Interview Part II - Looking at Market Integrity

March 6th, 2007 at 04:10am Agatha Degasperi - Iasta Europe

Q7: We had a few postings last year on e-sourcing Ethics/Market Integrity. I know that through some of the consulting support your organization received in the early stages of implementation, this was one of the key topics addressed. Can you comment on a few of the successes and failures when it came to ethics?

A7: During the first auctions it became apparent that buyers where not necessarily inviting suppliers to whom they where prepared to award the business too. Their motivation was to increase competition and obtain price reductions vs. their incumbent without changing suppliers. Some comments were:

“I am only inviting this supplier because I want to increase competition”

“I will not change supplier because my incumbent knows exactly what I want/need”

“Only my incumbent can completely satisfy my requirements”

In some cases, these arguments were made because of the long trading relationship with the incumbent, in others it was a lack of knowledge of the marketplace.

Q8: What were some of the most challenging behavior you remember dealing with?

A8: On the buyers front it was the skeptical attitude of buyers who have been dealing with their incumbent for years and the conviction that they already had the most competitive pricing and the best supplier. When probing them on when was the last time they tendered a contract, challenged their supplier, leveraged spend and/or looked at new solutions in the marketplace, most of the time the answer was years ago…….

On the supplier side it was mostly convincing suppliers to participate in the auction, especially when they had had negative experiences in the past. When explaining that the purpose of e-sourcing is to streamline the tender process for buyers and suppliers, ensure an equal playing field for all participants and have one central point of communication, most suppliers decided to participate.

Q9: How did you ensure an ethical e-sourcing process was applied across the organization?

A9: There were 3 main initiatives taken:

1) During our weekly meetings with all buyers in the organization we frequently discussed ethics. The key message during these meetings was that we should only invite suppliers to whom we are truly willing to award the business too.

2) We revised the Procurement Policy to force all contracts above a certain limit to be tendered through e-souring and ensure suppliers understand that non-participation automatically excludes them from the tender process.

3) Training: this was to look at ways to level the playing field for all suppliers when there are product/service differences, supplier communication best practices, and supplier selection/qualification.

Q10: It’s not fair to put all the heat on the buyers, it’s important to ensure suppliers behave ethically as well. Did you face any issues in this area and if so, how was it handled?

A10: We had instances where suppliers tried to bypass the e-sourcing tool and communicate directly with the buyer. Often this was the incumbent supplier trying to retain the business without having to participate in an auction.

We solved this by reiterating to buyers that all communication should be done through the e-sourcing tool and suppliers need to understand that they will only be considered when participating through the online process. Award decisions had to be approved by the Procurement Manager to ensure policies and procedures were followed. Support from Management in this case is crucial.

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Entry Filed under: General, Interviews, Supply Management Best Practices, Technology