More on General Procurement

The platform provided by Procurex enables companies to obtain the best possible value for the best possible price. Those in search of large amounts of a specific good or service will be adequately equipped with tools that will maximize strategic sourcing efforts. This platform has proved to be extremely successful in the market for energy, as seen in the blog post written by Matt. However, many businesses partner up with Procurex for the services provided in general procurement. In other words, I’m talking about the tangible commodities that are central to the functionality of a business. Desks, seats, tables, computer accessories, and paper, for instance, all fall under this category. These are the assets that must be given careful consideration prior to purchasing, especially when buying in bulk. As a business, don’t you think that overpaying for, say, computer monitors reflects poorly financially on the business? Rather, shouldn’t time and effort be allocated to the business’s overarching goal or mission, as opposed to miniscule commodities that are essential to the goal? Even though this doesn’t seem like a big deal, those little expenses can accumulate. This in turn may restrict a company’s budget, and that is unacceptable in these current economic times. Among other things, Procurex provides closure to the uncertainty attached with many business transactions; large or small. Here are a couple examples of how the services provided by Procurex can work in general procurement.

Several institutions have recognized the advantages of Procurex’s general procurement platform. For instance, one Big Ten school procured wireless microphones and other computer related accessories for their computer lab using Procurex’s reverse auction technology. In this auction, there were a total of 190 bids between the suppliers, and the price was lowered by approximately 30%. Another large university saved almost 40% on their purchases of ink and toner for their printers. Again, a reverse auction was used, and it took 153 bids to decide the winner.

There are numerous examples that show similar savings to the ones discussed above. In my opinion, the most valuable thing that Procurex provides for our clients is one thing; closure. Today’s economic situation forces businesses to think and rethink every business move. Are we paying too much? Are there alternative options? Did we get the best possible value for the amount of money we paid? These are all questions that must be asked in any business. Procurex puts those questions to bed. Our business model is intended to put them to bed; it’s our job. If you’re a business that wants to be sure you’re receiving the maximum return on investment, then you should look further into what we do and how we do it here at Procurex.

Breaking New Ground

Midwest Energy Efficiency Leaders Recognized for Groundbreaking Achievements with Procurex as reverse auction and technology provider

We have blogged about how Procurex, Inc. ran the first-ever Online Reverse Auction for Energy Efficiency Grants for the State of Missouri that resulted in up to 75 Million kWh of energy saved in the past. This was uncharted territory for both parties involved. This historic auction that was conducted in the summer of 2010 was recognized at the Inspiring Efficiency Awards held by the Midwest Energy Efficiency Alliance (MEEA).

The Missouri Department of Natural Resources won the Innovation Award for its Best Price Energy Efficiency Program. This program would not have thrived if it weren’t for Procurex’s software. Procurex was integral in helping the state of Missouri award $3 million in American Reinvestment and Recovery Act funded energy efficiency grants to businesses. You can see the official link below:

http://www.prnewswire.com/news-releases/midwest-energy-efficiency-leaders-recognized-for-groundbreaking-achievements-113580569.html

This was the first online reverse auction of its kind, and the state of Missouri, with Procurex, has proven that even energy is a product that can yield savings through a specific vision of strategic sourcing.

More On Reverse Auctions

Procurex prides itself in its versatility when it comes to purchasing. The platform they provide can successfully be applied to any market. Nonetheless, one component of their platform often seems intimidating to those who are not acquainted with it - the reverse auction technology. Check out this link - it's a great way to get to know what a reverse auction really is, how it functions, and how they can benefit you.

http://www.epiqtech.com/reverse_auctions.htm

Reverse Auctions: An Overview

So, you've heard about reverse auctions, or maybe you want to do one, but pump the brakes. You have a lot of questions and concerns regarding the process, and you want to make sure you have all your bases covered. With reverse auctions, there are a lot of things to keep in mind. Here is a list of concerns that Procurex has heard over the years, and keep in mind, we’ve heard it all:


- What I'm buying in this case really isn't a price only decision.

- I don't think my incumbent vendor will be too happy about having to compete for "their" business.

- I've heard from some of my suppliers that they hate reverse auctions.

- I want to make sure it's fair for the suppliers.

- Some of my suppliers can barely get their email, how can I expect them to bid online?

- This item/category is highly specialized and very few companies can make/provide it.

- I've heard that companies have to pay a fee to the reverse auction provider.

- What if I run the reverse auction and then, for some reason, I can't follow through with a Purchase Order?

- I can't commit a specific quantity or delivery schedule.

- I have to place this order quickly. Do I have time to set up a reverse auction?

- Can suppliers get help while the reverse auction is going on? What if it's only 15 minutes long?

- Is there a way for suppliers to practice on the system before the live reverse auction?

Procurex has an answer for all these questions and concerns, and probably some things you may not have ever thought of. Procurex has grown to master reverse auction and strategic sourcing methods, accompanying customer needs for everything from pizza to coal. In the upcoming posts, we at Procurex will tackle these issues in depth, and even validate the effectiveness of strategic sourcing with specific examples.

Procurex Milestone

Procurex, Inc. runs first-ever Online Reverse Auction for Energy Efficiency Grants for the State of Missouri resulting in up to 75 Million kWh of energy saved


The Missouri Department of Natural Resources utilized the Procurex, Inc. online reverse auction engine to successfully award $3 million in energy efficiency grants. Procurex, Inc. structured 3 consecutive one hour auctions with 23 pre-qualified bidders. A total of $3,000,000 in grants were awarded with grant values of $100,000 (10 grants), $250,000 (4 grants), and $500,000 (2 grants).

(Vocus) October 4, 2010 -- Procurex, Inc. in association with Shaw Environmental successfully implemented the use of it's proven reverse auction technology to run the first ever reverse auction for energy efficiency grants on July 28, 2010. Procurex, Inc's online reverse auction allowed pre-qualified providers to bid on $3 million in incentives on a $/kWh saved basis for expected energy efficiency projects. Available incentive dollars were allocated based on a lowest-price obtained, thus increasing the cost-effectiveness of the program and allowing the Missouri Department of Energy to spread each grant dollar further.

When all the winners fully implement their programs, Missouri could save up to 75 million kWh (kilowatt-hours) of energy, equivalent to powering 6,537 homes for a year or taking 10,299 cars off the road for a year. As one participant in the process put it, "That is a powerful use of reverse auction technology". Procurex, Inc. used its proven technology and procurement expertise to work with Shaw Environmental and The Missouri Department of Natural Resources to structure the most fair and competitive grant auction process available.

"It wouldn't have been possible to reap these types of results without the help and expertise of Procurex, Inc." said Jonathan Dierking, PE, CEM, LEED AP, Shaw Environmental. Ian Ayres, the William K. Townsend Professor of Law at Yale Law School and writer for the New York Times blog Freakonomics covered the historic event and said, "Overall, across three different auctions the averaged promised price-effectiveness was 3.97 cents per kilowatt hour of saved energy. This compares favorably “to recent point estimates of the average cost of other utility energy efficiency programs, which range from 4.7 to 13.3 cents per kilowatt-hour.” (Auffhammer, Blumstein, and Fowlie 2008).

He followed "For now, the great state of Missouri (the only state with two Federal Reserve banks) has shown that competitive auctions are a feasible way to get the most out of our stimulus money. (Now if only the Treasury would run with the reverse auction idea as a way to value troubled banking assets)."

Bret Grady, CEO of Procurex, Inc. said, "I was quite pleased with the results that we delivered with this auction. A process that has worked so well in other categories such as energy, commodities, and services was applied very successfully for the State of Missouri. I would expect given these results that we will be running similar events for other states and municipalities looking to replicate these savings."

Strategic Sourcing and its Benefits

Procurex has conducted over a thousand reverse auctions that have saved buyers an incredible amount of money. The Procurex approach has proven to be wildly successful over the past decade using strategic sourcing. There’s a whole lot to like about the strategic sourcing approach. They address both of the procurement goals: improving purchasing conditions and increasing procurement efficiency. Let’s lay it out for you:

• Broadening the list of participating vendors: reverse auctions reduce the cost to include a greater number of seller participants than your traditional methods. The pool of vendors can be extended beyond the local area or circle of existing or known vendors to, literally, the world (unless vendor location is a critical issue). A broader list of vendors increases the chances that the purchaser will find a “better or best fit” vendor for each item purchased.

• Increasing competition: with an increased number of participating vendors comes increased competition. This favors the buyer with better pricing and allows vendors the opportunity to compete to the best of their abilities and eliminate the guesswork of “best and final” quotations. This can produce substantial cost savings and/or product improvements to buyers.

• Decreasing cycle time: by concentrating the interaction with vendors into one time frame (the auction), the process of contacting and negotiating with individual vendors is severely truncated, reducing the time required to actually purchase an item. Reducing the cycle time for each item purchase can result in significant savings in procurement resources.

• Increasing efficiency of the procurement function: with an electronic system available to interact with an increased number of vendors and manage activity with them, the procurement personnel can produce better results without increasing the resources used.

• Improving ROI: through more efficient use of existing purchasing resources and lower prices from better competition, the return on capital spent on strategic sourcing and reverse auctions (as well as the entire procurement function) will yield a higher return, improving the buyer’s bottom line overall.

• Gathering information: buyers can develop important data on the pricing and sales terms for various items and vendor behavior by analyzing the activity during an auction. This could prove to be a vital resource for future sourcing. Essentially, a reverse auction creates an environment that more closely approaches the economic ideal of perfect competition: a large number of participants, readily available information, and a narrow decision making process that reduces other influences. By using this objective method, a buyer can substantially improve performance by creating a better market in miniature, reducing cost and improving conditions.

A Word of Advice: Don't be THAT Guy

The world, sometimes, is a scary place. And for as great as money is, it can make the world even scarier. Businesses around the globe are feeling the heat as a result of this worldwide recession. However, all is not lost. An article by Angeline Yeo iterates how buyers from all around the world failed to recognize the procurement opportunities. Here’s the article by Ms. Yeo.

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"Global - Buyers failed to take advantage of a potential 4% savings on material costs resulting from the global recession because of a lack of skilled personnel, inadequate number of procurement professionals in the sector, and the failure of top management to deal with the problem, revealed a new study released yesterday.

The study was conducted by consulting firm Valueneer and polled over 790 companies from 62 countries across all industry sectors.

The survey found the companies were achieving only a quarter of the potential 4% savings, hampered by the lack of qualifications and inadequate number of procurement personnel.

Potential savings went identified because there was not enough attention given to strategic procurement tasks, the study said. The bigger a company, the more likely it is to have a better procurement performance.

The study also said that CEO or CFO-lined procurement organisations have a significantly higher performance record than companies organised on a chief operations officer-organised procurement basis. Clearly defined and documented procurement strategy and implementation, purchase control, optimal tendering and skilled procurement personnel were also considered major factors of success.

Breakdown by region

The survey found that Indian companies showed the best procurement performance, followed by German, Australian and Swiss companies. The retail, consumer goods and automotive industries demonstrated the best procurement performance.

For North America, India is now the fastest growing sourcing market, with China stagnating at a high level. But China is expected to retain its importance as a key sourcing market in Asia. The country is also expected to develop the most rapidly in the procurement sourcing sector among the four emerging countries of China, Brazil, Russia and India.

Global sourcing is expected to continue increasing, with one-third of respondents indicating that they intend to bump up sourcing from markets like China, India and Eastern Europe, the study said.

Source: Yeo, Angeline: “Buyers Missed Out on Savings During Crisis” (http://www.procurement-online.com/news/19211)

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It’s an extremely interesting read. As a member of the procurement community, I cringe when I see articles like this. But that’s the way it is. This is living, breathing proof that companies aren’t utilizing the resources they could very easily have.

A buyer who utilizes the Procurex method will come to us with a wallet with a big wad of cash they’re willing to spend, and a cell phone (since EVERYBODY has one of those). They’ll leave us with another wad of savings tucked snugly between the wallet and the cell. On behalf of Procurex and the strategic sourcing community, PLEASE don’t be THAT guy who ignores the strategic procurement way.