How to improve competition with only a few suppliers

We've all been there. You have a category of spend where you'd like to run a bidding event but don't have enough qualified suppliers in-house to ensure a good, competitive process.

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Date

Wednesday, May 15, 2019

We've all been there. You have a category of spend where you'd like to run a bidding event but don't have enough qualified suppliers in-house to ensure a good, competitive process.

This can happen for a host of reasons:

  • Category has not been sourced recently so supply base knowledge is limited
  • The known supplier pool is small or highly fragmented
  • Specifications are customized and require more effort on the part of bidders
  • Multiple attributes (i.e. non-price variables) need to be factored into your bid

As we have discussed in previous Scanmarket publications, more bidders typically leads to more savings. So what's a smart sourcing professional to do if you only have a couple players at hand? Five things:

  1. Train, train and train some more
  2. Use non-traditional bidding formats
  3. Take your time, and prepare a careful bid
  4. There are other fish in the sea, but you might need to look for them
  5. Provide feedback and support options for bidders

1. Train, train and train some more. Since on average only about three-quarters of invited suppliers actually participate in an eSourcing event, it's imperative that you make sure that your bidders feel comfortable about participating. This is even more true when you have a limited supply base. In order to ensure that you don't lose participants at the last minute, be sure to:

  • Have a direct connection with the supplier resource who will be participating in the bid
  • Conduct, if appropriate, bidder conference calls prior to the event
  • Consider a test event if any of your bidders are new to the process
  • Employ the support/feedback guidance in #5 below

2. Use Non-Traditional Bidding Formats. When there are fewer bidders, it's important to select the right bidding format to get the results you need. Japanese auctions in particular have returned better results with five or fewer bidders. This is because a Japanese auction rewards bidders for "staying in" rather than making discrete bids to take a lead. 

Dutch auctions have also proved effective with limited number of bidders. A Dutch auction is characterized by the first come first served principle meaning that the first bidder to submit a bid closes the auction. As the numbers of bidders aren't visible in any way, this type of auction can be carried out with just one or two bidders. (For more information on non-traditional formats, download whitepaper below).

3. Prepare a careful bid. By eliminating any confusion or uncertainty, you can increase the probability that your bidders will actively participate. While this may take some time, it will certainly take less time than resolving a failed bid and starting over. This is particularly true if you have complex specifications or numerous non-price variables that you're incorporating into the event.

4. Go find more bidders. Just because you only have a few bidders identified doesn't mean there aren't more qualified ones out there. While sourcing and qualifying new bidders is frequently the hardest part of the process, it can also be the most important. It used to be that the only way to find and vet new vendors was either an expensive, time-consuming supplier discovery project or trolling around trade shows. Thankfully, the advent of new public and private supplier networks makes it much easier to find and qualify new sources of supply. Many of these networks are open and free of charge to buyers.

5. Provide feedback and support options for bidders. Even the best preparation will not anticipate everything that may come up during an event. Since you need your few bidders to participate, make sure they have an easy way to contact you and resolve any issues. While standard practice is to have bidders go through the online messaging tool in the platform, an event with few bidders may be an exception where it's advisable to staff a live telephone support line.

Want to know more about Japanese and Dutch eAuctions? Download our whitepaper on the subject here:

Download Whitepaper

For more information on this data or to learn more about how Scanmarket can help you achieve your business objectives, please visit us at www.scanmarket.com