In President Obama’s recent State of the Union address he reminded Americans of the impact new technology has in keeping American strong and competitive in the global marketplace.
“Thirty years ago, we couldn’t know that something called the Internet would lead to an economic revolution. What we can do — what America does better than anyone else — is spark the creativity and imagination of our people…In America, innovation doesn’t just change our lives. It is how we make our living.”
Reverse auctions are part of this “economic revolution” created by the use of the Internet for business commerce. In today’s competitive marketplace, organizations must stay on the cutting edge of technological innovation to stay ahead of their competition and remain profitable. According to a recent study by CAPS Research, reverse auction users save between 10-20% on goods and services purchased through process and reduces the purchasing cycle time by as much as 40% over traditional procurement practices.
eBridge recently ran a reverse auction event for a city government. At the conclusion of the event, the buyer stated, “I believe in every organization’s history, a window of time becomes available when you must make seemingly radical change to rise to a higher level of performance. eBridge’s reverse auction process has provided incredible value to our organization and enabled us to do just that. “
Is your organization using reverse auctions?
A medium-sized city recently partnered with eBridge to purchase water and waste water treatment chemicals. The chemicals included: chlorine gas, liquid caustic soda, liquid alum, hydrofluosilicic acid, aqua ammonia, activated carbon, polyaluminum chloride, potassium permanganate, chlorine gas, sulfur dioxide, HTH granular and HT 3″ chemicals.
The 13 suppliers placed a total of 319 bids on the 12 chemicals. First place changed hands a total of 50 times throughout the one hour, 18 minute bid. At the conclusion of the event the lowest spread between 1st and 2nd was 0.01%, indicating true market value had been found. The overall budget was $172,000 with the final low bids totaling $169,022.
From Reuters Environmental Forum:
December 16, 2010- The California Public Utilities Commission on Thursday approved a uniquereverse auction market to let renewable energy developers bid on small-scale projects under a program that would generate up to 1,000 megawatts for the state’s three big investor-owned utilities and further spur the solar industry.
Think of it as the eBay approach to ramping up production of carbon-free electricity.
The idea is to avoid problems with so-called feed-in-tariffs that set rates artificially high for renewable energy production. In Spain, for example, high rates spurred a solar building boom that was followed by a crash when a cap on renewable energy production was reached and rates fell.
Under the plan approved by California regulators, the onus would be on developers to calculate the cost of their projects and then offer a bid high enough to generate a profit yet low enough to beat out competitors. The 1,000 megawatts to be developed would be split between Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.
At peak output, 1,000 megawatts would power about 750,000 homes.
“This mechanism would also allow the state to pay developers a price that is sufficient to bring projects online but that does not provide surplus profits at ratepayers’ expense,” utilities commission staff wrote in their original proposal. “Providing a clear and steady long-term investment signal rather than providing a pre-determined price can create a competitive market.”
Dubbed a reverse action mechanism by the utilities commission, the program applies to renewable energy projects that generate up to 20 megawatts of electricity. The hope is to encourage development of small-scale solar power plants that can be built relatively fast and plugged into the grid without major – and expensive – transmission upgrades.
Developers much complete their projects within 18 months and deploy commercially proven technology, according to the decision adopted Thursday.
Adam Browning, executive director of The Vote Solar Initiative, a non-profit San Francisco advocacy group, said the new program fills a gap in California’s renewable energy program.
The state offers incentives for homeowners and businesses to install solar systems that generate up to 1.5 megawatts and utilities have signed contracts with developers to build big projects that will produce hundreds of megawatts each. Lost in the middle were mid-sized projects.
“The decision will help expedite solar development,” said Browning. “This is a way of harnessing the power of distributed generation to deliver a more robust grid and renewable energy development in a much more timely fashion.”
To view the original article, click here.
A Kentucky utility recently partnered with eBridge to purchase water treatment chemicals. Thirteen suppliers participated in the bid for a variety of chemicals.
Throughout the course of the reverse auction bidding event, 640 bids were placed and first place changed hands 105 times, showing the suppliers were actively competing for the business.
The estimated savings on the thirteen chemicals at the conclusion of the event was 11% versus least year’s budget.
Check out this recent post from Tim Taft’s blog, The Strategic Sourcer.
I was emailed the following story a few days ago that made me think about how Procurement Services Providers (PSP’s) should be regarded:” A blind boy sat on the steps of a building with a hat by his feet. He held up a sign which said: “I am blind, please help.” There were only a few coins in the hat.
A man was walking by. He took a few coins from his pocket and dropped them into the hat. He then took the sign, turned it around, and wrote some words. He put the sign back so that everyone who walked by would see the new words.
Soon the hat began to fill up. A lot more people were giving money to the blind boy.
That afternoon the man who changed the sign came to see how things were going. The boy recognized his footsteps and asked, “Were you the one who changed my sign this morning? What did you write?”
The man said, “I only wrote the truth. I said what you said but in a different way. I wrote, Today is a beautiful day but I cannot see it.”
The goal of a Procurement Service Provider is not to point out the mistakes of business owners, but to assist them in increasing productivity and profitability by exploring ways of doing it better, faster, and effectively.
PSP’s should be considered an extension of one’s internal procurement department bring to the table areas of expertise and innovative ideas to ensure best prices and high quality products & services are received. Business owners should feel like they are part of the process by being involved in decision making and by encouraging employees to be participate in any sourcing initiatives in place.
Moral of the Story: “When life gives you 100 reasons to cry, show life that you have 1000 reasons to smile.”
Be creative. Be innovative. Think differently and positively
To read more from The Strategic Sorcerer, click here.
A Midwestern city partnered with eBridge to purchase water treatment chemicals a total of 12 suppliers participated in the event, placing a total of 231 consecutive bids.
In a reverse auction, suppliers have the opportunity to place subsequent lowering bids for a product or service. In this case, several different water treatment chemicals. First place changed hands 29 times, with the clock extending 94 times.
Because the price of chemicals is volatile, it’s important to note that first and second place suppliers were less than .2% apart, indicating true market value had been achieved for the purchase.
The city was very pleased with the bid and will run several more items through the process in the future.
It’s no surprise that a company that prides itself in being an “innovator in the production and marketing of premium, value-added chicken products”, partnered with eBridge to purchase their stretch film for meat packaging.
The reverse auction is becoming the industry standard for purchasing professionals and this poultry company knew the reverse auction process fit with their company values to be “at the forefront of many of the industry’s top production and packaging solutions” by partnering with eBridge on this purchase.
Not only did eBridge help the organization save nearly 13% on the purchase of stretch film for their meat packaging, but eBridge brought more suppliers to the bid, ensuring this company achieved true market value for their purchase.
In a traditional paper bid process, the company would have only received 9 bids, which was the total number of suppliers. But with the reverse auction, the company received 72 bids from the nine suppliers.
Because if the efficiency and financial success of this bid, the company is poised to have a long relationship with the reverse auction process, allowing them to operate more efficiently and profitably, still producing the same quality product as they always have.
A Midwestern city partnered with eBridge to purchase water treatment chemicals a total of 12 suppliers participated in the event, placing a total of 231 consecutive bids.
In a reverse aucution, suppliers have the opportunity to place subsequent lowering bids for a product or service. In this case, several different water treatment chemicals. First place changed hands 29 times, with the clock extending 94 times.
Because the price of chemicals is volatile, it’s important to note that first and second place suppliers were less than .2% apart, indicating true market value had been achieved for the purchase.
The city was very pleased with the bid and will run several more items through the process in the future.
The Associated Press
October 17, 2010
DANVILLE, Ky. — A central Kentucky city has turned to online auctions to buy supplies such as road salt, water treatment chemicals and a new city fire truck.
Danville city commissioners and an official with the company running the sales say the method appears to be saving the city money.
Jock Kinnett, a representative of Louisville-based eBridge, told the Danville Advocate-Messenger that the city saved 16 percent on chemical purchases over the previous year.
The company organizes auctions for public procurement in a timed setting, much the same way an eBay auction is operated.
Kinnett said the company collects a percentage of the sale from the seller after the city has paid the vendor.
Read more: http://www.kentucky.com/2010/10/17/1483627/ky-city-turns-to-online-auctions.html#ixzz12iQDrDYo
A prominent south Florida city partnered with eBridge to purchase steel containers and roll off boxes. These items are used in waste management.
Four suppliers participated in the event, placing a total of 526 bids on the 26 different line items. The clock extended 110 times, allowing suppliers to continue to compete for business. First place changed hands 114 times, making the event outcome uncertain until the very last second.
Final pricing indicated a savings of 29%. It should be noted that the savings is based on a 2008 budget number for this bid- two years ago.