As you recall, the case for eSourcing 2.0 is one of compliance, visibility, knowledge capture, and efficiency, not necessarily one of negotiation strategy (i.e. If you want to run a competitive bid? Great! If not, use the system for final requirements and final bid capture).
That said, eSourcing 2.0 while not mandating a certain type of strategy, does not shy away from smart sourcing/negotiation strategies which can mean competitive bidding of any variety. In response to this list of eSourcing Myths and how to ‘bust’ them, I got into a discussion with one procurement exec (and loyal CPO Rising reader) from a very well-regarded procurement organization who kindly offered his team’s “Use of Auctions” policy and external communication regarding its use of eAuctions to be shared with the CPO Rising community (much appreciated and great thanks!).
I offer it for your consideration and commentary and will be back next time with some analysis.
About CompanyName’s Use of Auctions
As stated above, CompanyName reserves the right to conduct an Auction to conclude negotiations for this tender. Given the negative reputation Auctions sometimes receive in the market, we would like to provide the following clarifications about CompanyName’s use of Auctions:
- You have agreed to an eSourcing Code of Conduct when entering into this event. The rules stated within that Code were not exclusively focused on Supplier behavior, but CompanyName’s behavior as well. If you feel that CompanyName has violated its stated behaviors, you may contact CompanyName’s eSourcing management at eSourcing@CompanyName.com.
- Unless stated, CompanyName does not award strictly on price. The outcome of the Auction is one factor in the CompanyName sourcing decision. Suppliers will be selected based on ability to meet total supply program objectives including Total Cost.
- CompanyName’s objective in concluding negotiations with Auctions is two-fold:
- To create transparency into market pricing for CompanyName – transparency that we believe also benefits Suppliers. In traditional negotiations, a back and forth engagement occurs with a push for the Supplier to improve pricing with no transparency as to the competitiveness of pricing on the table. Therefore, Suppliers generally don’t know where they need to be with pricing. Furthermore, if a Supplier loses business based on the price component of Total Cost, they don’t know where the market pricing was so they can assimilate the data into their pricing models. Auctions provide transparency to where pricing needs to be and where the market is for Suppliers.
- To accelerate the negotiation process. Traditional party-to-party negotiations require significantly more time than Auctions. In some cases, weeks versus hours. We believe that this results in less time investment for suppliers overall. Additionally, it allows us to award contracts much quicker than traditional negotiations, so winning Suppliers receive business sooner.
