Transcript Growth and Capacity Development for Minority Suppliers

e: Sourcing/RFx Process
Overview
South Central Ohio Minority Supplier
Development Council (SCOMSDC)
December 7, 2011
Largest Traditional Grocery Retailer
2010 Sales - $82.2 Billion
338,000 Associates
2439 Supermarkets, Price-Impact Warehouse and Multi-Department Stores in
31 States under nearly two dozen banners, 796 C-Stores, 1067 Fuel Centers,
363 Fine Jewelry Stores and 40 Manufacturing Plants, in addition to other services
such as Kroger Personal Finance, The Little Clinic and I-Wireless
Corporate Business Strategy: Mission
• To be the leader in the distribution and
merchandising of food, pharmacy, health,
personal care, seasonal merchandise and
related consumable products and services….
• We will conduct our business to produce
financial returns that reward investment by
shareowners and allow the Company to grow….
• We value diversity and will strive to reflect that
diversity in our workforce, the companies we do
business with and the customers we serve....
Corporate Business Strategy: Goals
• Increase sales and profits
• Meet customer needs/expectations
• Customer 1st Strategy and Associate 1st
• Offer high quality products and services
• Gain a competitive advantage
• Control efficiencies and reduce cost
• Achieve sustainability and safety objectives
• Contribute to the economic growth of the
communities we serve
The History of Auction
• Recorded as early as 500 B.C. in Babylon
• 193 A.D. Roman Empire was auctioned off to highest
bidder Didius Julianus (an early sad case of the
“winner’s curse”… Septimius Severus
• Early England (ascending) “ English auction used
“auction by candle” for goes and leaseholds
• Oldest auction house in the world- Stockholm Auction
House in Sweden, founded in 1674
• Civil War- war goods auctioned by the Colonel of
military division ( unofficial title carried today
• Christie’s, Sotheby’s, Reynolds, Freeman’s and
numerous “local” auction houses exist and thrive
Uses of Auction
• Collections (art & antiques), wine, real property,
industrial machinery, commodities (oil, livestock, wool,
tobacco, fish, electricity, natural gas), autos,
thoroughbred horses, legal (public), radio spectrum,
timber, timber allocation, environmental, debt, treasury
bills, foreign exchange, mineral rights, etc.
• Flowers (Tulips) - Netherlands – “Dutch” Auction
(descending)
• FRB Chairman, Ben Bernanke suggested using auction
to valuate assets…($2 SOB – Bear Stearns)
• Sale of office wall art for Lehman Bros by Freeman’s
(doubled expected value)!
The History of “ Reverse” Auction
• The proliferation of the internet + the 90’s “.com era” =
ebay, Bidtopia, Bidville, GunBroker.com, etc.
• B2B electronic marketplace to negotiate pricing for
goods & services, where many sellers exist
• Freemarkets: 1995 - Glen Meakem (G.E./McKinsey)
• Y2K: Global Net Xchange was born (Sears, Kroger, PPR,
Carrefour, Coles-Myer, Metro AG, KQ, Sainsbury, &
Oracle)
• GNX + WWRE merger = Agentrics (2005)
• Current Agentrics membership generates over $1 Trillion
in revenues annually
Comparison /Contrast
Kroger e:Sourcing is not ‘like’ ebay!
Considerations:
Who can
participate?
Any registered user
Only suppliers qualified, approved & invited
by the buyer – in total confidentiality
Lose “lead” in the
final seconds of
bid?
Timing is everything!
The most adroit, wins.
Auto extends eliminates any supplier
attempting to “time” or use the clock
How is the “winner”
determined?
Best Price
Buyer reviews pricing as well as quality,
logistics, cost to change, M/WBE, etc. –
awarded to be BEST VALUE to Kroger
How are
negotiations
structured?
Best price without
freight
Multiple formats with terms suited for each
application : RFP/RFI/RFQ
Different Types of e:Sourcing Events
(refer to Supplier ezM tutorials)
• RFP: Request for Proposal
• Generally, an auction format, with
• Ranking Provided, Re-bids allowed
• Can be a “Blind, one-time bid (no re-bids)
• RFI: Request for Information
• NOT an auction format
• Generally, no pricing requested
• No Ranking Provided, No Re-bids allowed
• RFQ: Request for Quote
• NOT an auction format
• Pricing requested
• No Ranking Provided, No Re-bids allowed
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Auction:
Why Kroger Uses e:sourcing
• Competition in a free market = Fair Market Pricing
• The constant search for “perfect” market information in a
dynamic world market
• Every qualified participant brings additional knowledge to the
market/event
• Knowledge given to the market is a powerful driver for growth
• Agreement Term can provide stability for the supplier(s)
• Feedback during/from an auction is valuable to suppliers
• Process saves time and expense for suppliers, and Kroger
• Integrity of the process/Company Values (Code of Conduct)
rigidly adhered to (Kroger events are NOT like eBay)
• World-wide, over 10,000 active ezMarket-registered Kroger
suppliers
A Supplier’s Comments on being successful in
e:Sourcing events (Gartner Studios):
• Thorough preparation is key: “Know your costs, your
suppliers, and your market (tiny details can make the
difference in winning/losing; being profitable, or not)”
• The results of these preparations have allowed Gartner to
decrease production and shipping costs by almost 30%
• They have more than doubled their sales in 3 years (2003 –
2006)
• Increased profits to an all-time high
• “I know most people don’t look at reverse auctions
positively, but we see them as a process that makes you
better. If companies don’t look at it that way, they’ll lose to
somebody who does.”
Top X “to do’s” for Suppliers
(refer to handout)
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Resources:
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Kroger GNX Team
Agentrics/ezMarket CSS Team
Project Preparation:
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Invitation Email & Project Documents
M/WBE Certification
Plan Ahead
Communicate
Be Prepared
Establish your strategy
Award of the business
Abe’s wisdom is timeless!
“Give me six hours to chop
down a tree, and I will use
the first four to sharpen the
axe.”
-Abraham Lincoln
Contact
Questions???
Contact us
Contact
http://www.thekrogerco.com/supplier/supplierdiversity.htm