Daily Archives: June 20, 2023

Source-to-Pay+ is Extensive (P28) … Breaking down the ORA of Sourcing, Continuing with (e-)Auctions

In our first post, Part 26, we noted that, after covering e-Procurement, Spend Analysis, Supplier Management, and Contract Management, it was finally time for Strategic Sourcing. When it comes to Sourcing, we have to deal with the ORA et labora. The work, and the prayer (that it gets the results we want). But at least when it comes to the prayer, we have three tools at our disposal:

  • Optimization
  • RFX
  • Auction

Yesterday, in Part 27, we started with the most classic sourcing tool, RFX, where RFX stands for Request for X, where X could be Bid, Information, Proposal, Quote, etc. depending on the depth of response required and the terminology used in the industry and geography the RFX is being issued in.

The primary alternative to RFX is e-Auction. In e-Auction, instead of asking for quotes which will be reviewed in a long, detailed, often weighted process, you’re asking for real-time quotes in an online auction where a supplier can update its bids until it self-selects to drop out of the auction.


Lot Configuration
Just like surveys were so fundamental and obvious for an RFX solution that you’d think we shouldn’t even need to mention it, lots are so necessary to e-Auctions that we shouldn’t have to mention it either. But while you should trust a solution has configurable lots, you should always verify you can configure and manipulate the lots to suit your needs and your preferred lotting structures for category-based auctions.

Saved Market Baskets
Just like an RFX should support templates so you don’t have to re-create a survey from scratch every time, the e-Auction platform should allow you to define saved market baskets which represent pre-defined lots that can quickly be adjusted as need to set up events quickly. If a category is always sourced in a similar fashion, and the products / services the organization sources don’t change much over time, then a senior buyer should be able to pre-define a market basket for quick lot initiation.

Multiple Auction Types
There are multiple types of auctions — and the system should support a number of formats that may include standard reverse, sealed-bid, reserve-price, fixed price, Japanese, Brazilian, Vickrey, English, Dutch, and Yankee.

Supplier-Specific Views
A supplier should only see the lots they are invited to bid on, should only see the public messages and private messages sent to them, should see everything in a view localized to them, and so on.

Substitution Support
Sometimes a supplier has multiple products that can meet a buyer’s need, or sometimes has an alternate SKU that they believe would also work for the buyer (that requested a specific SKU be bid on) that the supplier could provide at higher quantity, higher quality, or lower cost that the supplier would also like to present. The platform should allow a supplier to define one or more substitutions for each product in a lot that the buyer can choose to consider, or not.

Proxy Support
The internet, like any other system, is not perfect — routers can fail, lines can be cut, providers can temporarily go offline, and so on — it’s as fault tolerant as anything we’ve ever designed in tech, but that doesn’t mean everyone has access all the time. A supplier should be able to define a lead bidder and multiple, ordered, proxies who can take over if the lead bidder cannot connect, or loses connection. The system should allow multiple proxies to be logged in at the same time, but only the lead bidder, or, in the lead bidder’s absence, the highest ranking proxy should be able to bid and every other proxy should be view only.

The system must support real time chat with each supplier bidder who has a question as well as group-based broadcast messaging.


Formula-Based Pricing and/or Bid Modification
Just like a modern RFX solution should support should-cost models, a modern e-Auction solution should support formula based pricing to allow for easy bidding during a short-time frame auction. For example, reduce all bids by 1%, the product cost is x + y% of the current commodity cost for steel per ounce (as the supplier will be buying steel at market price), etc.

Extensive Formatting
An auction, especially one with a short time-frame, needs to be extremely comprehensible to the supplier. As a result, the solution should support extensive formatting so the supplier display can be designed to be as comprehensible, and if necessary, as minimal as possible. This goes beyond just matching a colour scheme, but altering table formats, graphs, defining alternate views, and so on.

Asynchronous Real-Time Graphical Views
If there are lot of items in the lot, or a lot of suppliers in the auction, it can be difficult to understand tabular bids, assuming the bid is not blind, even if the tables are modified to tell a supplier their rank (and some indication of how much they have to bid to go up a rank). It’s often easier for a supplier to understand the current bid situation with a graph, that should automatically update after every bid.

Real Time Supplier Connectivity Monitoring
The platform should continuously monitor whether a bidder is (still) online. Due to the fact that the internet is not perfect, a bidder could lose connection at any time. The platform needs to detect this and if a bidder drops, automatically invite and promote a proxy, and if multiple bidders drop, assume there is a major connectivity problem and suspend the auction for a predefined time, or until the buyer selects a new time.

Constraint Support
A modern e-Auction platform should also support the definition of constraints on the bidding. Minimum decrements, floors, all or nothing on lots, and so on.

Of course, this is not a complete list of what an e-Auction platform might have, or necessarily should have, as systems continue to improve, but a baseline of what they must have to be considered a modern e-Auction solution.

Hi-ho, Hi-ho, now it’s time for “O” in Part 29.