Welcome to this week\u2019s installment of Whitepaper Wednesday here on the Purchasing Certification Blog. In this post, I\u2019ll be reviewing the whitepaper entitled \u201cMoving Beyond Reverse Auctions for Scalable, Sustainable Value\u201d from Emptoris. Though this whitepaper is about four years old, I still think that its content has value today.<\/p>\n
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The whitepaper pays a little homage to the reverse auction, saying \u201cCompanies have saved hundreds of millions of dollars using online auctions, often in categories where they thought they had already achieved substantial savings and rock-bottom prices through traditional negotiations.\u201d But a major premise of the whitepaper is that a reverse auction-only strategy is not sustainable for continued savings.<\/p>\n
The whitepaper posits that a major reason why companies see diminishing returns with reverse auctions is that they adhere to a \u201cbuyer-knows-best\u201d mentality when determining lots and combinations of items being bid upon. The whitepaper notes that a sourcing optimization solution will break down this barrier to additional savings.<\/p>\n
One of the core aspects of an optimization system is \u201cexpressive bidding,\u201d according to the whitepaper. Expressive bidding allows suppliers \u201cto offer discounts and bundled pricing, and flexibly address other non-price factors such as quantity, item specifications, delivery terms, etc. As a result, the buyer will have better insight into the supplier\u2019s capabilities and be able to better leverage their innovation.\u201d<\/p>\n
Combining expressive bidding with other aspects of sourcing optimization such as a flexible bidding model, supplier ratings, and business constraints would make bid analysis tough to accomplish manually, but optimization technology automates the analysis, allowing buyers to \u201ccreate multiple \u2018what-if\u2019 scenarios to conduct cost-benefit comparisons among various business constraints.\u201d<\/p>\n
But the benefits of optimization are not strictly for the buyer. There are benefits to the suppliers as well.<\/p>\n
The whitepaper introduces the concept of optimization-based supplier bid recommendations. This feature gives the supplier \u201cfeedback that recommends alternate pricing and bundling scenarios based on the overall negotiation dynamics and competitive bids. This benefits suppliers by providing them with additional insight into how they might bid more competitively, in ways they may not have considered,\u201d while also doing the buyer\u2019s work of enticing the supplier to make its offering more attractive.<\/p>\n
According to the whitepaper, procurement organizations using optimization tools are able to save an additional 7% after already exhausting the savings realized from using reverse auctions year after year on a certain category of goods or services.<\/p>\n
While this whitepaper may not cover as many of the nuts-and-bolts of optimization as myself and Michael Lamoureux did in our podcast entitled \u201cSupply Chain Optimization Simplified\u201d and is one of the older whitepapers I\u2019ve reviewed (consider that one of the analysts quoted in the whitepaper is now the Chief Marketing Officer for one of Emptoris\u2019 competitors), I still think it is a worthy read. You can download your own copy of the whitepaper from Emptoris\u2019 Web site (registration is required).<\/p>\n","protected":false},"excerpt":{"rendered":"
Welcome to this week\u2019s installment of Whitepaper Wednesday here on […]<\/p>\n","protected":false},"author":12,"featured_media":4033,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2649","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\n