The Online Bidding event is conducted on-line with pre-qualified suppliers being invited to compete on predetermined and published award criteria. An Online Bidding can be on any combination of criteria. Bidders are able to introduce newor improved values to their bids in a visible and competitive environment. The procedure and duration of the event will be defined before the Online Bidding commences. There will be a starting value that suppliers will bid against until thecompetition closes. The Online Bidding will be a key stage in the contracting process.
Most procurement that is of sufficient value to attract competition, with arequirement that can be accurately specified and for which there is a competitive market can be suitable for an Online Bidding. Please contact Tactica (info@TacticaAsia.com) for further information where there is a tool that will help with the decision making process.
Online Biddings are increasingly being adopted by major players in industry and in the public sector. Online Auctions are firmly built into the procurement strategies of many private sector companies to source direct materials, products and services and support services. They are increasingly used to support management of the supply chain and are not strategically restricted to primary suppliers. Both central civil government and wider public sector organisations are building Online Biddings into their sourcing activities.
The cost of running an Online Bidding varies depending upon the complexity of any given situation but the pricing schedules for the Tactica’s e-Sourcing solutions are available by contacting the Sales at sales@TacticaAsia.com.
As soon as you have identified a requirement or recognized that a contract is coming up for renewal you need to start planning your Online Bidding as part of your procurement. This will include selecting an bidding provider.
Suppliers identified by the Supplier Sourcing teams and approved by the buyer are trained one-on-one with a Tactica representative. It is typically a 45 minute phone conversation in which the suppliers and Tactica representative interact in a mock bidding event that is similar in structure to the suppliers’ actual event. During this training, suppliers are made comfortable with any thing they may experience on bid day.
Both buyers and suppliers agree to follow mutually beneficial market rules. Tactica acts as a third party, monitors compliance and determines appropriate actions when necessary. Buyers agrees to award only to suppliers who bid online, only invite qualified suppliers, award lots as specified in RFQ, and consider all competitive bidders. Suppliers agree to not submit offline bids, bid aggressively as possible, bid only on entire lots, submit all bids as legal quotations, and understand that the lowest price bidder does not automatically receive business.
Customers are provided access to Tactica supplier management activities and control each step of the process. Tactica actively recruits suppliers to register and has formed relationships with supplier organizations. Supplier’s key information is confirmed before being entered into the potential supplier database. At the beginning of an event, all potential suppliers are identified and the customer selects the initial suppliers. These suppliers are required to complete a capability profile to ensure they meet the customer requirements. From this information, the customer chooses which suppliers will be sent an RFQ and invited to participate in the event. Tactica also provides a customer care center to accommodate supplier inquiries and perform all necessary training and technical questions.
Following the online bid event, Tactica collects unit pricing, freight costs, and any additional post-bid data from the suppliers and provides it to the Buyer. The Buyer typically will evaluate the low-bidding suppliers by reviewing the post-bid data provided by Tactica, make site visits, conduct quality audits, etc. and then make final award decisions. Tactica will notify suppliers that are not awarded and assist the Buyer in implementation activities as requested.
All factors that would affect a supplier’s cost such as quality requirements, service expectations, payment terms, lead times, delivery requirements, etc. areincluded in the Request for Quotation. Tactica works with the Buyer to create a Total Cost RFQ, which is distributed to the high-quality suppliers that the Buyer selects. Following the bidding event, the Buyer makes award decisions and isnot obligated to award to the low-bidding supplier.
Tactica has market experts and program managers with specific vertical market expertise to assist customers with events. Customers benefit from working with experienced staff who provide expert advice on RFQ, lotting and auction strategies to achieve maximum results.
Dealing with suppliers in low cost countries is not appropriate for all buyers, nor for all purchase categories. Generally, you will need the support or infrastructure to identify, qualify and monitor the supply base, as well as tend to the continuing stream of shipments. This suggests that higher volumes, with continuing shipments, are the ones to address first. As experience and sophistication grows, many purchase categories may be seen to be appropriate.
With the selection of the appropriate low cost countries, and their better export suppliers, significant cost savings, cycle time reductions, and even quality improvements are possible. In a number of instances, higher technology components or devices may be preferable to purchase in these countries. Generally, buyers who continue to utilize low cost country suppliers experience total cost savings that, even after compensating for risk, longer transit times, and infrastructure to manage the buy, are quite significant.
This concern, or a similar one, may be expressed by Materials Managers or Plant Managers, to whom the Buyers report. One view of Purchasing work is to get the orders placed, with whomever the engineer/maintenance supervisor/office manager thinks is the best source. And, also do the expediting. The notion of Strategic Sourcing, or commodity plans or contracting may appear to be inappropriate, unrelated and different from what those managers have always viewed the work of Purchasing to be. The opportunity is to give the Buyers the tools that will help them move into the areas of strategic sourcing, and assist the Plant Managers in meeting their objectives by making suppliers responsive to them. This work would supplement, not replace, the important work of keeping the plant running.
This is probably a true statement, if the Buyers spend their days overwhelmed with requisitions, calling around to find suppliers, and chasing late shipments. Basically, they would be working in an out-of-control transactional situation, almost always without even rudimentary e-Commerce tools. And, the Buyers may find that they will not have the time to do the supplier identification, negotiation, selection and contracting necessary to put in place effective electronic catalogs to relieve this workload. Here, a review of the current stable of catalog-capable suppliers can immediately relieve a substantial portion of the workload from the Buyers, permit them the time to explore better suppliers for the remaining commodities, and then even re-quote some of the major commodities to achieve additional savings. This could be approached as a 1-2 year evolution, with the situation improving each month.
These are valid community relations issues, but need to be thought through as to how they are implemented. Such a commitment does not mean that the client needs to deal with all local suppliers. Instead, by focusing on the best local suppliers, or the best regionally suppliers, the client both underscores the commitment to the community and the requirement that suppliers need to meet certain standards in order to supply. Care should be taken to avoid commodity areas where local suppliers traditionally charge high margins; instead, seek out bright, aggressive suppliers with low overhead and active business flows.
It costs too much to change suppliers, just to reduce the total number In actuality, few suppliers are embedded or unavoidably-continuing suppliers. Most are continuing suppliers because they are the suppliers to whom people always go to for the same type of thing, time after time. Here, Online Biddings, coupled with e-Commerce tools such as EDI and electronic catalogs can break that habit, by channeling purchases to the newly-chosen supplier. Where there are truly embedded suppliers, close work with the requestors can often show them that better pricing and service can be made available, by their lending their commodity expertise to a Purchasing effort to meet their specific needs more fully. The key is to have the requestors fully spell out what their needs are, in an objective manner. Then, requestors would participate with Purchasing in making the final supplier selection. In these types of situations, the biases of requestors evolve toward understanding the value of the Purchasing contribution, especially when they are able to participate with Purchasing in the process.
This is a true statement for a very small percentage of the purchases. For any item, there may be an emergency need that cannot wait until the next day, or the day after. But, this is often used as an excuse for excessive levels of in-house inventory and for requiring only local suppliers. Again, the focus here is on service levels. And, the way to improve service levels is to aggregate the business, to make it more attractive to potential suppliers. The dollar levels are bigger, and multi-site needs are handled in a more uniform manner. Still, even when local suppliers are needed, more dollars can be aggregated onto fewer local suppliers by grouping related items together. For instance, plumbing supplies and light bulbs and electrical switches can all be bought from a large hardware chain, rather than from 3 or 4 different corner hardware stores. And, in doing so, you are selecting a supplier who has a greater likelihood of having such things as an e-Commerce infrastructure, and efficient billing system, and modern business approaches.
This leads to the proliferation of suppliers and the dilution of purchasing power. That dilution manifests itself in higher purchase prices, because what would otherwise be a significant chunk of business is split into several pieces, each less attractive than the whole. Also, each piece requires separate administration and negotiation, leading to higher overhead costs for the supplier. But, what the internal customers of the client also see is poorer service, since each portion constitutes less attractive business to a supplier.
No. The use of an Online Bidding in no way impacts upon buyer’s policy to award contracts on the basis of the most economically advantageous tender. An Online Bidding does offer the buyer the opportunity to arrive either at or close to the true market price in an efficient and transparent way, but does not encourage suppliers to submit bids at unsustainable levels.
The reality is the risk may be greatest by not exploring the marketplace and identifying potential new suppliers; ones who may employ more modern techniques, equipment, and processes, as well as those in low cost countries. To include new bidders, you will need to perform pre-screening, at a minimum, or even a full qualification. By proceeding incrementally, with those companies who display the most promise, you can infuse competition, while minimizing risks at each step. Again, the greater risk may be in not remaining as a competitive company in a global marketplace.
No. To the contrary, you are telling them that their cost-effectiveness and efficiency in all aspects of their operation is what will continue to earn them your business. It reinforces the signal that they must compete to win your business. Most often, this is the environment that your company encounters in its own marketplace.
Each company necessarily has several purchase categories that it considers critical. For these categories, they choose to value the special characteristics of highly-respected suppliers; their patents, their craftsmanship, or key technologies. However, for the vast majority of purchases, most reputable suppliers can meet the need, within a range of performance. For those purchase categories, the use of an Online Bididng (Online Auction) tool is most appropriate to select suppliers. And now, for competitive companies, becoming more price-competitive is a critical need. We view Online Biddings as a way to address that need.