Transcript Reverse Auctioning at Penn

Reverse Auctioning at the
University of Pennsylvania
SUNY Purchasing Association
Fall Conference
October 9, 2003
Presentation Agenda
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About Purchasing at Penn
Business Opportunity
Motivation for Change
What is Reverse Auction?
How Does It Work?
What are the Challenges?
What are the Benefits & Drawbacks?
Penn Events
About Procuri Incorporated
About Purchasing at Penn
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Distributed point-of-demand purchasing environment
Over 1,900 Oracle Financials users – Purchasing
(iProcurement), Payables & GL
Delegated approval authority for transactions <$5,000
EDI, Document Imaging & Reverse Auction
technologies used to compliment eProcurement system
Annual purchase volume of $700 Million
Consistent & on-going senior management support for
strategic purchasing, cost containment, supplier
diversity & eProcurement initiatives
Business Opportunity
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Purchasing has always used traditional competitive
bidding initiatives for annual volume requirements
Solicitation of bids for one-time capital equipment
purchases was usually conducted in Schools & Centers
Post-bid negotiations always resulted in additional
savings
Realization was that there had to be a better way to
leverage Penn’s buying power
Market assessment was conducted to identify an
alternative to traditional competitive bidding
Motivation for Change
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Senior management support for implementation of
emerging technologies
Success of formal cost containment program increased
pressure for new savings opportunities
Pressure to maximize potential of existing supplier
relationships
Emerging technologies that increase performance and
efficiencies
Staff compensation based on performance and
accomplishments
What is Reverse Auction?
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Secure online competitive bidding tool to leverage
spend
Opposite of auctions such as eBay, low price wins
Does not impact or change current business
requirements (pre-bid meetings, specifications, quality
analysis prior to contract award)
Buyer creates bid specifications, identifies authorized
bidders, event and award dates
All event activates are recorded and reports are
available to buying organization for audit purposes
How Does It Work?
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Buyer identifies requirement, develops RFP, selects
invited bidders, and schedules online event
RFP/RFQ documents distributed electronically to
invited bidders
Invited suppliers are trained by business partner to use
the Reverse Auction tool (Procuri Inc. for Penn)
Event duration and extensions are based on commodity
(usually 20 minutes with 3 minute extensions for Penn)
Buyer and suppliers can communicate via e-mail during
event
Award can be made at the end of event or after review
of bids
What are the Challenges?
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Acceptance of new procurement tool by purchasing
staff and other Penn ordering units
Reluctance by some suppliers to participate in an
initiative that may dramatically reduce their GPM
Payment for service, decision on buyer or supplier
payment options
Ability to distribute the technology to the campus
community for spot buys
What are the Benefits?
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Easy to use web-based tool to streamline the
competitive bidding process
Reduces time and effort related to RFP/RFQ
creation and distribution
Speeds up competitive bidding & contract award
process
Promotes fierce competition for Penn’s business
Average events savings is 12%
Great use of technology
What are the Drawbacks?
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Requires careful selection of targeted
commodities as the technology is not useful for
all purchase requirements
Some suppliers may elect not to participate in a
Reverse Auction event
May impact supplier relationships if not used
appropriately
Dramatically reduces supplier profit margins
Penn Events
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Collaborative buying event for HVAC Filters
Collaborative buying event for office supplies
Event for cost-per-copy copier contract in development
Event for copier paper in development
Process for bidding vehicle requirements in
development
Process for leveraging content position in the Penn
Marketplace in development
Discussion with Penn Facilities for possible use for new
construction projects (steel, concrete, drywall, etc…)
About Procuri Incorporated
WWW.PROCURI.COM
Conclusion
Please visit the Penn Purchasing Services
Reverse Auction web site for
additional information
www.purchasing.upenn.edu/about/bidding.php