Wednesday, 18 February 2015

Auctioning the elderly - what is the real story?

CC Image courtesy of Kevin Dooley

The Daily Mail recently published an article about how elderly people had been auctioned off to care homes on the internet.

Of course, the Daily Mail specialise in creating provocative content which people will want to read. This article received 740 comments, which is far better than my average blog post.

Market Dojo does not provide the IT system identified in the article. We did want to provide an alternative viewpoint on the story.

So, lets take the key points in turn...

At least a dozen local authorities are listing vulnerable people's details

There doesn't seem to be any suggestion that the local authorities are sharing details with anyone other than those approved to see them. Indeed, the registration process seems to be very thorough. In common with Market Dojo, only approved companies would get access to the details of the event. These details would be required in any kind of tender process to enable to vendors to bid accurately against the requirement.

Ages and care needs including medication sent to up to 100 care firms

Well, yes. It is wise to provide details if you want to find a provider who can care for the person based on their individual needs.  I am quite sure that an ethical firm would require this information before they would be able to provide an offer of care for someone. Without knowing their individual needs, how could they be expected to provide proper care for them? Using an electronic approach allows you to spread the net wider, which means finding a better match for the individual's needs and the auction element of this is simply for the last stage to negotiate the price.

They pick which people to bid for - and cheapest offer nearly always wins

Yes, this isn't suprising.  Generally this only happens after the following steps have taken place:
- The suppliers have been screened to ensure they can offer the level of care which is required.
- The screened suppliers have assessed the persons needs to ensure they can provide the appropriate level of  care.
 - All suppliers have agreed to meet the required SLA's (Service Level Agreements)

This makes it unlikely that the cheapest supplier is offering an inferior level of care. In fact, by comparing bids from several suppliers, it is easy to identify anyone who is cutting corners and offering a much lower price than everyone else.

'eBay-style' system 'awful' and 'just uncivilised'

The comments seem to refer to the funding crisis for elderly care. This is a cause I completely support and commend Roz Altman for speaking out on this issue. For local authorities who have been tasked with using fewer resources more efficiently, a reverse auction makes a lot of sense. The process can be completed faster, leaving the clients and their families with a shorter period of uncertainty at a very difficult time. By putting strict quality criteria in place (a point mentioned but not emphasied in the article) the local authority get the best possible standard of care, whilst ensuring that private companies are not able to make excessive  profits at the taxpayers expense. Again it should be noted that this is no different from any tender process except by the use of an auction the negotiation is more efficient, and not to mention completely transparent.

Health group leader: 'It's an absolute disgrace - it's like a cattle market'

It wasn't clear to me why the system had been compared to a cattle market. I suspect that this was because an auction was used to match them with care firms. Whilst it's true that cattle markets use an auction approach, I think that is really where the similarity ends. An auction is an efficient and fair method to identify the best match for a specific set of requirements. Whilst price is a factor, auctions can also consider quality factors as the councils quoted in the article clearly said.

The article did raise some serious issues where vulnerable people had been sent to homes which were zero rated on a councils own quality scale. I'm glad that these problems were highlighted. I would have liked to see more investigation into the reasons why. When used correctly, an auction can help prevent this type of issue. They provide a clear view of the different choices available. I think it's quite wrong to relate these issues with the use of an auction system for the sake of a good headline.  In fact this is far more related to how the SLA was defined and how the contract was awarded and managed.

In summary

- Unlike eBay, the details shared on reverse auction systems are only available to companies who are approved to see them and who have agreed to the SLA's
- Using an online tool simply increases efficiency. It saves time and money allowing those resources to be used in other areas.  In reality the process is no different from any paper based tender.
- Auctions are an efficient method to find the best offering for a particular set of needs. They do not need to focus only on price.
  - Contract management needs to be carefully reviewed to ensure all SLA's are adhered to following the tender. Any suppliers deviating from these would not be a result of the method for price submission but rather refers to their attention to detail and rigor during the tender process.


About: Market Dojo provides accessible eSourcing software. Find out more at www.marketdojo.com

Thursday, 22 January 2015

Effixens and Market Dojo partner up to increase coverage in the French market

We are really excited to welcome Effixens as our partner to offer our leading eProcurement tools into the French market.   Read on to hear their formal press release.

Effixens strengthens its services around eProcurement.  They have signed a distribution agreement for France from the cloud provider, Market Dojo, across their whole product range.

Market Dojo’s e-Sourcing solution - a comprehensive eTendering solution which includes an extensive eAuction capability;

Innovation Dojo - helps create two way collaboration with companies and their suppliers to develop and prioritise new ideas;

Category Dojo  - assists buyers in better understanding their spend categories and also finding new opportunities.

Anne-Marie Guillemoteau, Effixens president says, "We were initially looking for a tool for the French SMEs who do not normally invest in e-Sourcing due to complexity or cost. We’ve performed lots of tests on Market Dojo’s tools. This solution applies to companies which have neither the time nor the budget for conducting a traditional project, and also appeals to companies wishing to test the use of a tool for complex tenders or auctions."

According to Jean Michel Mabille, co-founder of Effixens "These solutions do not have a comparable competitor in today’s market. For example, there are no implementation challenges, very little training required and this is all combined with well-defined functionality in a user-friendly interface."

One of Market Dojo’s strengths is that it offers a flexible pricing solution.  This allows either the purchase of one or more licenses on a minimum term of one month, or on an event basis.

Alun Rafique, co-founder of Market Dojo mentions, "We have had fantastic success within the UK market and it is the time to start realising our potential abroad.  Effixens are a great partner to help us achieve success in the French market."

Press contact: 
anne-marie.guillemoteau@effixens.fr
tel. : + 33 (0) 644 038 960

 
About EFFIXENS:

Effixens is a consulting company specializing in assisting with the implementation of ERP and Information Systems in the areas of purchasing and logistics. Based in Laval (53) and Paris (75), it was founded in 2011 by Anne-Marie Guillemoteau and Jean-Michel Mabille.

About Market Dojo:

Market Dojo is a SaaS (Software as a Service) provider who specialises in eSourcing software. Their solutions cover eTendering as well as innovation and opportunity analysis.  Based in Bristol, UK, it was founded by Nick Drewe, Alun Rafique and Nicholas Martin.
 

A brand new application of the reverse auction

The concept of the reverse auction has been around for close to 20 years and is a well-known approach to negotiating effectively with multiple suppliers.   

However, the Morning Star Scholarship Foundation utilised the reverse auction for an entirely new and creative concept that we have not encountered before – to negotiate scholarships towards tuition fees!  Read on to learn more about this innovative idea lead by Mike Sertic and his colleagues at the Morning Star Scholarship Foundation.

The Morning Star Company is the world’s leading tomato ingredient processor, supplying approximately 40% of the U.S. industrial tomato paste and diced tomato markets. 

They operate the Morning Star Scholarship Foundation, a charitable organisation that provides tuition grants to Morning Star colleagues (parents) to help fund their child’s switch from public to private or home school education, a very noble cause.

The Foundation was looking for a way to increase the number of scholarships they could offer to parents within the $15,000 funding allowance that was periodically available. 

They decided to contact Market Dojo, an e-Sourcing software provider focusing on user adoption, to try a closed-market auction as a solution to this, by letting parents compete in a reverse auction to determine their willingness to secure a grant. 

The concept was that the auction would begin at a maximum grant of $3,000 per child, at which point the total available pot of $15,000 would provide 5 scholarships.   However, because there would be more parents bidding than there were available grants, parents could use the ranked auction as an opportunity to bid incrementally lower amounts to ensure themselves of a top 5 position and secure a grant. The difference between the $3,000 opening bid and the bid offered by the parent would be paid for by the parent themself

For example, assuming the cost of the child’s tuition was $3,000, if a parent bid $2,700 to stay within the top 5 places, the parent would be committing to contribute $300 of their own money towards their child’s education, with $2,700 coming directly from the Morning Star Foundation.

The auction would continue until it hit a point where the average grant across the top 6 spots equalled $2,500.  For this amount, the $15,000 total fund would now be able to provide 6 scholarships in total, hence any parent ranked in the top 6 spots would be granted a scholarship for their child.  Should the auction reach an average of $2,142 across the top 7 spots, there would be 7 scholarships on offer, and so on.  Parents were to be notified of the news via the messaging facility in the application. 

Since the parents who were bidding in the auction were essentially consumers and not e-Procurement professionals, it was essential that the software was extremely easy to use and consumer-friendly.  Mike Sertic, who managed the process for Morning Star in a highly adept manner, conducted a series of trials to ensure everyone was up to speed with the concept:

"Prior to the auction, we utilized the neat "Sandpit" feature within Market Dojo for colleagues to practice and also held an informational webcast about the Foundation and auction process."

Absorbing all the feedback from the trials, two live auctions were conducted in late March over a 48 hour duration involving 16 competing parents in total.  Each auction represented a pot of $15,000, which when combined would be able to provide 10 scholarships.  Upon completion of the two auctions, which received over 270 bids, we were delighted to hear from Mike:

"This year we will be awarding $28,789 for a total of 14 scholarships. We hope that in the future, even more colleagues will make the switch to private or home school.  The Morning Star Foundation’s effort in implementing this program was made much easier by the folks at Market Dojo.”

Parents were equally supportive of the process, filling in the Market Dojo post-auction survey with very encouraging comments:

Awesome way to be fair to all colleagues!”, “It is a very generous offer that others could benefit from” and “The process is very user-friendly”.

This was an excellent achievement and only made possible through the team's vision in taking an existing process and modifying it for new solutions.  Mike and his colleagues have used this novel approach to enable an additional 4 children, bringing the total to 14 children, to benefit from the generosity of the Morning Star Scholarship Foundation this year.

As for the reverse auction, it’s great to see innovative ways for it to be used.
 


About: Market Dojo provides accessible eSourcing software. Find out more at www.marketdojo.com.

Friday, 9 January 2015

Odesma Ltd and Market Dojo Announce Alliance

Here is some exciting news of our new alliance with Odesma, as first published on their website here.  However you can read about it below.

By Ed Cross on Thursday, January 8th, 2015.

Odesma Ltd are pleased to announce their first partnership with leading e-Sourcing SaaS solution provider Market Dojo. The agreement will give Odesma, its customers and network the opportunity to utilise a best of breed, easy to use procurement sourcing solution to deliver value from third party spend fast and efficiently.

Nick Drewe; Co-Founder of Market Dojo said: “We are hugely excited to be partnering with Odesma to support them with this novel business model.  The team behind Odesma have such a fantastic track record and passion for procurement best practice that we are very proud to have been selected as their technology partner”.

Ed Cross; Managing Director, Odesma Ltd stated: “We view Market Dojo‘s solution as having all of the facets required in today’s market to deliver breakthrough value from third party spend. The solution is incredibly practical, founded on real World experience and very easy to use”.

Odesma is a new breed of advisory business whose goal is to help clients create immediate and sustainable improvements in the performance of their business. This is done through a combination of experience and application of the best talent and technology in the market. Business & procurement solutions are enabled through the unique Procurement PeopleCloud TM.

Market Dojo is a dynamic UK company that offers intelligent procurement applications, covering eSourcing, Opportunity Assessment and Innovation, that are affordable and on-demand.

For further information, please contact:
Odesma Ltd                                              
Ed Cross, Co-Founder.  Steve Trainor, Co-Founder
Tel: 0161 433 7833 www.odesma.co.uk
MarketDojo
Nick Drewe, Co-Founder,
Tel: 0117 230 9200, www.marketdojo.com
 

Friday, 19 December 2014

Technology in the year 2000!

We thought it would be interesting to look back at some of the leading tech at the turn of the millennium, things that we've all no doubt used in our past daily lives.   

We've handpicked some categories, each with a perfect example to help jog our memories.  Find out at the end why this is relevant to us all in procurement!

Mobile phone


The Nokia 3310 sold over 126 million models, by far the best selling phone in 2000.   Featuring an 84 x 48 pixel monochrome screen and talk-time of up to 4.5 hours, it also had a range of novel features such as a calculator, stop watch and Snake II. 

Laptop

One of the leading laptop brands as we entered the year 2000 (without much sign of that millennium bug, we should add) was the Sony VAIO.   Take this little beauty for example, the VAIO PCG-SRX99 (circa 2001).   It had an 850 MHz processor, a whopping 256 MB of RAM and a boggling 20GB of storage.   However the latest tech came with a hefty price tag of around $1,500.

Incidentally the iPhone 3GS, first introduced in 2009, pretty much matched this laptop's spec, which just goes to show how technology leaps on.

Web browsers


Internet Explorer 5 was one of the main participants in the browser war that unfurled between Microsoft and Netscape.  This IE held over 50% market share by early 2000, increasing up to 80% by the time IE6 came out in 2001.  Over 1000 people worked on IE5 during its development, putting the finishing touches to features like a Search Explorer bar, autocomplete and offline favourites.

Microsoft Office


With the catchy name of Office 2000, Microsoft wanted to embrace the Web in their latest office product.  Looking back on it, their crystal ball was working well that day.  There was also an enhanced Open and Save dialog box, customisable menus and self-repairing capability in case it became corrupted - very smart indeed!

And of course we all remember this guy, who got a bit of a face-lift:  

Microsoft Windows


In vogue at the turn of the millennium was Windows ME.  Supporting 16-bit colour icons, a brand new Windows Movie Maker and even an on-screen keyboard for tablets(!!), there was a real emphasis on usability in this product for both consumers and businesses alike. 

So why mention all these? 

Now you've revisited all the above, we hope we're correctly assuming that you're not still using any of these products.  Technology has moved on to such an extent that these are nothing more than old relics to amuse ourselves by.

And yet how many of you are still using procurement software that dates from the same era?  

Sure, there might have been various 'new releases' along the way, but typically these are nothing more than a few enhancements and bug fixes.  They are unlikely to be a complete refactoring, certainly not on the scale of the 1000 Microsoft staff who worked on IE5.   Try comparing Windows 8 to the Windows ME example above and you get a sense they practically come from different planets.  

However, a lot of procurement software is fundamentally the same as it was back then, even if new terms like 'cloud', 'SaaS', 'intuitive' and 'real-time' have been inserted into their revamped website literature.

Therefore the next time you're looking invest in procurement software, research into whether you're about to buy the Nokia 3310 in the age of the smartphone.


About: Market Dojo provides accessible eSourcing software. Find out more at www.marketdojo.com

Wednesday, 10 December 2014

Sealing your fate with a sealed bid period

Recently we encountered a twist on standard eAuction formats which worked by concealing supplier rankings at the end of an auction whilst allowing new bids to be submitted. 

You can think of it as a post-auction sealed bid phase but lasting minutes, not days or weeks.  

We say "post-auction" as it may technically still be part of the auction process, though by no means can you call a sealed bid process an 'auction'.  For example the Merriam-Webster online dictionary defines an auction as 'open public bidding', which a sealed bid quite clearly isn't.

The idea is that whilst the bidders would battle it out amongst themselves during the eAuction, they could further reduce their bids during this post-auction 'cool-off' without alerting their competitors.  In other words, it would leave all auction participants in the dark as to where they were finally positioned, much like a typical RFP.


This can give the buyer an advantage by avoiding the situation where the bidder knows they finished in first place but is later upset at not being awarded the contract.  It can happen for many reasons, albeit almost exclusively in the private sector, and typically it is due to the first-placed supplier not quite offering a compelling enough reason to be chosen.

A secondary advantage is that it can also prevent 'bid shadowing' which is where one or more bidders closely follow the lead bidder to ensure they are in with a chance of securing business but without having to give away as much margin.

However, it doesn't necessarily solve these issues.  The winning bidder during the auction may still be upset if they were not to be awarded the contract.  You couldn't help but empathise with the bidder that, if anything, they now have even less information to go on than if it were just an eAuction, adding to their frustration.

Furthermore, it possibly undermines the  purpose of an auction.  An auction is driven by open competition and interaction amongst bidders.  If the process was to be settled at the end via a sealed bid, you might as well have simply opted for a sealed bid process only.  The auction was a mere distraction.

In our former lives as eAuction consultants, best practice was not to allow post-auction bids, as it can compromise the auction itself.

To validate this point, we deliberated what we would do if we were invited to this two-stage negotiation process of eAuction followed by sealed bid.  

Firstly, we would identify our BAFO: best and final offer.  We would be forced to make an initial bid, be it during the RFQ or as our auction start price.  We would go in high; not so high that we get eliminated but high enough that we are conceding very little.   

Next, we would sit and observe the auction, not making a single move.  We might have an understanding of how many other players are involved, which is always nice to know, as well as where our uncompetitive offer finished up.

Once we enter into the sealed bid phase, we make our move knowing that our competitors will have no idea.  We'd hop in at our BAFO and hope that it would suffice.

How would our strategy differ to a single-stage sealed bid process?  We don't believe it would.  Hence the irrelevance of the eAuction in this case.

The trouble is the concept becomes a self-fulfilling prophecy.  Once bidders are told how this two-stage negotiation operates, they will logically hold back during the auction.  Why give the game away early?  And so to the client using this feature, they will see a not-very-successful eAuction followed by what appears to be a hugely exciting sealed bid process that has appeared to save the day!  Well, yes, of course it has:  the bidders have already realised the auction serves no purpose and have bypassed it. That is the consequence of allowing post-auction bids.

As a final illustration of why interactive auctions are more powerful, here's something we've all no doubt experienced on eBay:


You decide to bid on an item so you enter the maximum price you'll be willing to pay - your BAFO.  As the final minutes tick by, a new bid drops in that knocks you off the running.  You quickly decide to improve your offer - now call it your absolute BAFO! - if it means you might have one last chance of being successful.  

And so what you've done is exceeded the bid that you initially thought was as far as you'd go.  You've done this because competition has pushed you and you've decided that you still have the smallest of margin left to offer if it means you still have a chance.  The alternative is that you know you've lost. 

The second parallel with eBay is that you can be 'sniped', whereby someone pips you to it right at the end, even though you would have relished the chance to react.  This is precisely what the sealed bid phase detrimentally encourages.

Hence the conclusion is that communicating to bidders that there will be a post-auction sealed bid period fundamentally impairs the very thing you're looking to accomplish - using market forces to negotiate the absolute market price.


About: Market Dojo provides accessible eSourcing software. Find out more at www.marketdojo.com

Thursday, 4 December 2014

Does Lord Sugar need a basic procurement course?


'Negotiation is the DNA of business' was Alan Sugar's opening line in the boardroom following the negotiation task on 10th series of the Apprentice.

Always an interesting episode and this time proved no exception.  The crux of the task was that each of the teams have a day to source nine random items at the best prices across London.  The winning team will be the one who spends the least although the teams will be punished for failure to source or being late.

Essentially the hapless candidates traipse across the capital looking for items ranging from oud oil to kosher chicken.  You would think that they would be looking at a negotiation strategy involving MDO's, LAA's and BATNA's.  Unfortunately the actual tactics seems to be a cross between charming the seller or begging for the goods at the lowest possible price.

The most provocative part of the task was the human skeleton.  This needed to be anatomical and full size. One team spent over £200 on a typical skeleton often seen in a biology class.  However the others 'thought outside the box' and bought a paper skeleton that can be constructed into a full size skeleton for 10% of the other team's cost.
One might have thought that Lord Sugar would have given bonus points for thinking laterally. But alas not so.  No leeway was given for an exemplary case of unclear specification perhaps due to the idea arising from a lawyer, a profession that seems to be one of Lord Sugars pate hates!  And so the paper skeleton was firmly put into the closet and the team fined, resulting in their failure for the task.  However this wasn't the only fine they received; the other being for the inability to cut a 1.7m piece of old rope down to 1m.  Giving more does not always put you in good stead!

Was this decision fair?  And in the end does it matter, as the customers decision is final?  The observations from this task are quite thought-provoking and you can draw parallels to a typical two-sided buyer-supplier negotiation. It pays for the buyer to specify what it is they are buying, otherwise comparing like-for-like is impossible.  This is especially important if you run a reverse auction to negotiate. 

Also suppliers need to ensure they have interpreted the specification correctly to ascertain whether they can offer a better solution. Perhaps more importantly, as it is the buyer who has the final say, does it pay to take advantage of a loose specification?  What do you think?

{You can see our comprehensive guide on Face-to-Face negotiation strategy here}

About: Market Dojo provides accessible eSourcing software. Find out more at www.marketdojo.com