This week was the week of shifting sands. I’m not sure why this was the week, but multiple e-auctions I’ve been involved with had last-minute changes, unexpected challenges, and a bit of a scramble. This is a learning opportunity for how to deal with very specific scenarios for specific categories: professional services, office furniture, and apparel/promotional materials. We’ll go from a very tactical standpoint today, walking through the specific and real-world situations. Today’s article talks about the original situation for each of these, how the sands shifted from underneath the e-auction team, and what to do about it. Interestingly, all of these were for indirect spend, which makes sense because indirect is usually trickier to e-auction than direct spend.
Professional Services
Original Scenario: The procurement team is using an e-auction to refresh pricing for professional services businesses, specifically for surveying/siting/environmental permitting.
- There are thirteen suppliers, and all will receive contracts in the end.
- We have estimated annual hours for each of the hourly rates.
- While suppliers might improve their pricing on certain hourly rates through the e-auction (like if they see they are in tenth place for a certain rate but are more competitive in others), the goal here is clarity instead of savings.
- The intent is to ensure the rates the procurement team has are correct, suppliers are willing to hold them, and give suppliers information about where they are in the market.
- Selections for individual projects will be made by the business unit/technical team when they are needed, at which point they will decide if they have the budget to go with a higher-priced supplier or if they need to award work to the low bid.
(Side note: I love these kinds of e-auctions because they are all about value over price, transparency to suppliers, and speeding up the contract pricing because the auction brings so much clarity. When I talk about e-auctions being about true value, this is what I mean.)
Shifting Sands: After publishing the initial practice auction, the chaos began.
- Six of the thirteen suppliers had the wrong contact information.
- Several suppliers protested the rates the e-auction team set as their starting bids (more on bid ceilings in my book in chapter five) and said those rates dated back to four years ago.
- The procurement team had left some suppliers off of certain bid categories, but the suppliers asked to be considered for those items.
In short, the e-auction team found after publishing that the bid was a bit of a mess.
What to do: The first issue to tackle was the supplier contact information.
- The e-auction team worked with the procurement team to get the right contacts, reach out to those contacts through the sourcing software, and get them added to all e-auction activity.
- The e-auction team decided to run the original practice auction as scheduled, but to schedule a second practice auction and push back the real auction.
- The e-auction team and procurement team worked on the hourly rates for each supplier. It turned out the procurement team had provided some of the wrong spreadsheet information, and there was also no Request for Proposal run ahead of this e-auction. This is one reason I always like to run some sort of Request for Proposal for anything even slightly complicated before using the e-auction as a negotiation tool.
- The procurement team worked out the right rates with suppliers to form their baseline, in some cases using the e-auction to require suppliers to hold last year’s prices and be clear about all of their pricing.
- The procurement team double checked with the technical team to determine which suppliers were approved for additional parts of the scope.
While this all sounds like a long delay, it was completed within about two business days and delayed the e-auction by about three business days. Ultimately a good outcome that would have otherwise caused a mess during contract negotiation and taken weeks to sort out.
Office Furniture
Original Scenario: The technical team had two office furniture suppliers on the shortlist for a small project of about forty workstations.
- The technical team had quotes from both suppliers, broken into three prices: the product, installation/labor, and freight/tariffs.
- Both suppliers, the procurement team, and the technical team all knew that this small project was a precursor to a much larger office remodel coming up in another location.
- The technical team had a strong preference for one supplier over the other and felt their service was superior, resulting in a bid transformation of 5% to represent this service difference.
- The preferred supplier was fully approved, while the second supplier was still dragging their feet through the safety and cybersecurity vetting process.
- The preferred supplier told the technical team that they would be having a pricing increase on February 11th, so the team needed to seal up their order in less than a week. (Experienced procurement professionals, I can hear your eye rolls from here. You’re right, there was no general increase for this supplier on February 11th or even a specific one for certain products. I checked later.)
- The technical team was convinced this preferred supplier was offering their best pricing option and would not see a reduction in cost from an e-auction, therefore the auction had no value. Regardless, their management told them they had to run an auction.
- The technical team came to the e-auction team on Friday asking to run the e-auction on Monday. After discussion, the practice auction was scheduled for Monday and the live e-auction was scheduled for Tuesday. The non-preferred supplier was also given a deadline by which they needed their safety approval complete if they won the business or it would go to the next supplier.
Shifting Sands: After the practice auction, the technical team decided to change the pricing from three pieces (product, labor and freight) into one lump sum. When the e-auction team changed the pricing to that format, the e-auction software dropped the bid-transformation that was previously tied to each item and the e-auction team didn’t catch the change because there was not enough time to fully test the new auction format.
What to do: The right answer would have been to test the revised auction quickly and ensure all the settings stayed intact. It also would have been simpler with an e-auction tool that assigned bid transformations to the supplier instead of to individual lines (Synertrade is an example of one that does this). However, the technical team did get a good result.
- Their preferred supplier came down another 5% in pricing when exposed to competition, and the non-preferred supplier was not able to complete their safety qualification in time.
- Both suppliers are now firmly in the game and trained for when the large bit of business comes onto the market, and the non-preferred supplier understands how important completing their qualification is.
Not a perfect outcome, but a reasonable one that built value and preserves the integrity of the bid and auction. The team will be stricter about going through a full vetting process on changes to complicated e-auctions, even when timelines are tight.
Apparel and Promotional Materials
Original Scenario: The company wants to run a competitive bid for apparel and other branded products.
- An RFP was run for apparel last August using the data from 2024.
- The plan was to e-auction the top items that formed 90% of the spend (following the Pareto rule), which ranged from polos to baseball caps and jackets.
- Suppliers had submitted pricing for these items along with brand details, but the RFP did not ask for any other fees (shipping, minimum order quantities, stocking fees, etc.). It also did not specify stitch density or any of the other necessary specifications that come with custom-branded products.
- The buyer reached out to suppliers to tell them they were on the short list and the company was considering running an e-auction to finalize the award.
- The buyer also requested current contact information so she could then get clarity on those missing fees and quality specifications.
Shifting Sands: Two of the four short-listed suppliers immediately responded they would not participate in an e-auction (side note: this client doesn’t actually call it an e-auction, but that did not make any difference in supplier response).
- Considering the buyer wants to award two contracts, this is detrimental to the true competition in the space.
- Running data for 2025, there was also a different set of items that represent 90% of the spend, in some cases radically different.
- The buyer is considering awarding without an auction.
What to do: I see this exact scenario A LOT. Usually the suppliers involved haven’t been a part of an e-auction for more than 10 or 20 years and are still approaching e-auctions as if they’re the same as they were in 2006. I asked the buyer how she was going to decide which suppliers won the contracts if she didn’t run an e-auction. This caused her to pause, during which she said she would probably pick a market basket of 15 items or so and use those prices to make a decision. Possibly without suppliers being able to respond or refine their offering if they were high on those fifteen items. Ultimately, this is simply an e-auction where the suppliers never get a chance to respond to their position in the market. In this scenario, the procurement team (and potentially company executive team) have a choice to make:
- Are they going to win this game of chicken with suppliers or are they going to cave and decide to negotiate this category face-to-face from here forward?
- If they decide not to e-auction the category, those suppliers know they can simply protest and the procurement team will capitulate.
To be clear: I’m not actually against the non-e-auction path. I simply want teams to realize what they’re doing when they choose it.
There is also another path:
- Talk to the suppliers about what the e-auction is trying to accomplish for the company, the supplier benefits to an e-auction (clarity of scope, speed of award decision, and transparency of market position), and try to reengage them.
- A good supplier partnership goes both ways and starts with communication. I’ve very frequently been able to get suppliers to reengage with an auction process if they know it’s fair, it’s truly between them and their peers, and it’s not merely a race to the bottom.
I’m hoping that’s the direction this buyer goes and I’m hoping we can reengage these supplier partners. At the other end of this bid process (including e-auction) is a great opportunity for the supplier with a growing business, and future quick e-auctions as a way to get easier quotes for those really BIG apparel orders that come through (i.e. polo shirts for all of the management team for a leadership conference). Letting fear rule their approach instead of voicing their concerns and making sure their quality offerings are included may cause these carefully selected suppliers to lose the opportunity.
If you would like to talk about the shifting sands in your world (or you’re a supplier who wants to figure out how to get your buyer to run a fairer and more transparent e-auction process), let’s chat. If you’d like to get these articles weekly straight to your inbox and never miss one, sign up for my newsletter.
My book, Transform Procurement: The Value of E-auctions is now available in ebook, paperback and even hardcover format: https://www.amazon.com/dp/B0F79T6F25
