to sit up and take notice.
What does an engineering design story have to do with procurement? How about switching out “noise” for “cost” so you have a sentence that reads something like this: “it is easy to design a lot of cost into a blueprint for a machine without even noticing.”
It is a commonplace amongst procurement circles that procurement needs to be involved earlier on in projects in order to add the most value. So it’s heartening to see how other areas, like engineering, are proving that integrated teams deliver better results.
3 comments August 13, 2008
Unite Members to Protest Against Council Tendering
See here.
Unite, Scotland’s largest trade union, will hold a demonstration [Wednesday, 4th June] outside South Lanarkshire Council offices in protest at the blind bidding process for the care and support services for adults with learning disabilities.
South Lanarkshire Council set up an e-auction for firms to tender for providing care at home by submitting charges by the hour.
Thus begins the press release. Looks like an e-auction is the root cause of the antipathy.
Well – look again, further down.
Bidders were given no information in the tender document on the current terms and conditions of the employees who would be transferred.
In other words: the union’s issue seems to be with the quality (or lack) of information that was given out to bidders rather than with the bidding process itself. Once again – to run a good sourcing process (whether it involves an e-auction or not) you still need to be clear with suppliers. And make sure they have full access to the information they need to place sensible bids.
Add comment August 7, 2008
Wordle: A bit of fun
Wordle.net is a fun utility that picks out the most significant words in blocks of text (e.g. documents or web pages or RSS feeds). Like an automated tag cloud generator. FYI I picked it up from this posting: http://www.fastforwardblog.com/2008/07/07/transparent-and-explicit/
Here are Wordle pages for some supply chain blogs:
Spend Matters
Sourcing Innovation
Plenty of talk about Challenges, Sourcing, Execution and Johnson (again – see Spend Matters)
e-Sourcing Forum
And of course, mine:
e-Sourcing Place
Add comment August 4, 2008
Reverse Auctions in the news
See here .
Local government and schools are hoping to join forces to cut what each unit spends on millions of sheets of paper each year.
Rick Morrisey, purchasing manager for Lafayette, is working to arrange a bulk paper purchasing contract along with the county, Ivy Tech Community College and possibly others.
Despite rising paper prices Morrisey believes that by going through a spend aggregation exercise and then running a reverse auction on the aggregated spend that he will be able to achieve valuable savings.
Assuming he runs his auction process well I’m sure he will, and I wish him all the best in his project. Reverse auctions aren’t 5-minute jobs but when run well they tend to blow away people’s expectations.
Add comment August 1, 2008
