Thursday, 27 March 2014

Can E-Sourcing Break the Bonds of E-mail?

These are the introductory paragraphs of a guest post by Alun Rafique of Market Dojo.  The full article features ThomasNet News who is one of the leading supplier discovery and product sourcing platforms on the market today. 

Self-service e-auctions are a great technological path for any company, as the advantages derived from more efficient negotiations are easy to relate. The real challenge is on the full e-sourcing software suite. Electronic Request for Quotations (eRFQs) are a great example. The benefits from eRFQs come from the centralization of data, auditability, and the ability to send out to more suppliers without a large increase in overhead.

It has been found that suppliers involved in eRFQs yield better savings. This is attributed to the process making the suppliers simply sharpen their pencils when they send out bids. In research by the University of the West of England, it has been found that e-sourcing strengthens buyer-supplier relationships.

So if the benefits from e-sourcing are there, why is there not more of an uptake in the process?

[Find out more by reading the full article here.]

Wednesday, 19 March 2014

Rightsourcing: how to benefit from offshoring IT

This is the opening gambit of a guest publication by Nick Drewe of Market Dojo on the highly respected Information Age magazine, whose objective is to help their readers become more confident and successful in their use of technology, in their choice of suppliers, and in their management of people and partners.  The article discusses why offshoring IT was the right choice for Market Dojo, but wasn’t without its challenges.

On 12 March 2014, the World Wide Web commemorated its 25th birthday. The internet has evolved to enable our corporate world to globally communicate in real-time via a diverse set of media.

We have never been better equipped to implement strategies that stretch across all continents of the planet. Even start-ups working from their local cafe can build businesses with global operations, something that was near impossible pre-internet.

The benefits to offshoring IT requirements are clear. The average cost for an equally skilled web developer in India is a third of that in the UK. Continue further east to Indonesia and it’s possible to halve the cost again. In some cases, even Indian companies offshore their IT services to Indonesia.

Offshore services can be purchased on a rolling monthly basis, and so, should a particular contractor not fulfill the obligations, another can be sourced. This is a much less risky and less costly process than trying to hire, house, equip and train your own employees. It gives a business real scalability, as it can flex its resources from one month to the next across a broad range of services – be it hosting, software testing, web development, project management, quality assurance or customer services.

However, there are recognised challenges....[read the full article here]

Friday, 14 March 2014

Why Buyers should embrace Japanese Auctions

'We have the pleasure of a guest post from one of our clients, Terri Hudson, who represents Baker Wanless and eQuiddity.  She is has many years experience of running auctions and has shared her thoughts on the Japanese auction format.'

Many people often question the use of Japanese Auctions with me.  Why use them?  What are the benefits?  How is this fair?  So I thought I would share my views on Japanese Auctions to illustrate the benefits of this auction type and when and why to use it.

So what is a Japanese auction?  A Japanese auction is where there is no free bidding by suppliers.  The software drops the price automatically (typically 1% every 5 minutes) and the supplier simply needs to ‘Accept’ or ‘Decline’ that price drop.  The Market Dojo platform makes it very easy for bidders to take part.  The screen is fresh and bright.  Accept is coloured black and Decline in red to avoid mistakes and the screen refresh is fast so bids are received in no time at all.  The platform also gives the buyer the ability to adjust the decrements and time gaps during the live auction so as suppliers get familiar with the process the buyer could look to reducing the time between drops from 5 minutes to 3 minutes.

Throughout 2013, Baker Wanless / e-Quiddity ran between 45 and 50 Auctions through the Market DoJo platform and 90% of those were deployed as a Japanese build and identified savings in the region of €20m for our clients.  Some would argue that you could achieve the same or similar results through more traditional auction builds, however this is debatable.

To begin with, Japanese auctions provide a level of commercial confidentiality on categories that sit under goods for resale.  For example, one bidder would not find it difficult to work out what another bidder’s margins are if they were given full visibility of the end result and positioning during the live event, because the retail selling price is in the public domain.  This is particularly sensitive with incumbent suppliers.  In many cases, the time between the live auction to award of business and the first delivery of the goods can often take around 3 to 4 months and it is important that the buyers maintain healthy relationships with their suppliers during a tender process.

The other benefits include the fact that when a supplier has reached their exit price, they are free to exit the auction and leave.  It does not stop the auction for others, only for them, and means there is no benefit to them watching the auction further.  Other methods may result in the supplier continuing to watch the auction whilst it continues with the other bidders in order to gain free market information.

As a buyer, you would notice that in more traditional eAuction methods, incumbents don’t tend to perform well.  They typically will tailgate the leading bidders and remain 2nd or 3rd ranked in an attempt to demonstrate a competitive yet non-leading bid.  This is because they feel they don’t need to be the best price. If the difference between them and another bidder is not significant the buyer is unlikely to change supplier.  The Japanese format removes visibility of the ranking meaning that they are unable to tailgate and must put their best foot forwards when bidding.

Why not give it a try?  We are experts at running them now and would be delighted to work with you and show you how it’s done, so get in touch.

Tuesday, 11 March 2014

Home advantage: our article posted on Supply Management

Supply Management recently posted an article by Nick Drewe of Market Dojo outlining some top 10 tips for running an eSourcing event, based on his experience of using an eSourcing tool to find a builder for his own home extension.  Here are the opening few paragraphs, and the rest can be found on Supply Management here.

At the end of 2013 Nick Drewe decided to use his professional expertise to electronically 
source a ground floor extension and loft conversion for his 
house. Here are 10 things 
the process taught him.

When none of the initial RFQs my wife and I received via a traditional email and face-to-face process for a ground-floor extension and loft conversion were within our budget, we decided to change 
our approach.

Instead of reducing the scope of works, we embarked upon a competitive bidding process, underpinned by e-sourcing software, involving 96 local building firms. The exercise resulted in a £35,000 (33 per cent) saving against the best of the three initial RFQs and, if anything, an increase in the scope of works due to some excellent market-informed suggestions.

Conducting a full-scale strategic sourcing project on something so close to home (sorry) can feel both risky and daunting. And so I’ve listed the top 10 tips from my professional experience that enabled us to achieve this result.

[The top 10 tips can be found on the Supply Management website here.]

Monday, 10 March 2014

eWorld March 2014 & our little talk!

We recently returned from another fantastic eWorld event in Westminster.  The most noticeable difference for us between this event and previous ones was the absence of Market Dojo co-founder, Alun Rafique.  Alun and his wife Justyna are expecting their first child imminently and so a trip into central London was strictly off the cards, as you can imagine!

Having to make do with two of us on the stand, quite simply we were overcome by the sheer quantity of great discussions with passing delegates.  For any of you who approached our stand and did not have the chance to talk to us, we apologise profusely!

If it is any consolation, we missed the 2pm cut-off for hot lunches and had to make do with a chicken wrap and fruit salad for nourishment shortly before 3pm!  We’ve learnt our lesson and will ensure we have more colleagues on hand next time.

This year was another first for us as we held our own Innovation Briefing seminar entitled, “From identifying opportunities to realised savings” in conjunction with our client and partner, eQuiddity.   The 30 minute talk covered two major areas of procurement that are poorly defined, specifically:

  1. Opportunity assessment:  how to build a procurement plan addressing what it is that you should tender in the next X months, what approach you should take, what resources you should allocate and what you are looking to deliver back to the business;

  1. Implementation:  how to implement the tender outcomes, as post-tender all you have are a set of figures on a computer screen and some supplier names.  Here we outlined how you implement those results and even enhance them in the process.  

The seminar, which was held concurrently with other events, was very well attended with all 80 chairs taken and some attendees even standing at the back!  eWorld are excellent at providing detailed feedback from delegates so we look forward to learning from that in due course.  

For those of you who couldn’t make it, or if you’d like to own a copy of our presentation, you can download a PDF copy here (please first sign in or sign up to Market Dojo for the link to work).

It’s also great to see that eWorld have taken on board their own feedback and have provided free tea and coffees, which was possibly the most popular event of the day!  The queue snaked past our stand, which provided us a captive audience to engage with.  I hope we made your waiting time fly by!

Thanks again to all of you who came by and we look forward to a repeat event in September.

Thursday, 6 March 2014

Strategic procurement and departmental organisation

Thinking of becoming more strategic? How should you adapt your organisational structure? Some time ago one of our client's was asking the same questions. We sat down and worked through our past experience. We have seen how a large number of companies including Rolls-Royce and PriceWaterhouseCoopers have approached this challenge. We have summed up a simple structure below and we hope you will find it useful.

The introduction of ERP programs, new sourcing methodologies, continuous supplier rationalisation and commodity management, can force companies to adapt the structure of their procurement organisation.

There is a normally an emphasis to reduce the Downstream activities such as:

    • Issuing orders 
    • Expediting 
    • Trouble shooting 
    • Sorting queries 
    • Invoice queries 
    • Inspections 
    • Reporting 

And to increase the upstream activities such as:

    • Customer analysis 
    • Budgeting and forecasting 
    • Market Research 
    • Sourcing Group strategies 
    • Supplier Analysis and visits 
    • Supplier Strategies 
    • Concurrent Engineering 
    • RFP’s 
    • Negotiation planning and negotiation activities 
    • Supplier development 
    • Should cost exercises, parametric analysis, risk analysis, process and quality capability studies. 

A typical modern approach is to break the standard buying role into these four areas:

    • Operational 
    • Strategic 
    • Internal customer facing 
    • Supplier facing

Once you have identified the roles and created a job specification, the next step is to produce a person specification. This is a crucial step, often missed, which ensures you know when you have found the right person for the job.

The roles and responsibilities could be broken down as follows:

Operational professionals

These procurement professionals would be focused on the daily buying, the functional role.

Within this area you have the two management layers, the commodity managers and the buyers. Depending on the size of the organisation, these could be the same role.

Or the day to day functional buyers could be here (who you rotate from time to time) and the Commodity Managers might be in the strategic group.

The buying in this area should be driven by pre-agreed contracts, frameworks and pricing.

Strategic professionals

These strategic professionals would be looking at the higher level arrangements, such as:

    • e-Auctions, e-Sourcing 
    • Group buying 
    • Commodity plans (perhaps the commodity managers will sit here) 
    • Sourcing methodologies 
    • e-Cademies 
    • Supplier Rationalisations 
    • Volume aggregation 
    • Increasing efficiencies and reducing administration. 
    • NPI – new product introduction 

Essentially these professionals would be developing methodologies that other teams can follow. They could also provide advanced support on procurement exercises or even run complex tenders themselves. These would also form a principal part of your e-Cademy, if you decide have one.

Customer-facing professionals

Procurement professionals who focus on project work would be the best people moving forward to take this role.

The internal customer-facing role is about creating a good relationship between the buyers and the project teams.

This allows the buyers to work within commodity groups and the project teams can still get their due care and attention.

This kind of relationship would work well for concurrent engineering and liaising with sales teams around discounts. It would also help reduce renegade purchasing.

Supplier-facing professionals

The procurement professionals in this role would be primarily focused on the supplier side of the equation. They would need to liaise heavily with the commodity managers.

This would involve:

    • Managing supplier statistics around cost, quality, delivery, responsiveness, flexibility 
    • New supplier introduction process 
    • Managing supplier lists: approved, preferred, etc. 
    • Auditing 
    • Quality failures 
    • New product introduction 
    • Design and make 
    • Developing cost out 

In Summary

This is really a flavour of where you can go. The great thing about this methodology is you can implement as much or as little as you like. The main objective is to find a strategy for your procurement team that fits your organisation.

Tuesday, 4 March 2014

Variables in the Adoption of Auctions in Procurement by Kelly Barner & Alun Rafique

Posted on February 24, 2014 by  Jon Hansen on Procurement Insights

Editor’s Note: When Kelly Barner and Alun Rafique submitted this post on the variables in the adoption of auctions, they hit close to home in terms of an area of procurement about which I have a great deal of experience and expertise.
For several years my research into the utilization of advanced algorithms within the framework of an agent-based model was funded by the government’s Scientific Research and Experimental Development program.
From the early development phase through to the eventual introduction of a production system in the Department of National Defence, the model progressively demonstrated tangible savings while maintaining a high degree of supplier participation.  The key to success was not only in the flexible bid parameters that leveraged complex algorithms to assign the weighted values that resulted in the optimum supplier being picked 98 percent of the time, but was also achieved through an understanding of the market.  More specifically, the identification of commodity characteristics about which you can read in my May 2007 (reposted 2011) article Dangerous Supply Chain Myths Revisited (Part 7): Enabling Technology – The Emergence of the Metaprise.
Read more here

Also here is our guest appearance on Buyers Meeting point weekly update radio interview 24th Feb 14 discussing weighted tenders.