From Ideas To Savings - Chapter 3 - Part 2
You now have your projects nicely planned. Maybe it’s time for some ‘real’ work.
Chapter 3, part 2 - The Event
Now that you understand your categories and their potential savings, it’s time to produce those saving! To do so you will need to create a sourcing event. Variants of this could be the addition of a pre-qualification questionnaire, invitation to tender, RFx, and so forth.
These steps include bringing together the process from selecting your category to awarding the contract to your chosen supplier.
Step 1 - The process of putting together the information on your spend categories such as the savings potential and liquidity of the market into timescales and potential barriers for running the event.
Step 2 - Refers to the spend value for suppliers (the value and profit that suppliers are likely to gain from the business) with the specification for the goods or services and the structure of the event to encourage maximum participation. Combining into a RFQ overview or contract overview.
Step 3 - The point at which you search for suppliers through web research and referrals. Finding suppliers that match your criteria and can accommodate at least a proportion of your demand.
Step 4 - At this stage, you engage with suppliers for their initial bids. Gathering an understanding supplier engagement, how effective the bid structure is and whether you have produced initial savings. Am I still projected to hit my savings target? Do I need to change by strategy to reflect this?
Step 5 - Running the auction or the event involves gathering the final bids, recognising price compression and keeping a level of communication with suppliers to resolve any issues that may arise during the time frame.
Step 6 - The final step of awarding the contract should involve gathering feedback on the event, signing the agreed contracts and the early implementations of your chosen supplier or suppliers.
Category Strategy and Opportunity Assessment
If you’re still asking yourself how can a buyer determine the strategies by category and reliably determine what opportunities are worth pursuing when taking into account a number of factors including internal (such as historical and forecasted spend, maturity, criticality of the purchase etc) and external? (market trends, the balance of power etc)?
Then we have a solution for you!
The mass of data for each opportunity when multiplied by the number of opportunities makes it very easy to miss a good opportunity or bet on the wrong horse.
A recent breed of tools, such as Category Dojo, offer a very valuable process to assess categories and opportunities in a systematic matter, thus allowing you not only to save time in the process but also make it reliable and reproducible.
It isn’t rocket science and simply encapsulates the process every procurement department carries out and make it more fun, consistent and puts some rigour to category planning.
eRfx’s & eAuctions
A large part of the time as a buyer is spent running various event and tenders. You can either continue to run events as you have since the 20th century by email, or embrace new technology and use those futuristic tools that everyone has been talking about.
Regardless of the type of event that you intend to run or have ran, an eSourcing package will help you be more productive and effective at all stages: building your RFx, centralising sourcing activities, comparing and analysing the data.
It will also make it much easier for your suppliers to participate in your event. eRFx’s will become much more auditable and efficient system when using an eSourcing system and eAuctions will to help speed up negotiations while producing further savings.
As explained in the video, Market Dojo can be used for eSourcing events including questionnaires, eRFX’s and eAuctions. We found that ranked reverse auctions produce an average saving of 23%.
“I managed to generate a 48% saving in 2 hours so was very happy with the result!!” - Tara Hunt, Category Manager, Arqiva.
“In 2015, Specsavers ran an auction for the supply of components for glasses with a multi-million pound value. The auction ran for 35 minutes in total with 19 bids received from five suppliers, finishing with a 16% saving, equivalent of almost one million dollars.” - Jasper Raby, Procurement Consultant, Specsavers.
Stay tuned for the Third part of Chapter 3, where we will discuss the important and final step of reporting your savings figures.