We have been known to promote the usage of reverse auction in these parts. However, rarely have I had the opportunity to discuss the process from the first person. Recently, Iasta had the opportunity to manage and execute an e-auction from cradle to grave. Needless to say, we did not need much support, but it was pretty easy to get. The auction was managed directly by one of our IT Managers, who despite having never used SmartSource as a practitioner, was able to create a very good event with absolutely zero glitches.
This auction was run for a particularly large and expensive category of equipment that we needed in our ever growing IT infrastructure. I will not say who the OEM was or the specific hardware; however, I will say it is a widely used item by IT departments with any size and complexity to them.
As we would tell any client, we methodically went through our best practice steps and included only qualified vendors. This is critically important! Why? Because we told the 5 vendors bidding that this was winner take all! We were so confident in our process and understanding of the supply market (which included vendors RFx responses, references and documentation) that we were fully prepared to work with every one of them. The auction was the last thing to do. Thus price, was in fact, the only matter left for debate.
As a result, our prices which started at $375,000 per unit lot, were quickly pushed to an opening bid of $185,000 for the leading suppliers. After an hour of spirited bidding, the final two bidders were within .5% of each other and below $165,000 each. A whopping savings of 56% which included all freight, hardware and installation services. For a small company like Iasta, this is a huge amount of money and cost avoidance. I suspect that big ticket IT purchases are stalled right now and vendors are looking for any way possible to acquire new clients and potentially build long term relationships.
What should this do for you? For starters, every company needs to be looking at source-able categories. IT needs to be at the top of the list. This is just our example, we are seeing most of our clients crush current pricing in this area. Next, be sure you know how to actually run an auction. Going through the process correctly makes the difference between implementable results and possible high visibility chaos.
Finally, for those wondering about captured vs implemented savings – that would be measured at exactly 100%.