I found your bundling article interesting and enlightening, but I am not sure if you have defined what the primary goal of bundling is. http://www.esourcingforum.com/?p=23 and http://www.procureiq.com/2007/01/15/combinenet-v-expressive-bidding/

If the primary goal of bundling items together (by the buyer) is to get better pricing, then you want the supplier to bundle the items together. The reason is that they are the only ones that will know how to optimize their unique supply chain in order to decrease their costs. If they can decrease their costs, they can sell the items at a higher margin for themselves, but still at a lower cost for the buyer. That is, they are lowering the cost of sale for themselves and can pass on the savings to get business.

If the primary goal of bundling is to guarantee a buyer business rule, then this can be accomplished via constraints on the outcome of the awarded allocation. In this manner, let the suppliers bid on line-items or let the suppliers bundle items together, but when you find an optimal awarded allocation, make sure that solution guarantees your buyer business rule constraints are satisfied.

In either case, bundling by the buyer is not needed and in fact disadvantageous. Having the buyer put the bundles together assumes that 1) all suppliers have the same business processes, same infrastructure, and same delivery mechanisms and 2) that the buyer has perfect knowledge of the supplier business processes, infrastructure, and delivery mechanisms. These assumptions are almost always invalid.

I am sure there are special cases when the buyer wants to and should bundle items together and then this should be allowed, but in general letting the supplier bundle the items together to reduce the cost to deliver and guaranteeing that the allocation abides by the buyers business rules will al most always yields a lower cost of allocation.

Sincerely,

Jason Brown, PhD

In order to combat this erosion I recently completed an event with 2,500 stationary items core and non core. We had excellent results and although there was initially a lot of work for the bidders they were well able to adjust bids. To help them we allowed plenty of time for pre bids and extra long extensions. There were no offline spreadsheets. The suppliers in this market are well trained at participating in events.

On last point we still split the European spend out separately.

There is a tradeoff not only between bundling too much vs. too little volume, but also in regards to the homogeneity or heterogeneity of the bundle. The bundle should not be too diverse in terms of requirements, capabilities and capacities needed (i.e., suppliers should be able to competitively quote on the bundle), but a bundle should also not be too simple (i.e., should not only include very popular items for suppliers). It is again a fine line that has to be followed: combining attractive (popular) and unattractive (unpopular) items in the same bundle, to globally optimize the result for the entire set of items. The bundle cannot be too complex (include only unattractive items), otherwise no suppliers would be able to competitively bid on the business; it however also cannot be too simple (include only attractive items), since then the unattractive items would most probably not get any competitive bids.

In my reverse auction events I seek to bundle to the point where I gain my economies, but am mindful of the possibilities for diseconomies, particularly on international events. I feel it important to bundle only so much as to optimise competition; With a large product/service bundle spread over multiple geographies I find this can limit greatly the number of capable bidders, and so always factor this in.