eBridge News
Individuals are an organization’s greatest asset. Creating an environment where employee’s thoughts and ideas are valued and where they feel comfortable sharing these insights, is an organization’s greatest opportunity to soar- in productivity, job satisfaction and morale. When leadership learns to effectively facilitate open communication, employees handle change with greater ease- transforming organizations and employee potential.
In a recent article entitled, The Biggest Mistakes in Managing Change, Dr. Carol Goman outlines several common mistakes organizations make when managing change. The most pivotal mistake she discusses is not being aware of the importance of people, under-valuing their opinions and feedback and not making them part of the process.
Statistics show that nearly 75% of all restructurings fail- not because of strategy, but because of the “human dimension”. Organizations don’t change- people do or they don’t. If staff people don’t trust the leadership, don’t share the organization’s vision, don’t buy into the reason for change, and aren’t included in the planning- there will be no successful change- regardless of how brilliant the strategy.
The use of reverse auctions is rapidly increasing in businesses across the world. The online auctionprocess creates tremendous efficiencies and dramatic cost savings- but does require organizational change.
eBridge, a reverse auction consultant, provides leadership in running the reverse auction process and understands the value of people and orchestrating process change- getting everyone “in on things” to collectively implement the purchasing solution.
Technological innovation, including online reverse auctions, continues to shape the way companies do business. Will your organization be a part of the change?
Reverse Auctions have been around since the mid-1990s and have grown in popularity with the evolution of the Internet and its role in business commerce. Companies like GE, Target, 3M and Pfizer pioneered the use of reverse auctions and now consider them an integral part of their purchasing process. According to a study conducted in 2009 at the University of Arkansas’ Information Technology Research Institute, approximately 25% of all firms and almost 45% of all large firms use Internet-enabled reverse auctions to facilitate procurement process. Research also finds that over $400 billion of goods and services are procured using reverse auctions in the United States alone.
As with most new technology, the use of reverse auctions is sometimes met with resistance, fear and caution. In any business, uncertainty exists when implementing a new process and there is always risk involved. But allowing these emotions to interfere with adopting cutting edge technology can mean lost profits and allows your competitors to gain the edge.
The Commerce Department estimates e-commerce for the third quarter of 2010 at $41 billion, up 13.6 percent from the same period last year. E-commerce is not going away.
The premise of reverse auctions is simple: buyers solicit suppliers for a defined product or service. Suppliers submit specifications and enter their pricing online, rather than on paper. Suppliers then go online and place subsequent lowering bids during a defined period of time.
The reason this process works is this: because of the dynamic environment, suppliers have the opportunity to place subsequent lowering bids and the time-sensitive bidding opportunity calls them to be more efficient in their pricing. Historically, reverse auction procurement saves an average of 10-20% net on everything run through the process.
Consider the evidence from reverse auctions for an internet content filtering solution for a large school district on the West Coast. The school system had estimated the purchase to cost about $795,000. Seven suppliers bid in the reverse auction event. The on-line event produced a total of 546 bids, with first-place changing hands 46 times, between 7 suppliers on the 4 line items. At the conclusion of the bidding event, because of the competitive opportunity, between suppliers to win the business, the school district is enjoying a 46% savings versus budget.
At eBridge we offer a web-based reverse auction solution along with the consulting and advisement to make your reverse auction a successful event. There are several factors to think about before running your first reverse auction event. Below are a few of the high notes when considering this procurement practice:
1. Your first event may take some getting used to: Change is difficult and while the reverse auction process isn’t difficult, it is different and may require some additional effort in understanding how it works.
2. Make sure the item is a good fit for the process: Not everything you and your organization buy is a good fit for the reverse auction process. Many first time users are not aware of the importance in picking the right purchase to make sure it works in the process. Because of this, the auctions don’t yield the results they were promised or hoped for. Items that are not clearly defined or do not allow for a wide range of suppliers do not lend themselves to highly competitive events, thus don’t see the greatest benefits of the reverse auction process.
3. It takes leadership. But remember, change can be difficult and it requires a champion to carry your team members and suppliers through to success. Innovation and risk help you stay ahead of your competition!
Whitney Headlee is the Marketing Director at eBridge Business Solutions. For more information visit www.eBridgeGlobal.com
The Federal Communications Commission is set to meet February 8, 2011 to discuss the vision for Universal Service in America. To ensure this plan is executed the leadership is issuing a series of grants to companies like AT&T so they can create the infrastructure necessary to provide broadband service to under-served areas. According to executives at AT&T, the FCC is likely to use reverse auctions to award funding for areas that cannot get broadband today. Read the full article below and here.
AT&T exec: FCC will recommend 4 Mb/s broadband Universal Service target next month
Carrier would consider applying for funding for unserved areas if terms of “compact” with the commission are right
By Joan Engebretson
The Federal Communications Commission on February 8 is likely to issue “some kind of order—their vision of the way Universal Service will look in the future,” AT&T Senior Vice President Bob Quinn told reporters on a conference call yesterday. “The order will be a vision of the end-state and the principals [the FCC] will use to achieve that end state.”
The initial order then will generate a series of orders and notices of proposed rulemaking over the next several years, Quinn predicted.
To get that process started, Quinn believes the FCC will issue several NPRMs at the February 8 meeting. One will propose modifications to the high-cost Universal Service program, one will involve traffic pumping, and another will address phantom traffic.
Formalizing NBP recommendations
Many concepts that the FCC will put forth in its vision for Universal Service reform will come from the National Broadband Plan, Quinn said. For example, he believes the commission will recommend shifting support from voice to broadband, with a minimum 4 Mb/s downstream- 1 Mb/s upstream bandwidth target.
As recommended in the NBP, AT&T also expects reverse auctions to figure into FCC recommendations at the upcoming meeting. On the call with Quinn, AT&T Vice President of Federal Regulatory Hank Hultquist said that the FCC is likely to use reverse auctions first in awarding funding for areas that cannot get broadband today. As for areas that already have broadband but require ongoing support, Hultquist said he expects the FCC would more likely ask for comment on whether a reverse auction would be feasible.
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.