Charles Eddolls© 2013

Support Support (revised edition 7(revised edition 7thth June 2013) June 2013)

I have needed to revise “My support service” I have needed to revise “My support service”

presentation released at the beginning of this month.presentation released at the beginning of this month.

It was suggested that the presentation did not It was suggested that the presentation did not

properly address the pros and cons of the topic.properly address the pros and cons of the topic.

I have produced this show to rectify this issue and I have produced this show to rectify this issue and

to give further insight into the benefits of successful to give further insight into the benefits of successful

tenders and reverse auctions (RA).tenders and reverse auctions (RA).

A Balanced ViewA Balanced View

Whilst promoting my “Buyers Guides” to University Students in the Whilst promoting my “Buyers Guides” to University Students in the

USA I had an exchange with a prominent academic resulting in the USA I had an exchange with a prominent academic resulting in the

production of a “White Paper” see production of a “White Paper” see http://dld.bz/c4E9d

The problem is that a well run tender and RA gives benefits to allThe problem is that a well run tender and RA gives benefits to all

whilst a badly run RA is at best un-commercial and at worst couldwhilst a badly run RA is at best un-commercial and at worst could

result in civil or criminal action against the perpetrator.result in civil or criminal action against the perpetrator.

I have seen this type of RA in action and agree with the majority of I have seen this type of RA in action and agree with the majority of

buyers that its use spoils buyer/supplier relationships and leads to buyers that its use spoils buyer/supplier relationships and leads to

the award of bad contracts.the award of bad contracts.

My RA historyMy RA history(a synopsis)(a synopsis)

ThyssenKrupp - 150,000 employees in over 80 countriesThyssenKrupp - 150,000 employees in over 80 countries

At the turn of the Century ThyssenKrupp AG allowed me to use At the turn of the Century ThyssenKrupp AG allowed me to use their actual purchases to develop my reverse auction process.their actual purchases to develop my reverse auction process.

They gave me a free hand that resulted in the creation of unique RA They gave me a free hand that resulted in the creation of unique RA software and purchasing procedures. software and purchasing procedures.

My in-house reverse auction software was years ahead of its time.My in-house reverse auction software was years ahead of its time.

The trials were so successful that ThyssenKrupp issued a press The trials were so successful that ThyssenKrupp issued a press release confirming that I had saved them 29%.release confirming that I had saved them 29%.

http://dld.bz/cA7sh

Reducing costsReducing costs

My largest publicised saving was £100 million + (My largest publicised saving was £100 million + ($155 million)$155 million) (43%) (43%)

This was a complex competition that was successful because we split up an existing This was a complex competition that was successful because we split up an existing single source contract into manageable portions.single source contract into manageable portions.

This enabled smaller companies to complete in tenders that were structured to meet all This enabled smaller companies to complete in tenders that were structured to meet all

of the suppliers needs of the suppliers needs

The AuctionThe Auction

2,432 bids were received. The extension period was 13 hours & 45 minutes with an 2,432 bids were received. The extension period was 13 hours & 45 minutes with an hourly saving of circa $10. millionhourly saving of circa $10. million

http://dld.bz/cAwTz . .

What size are reverse auctions?What size are reverse auctions?   

My largest auction was for £1.5 Billion My largest auction was for £1.5 Billion My smallest £20KMy smallest £20K

To save money you do not have to use an auction! To save money you do not have to use an auction!

I purchased 500 estate cars from a leading motor manufacturer who I purchased 500 estate cars from a leading motor manufacturer who had professed to have already given my client their rock bottom prices.had professed to have already given my client their rock bottom prices.

I competed the need between their sales and finance departments I competed the need between their sales and finance departments using e-mail and telephone.using e-mail and telephone.

All parties knew that I would only buy from them: All parties knew that I would only buy from them:

I saved over $500,000!I saved over $500,000!

Air filters 36% Aluminium Extrusion 12% Architects services 14% Audio & Video Cassettes 26% Audio/Visual/installations 49% Automotive Metalwork 20% Bakery Ingredients 6% BT Lines 20% Building Surveyor 14% Camp Beds 14% Cameras 10% Catering 18% CCTV service contract 43% Cheese 8% Chilled/Frozen Goods 18% Chocolate 7% Civil and Structural 13% Cleaning Cloths 54% Clinical Consumables 18% Coffee 17% Commercial Tyres 10% Compasses 27% Computer Consumables 63% Contrast Media 65% Copier Paper 8% Corrosion & Icing Inhibitor 5% Courier parcel services 22% Derv & Gas Oil exc duty 12% Diving Apparel 63%

Domestic Couriers 23% Domestic Linen 10% Desk top stationary 46% Electric Office Supplies 33% Electricity 6% European Freight 11% Frigate Refit 21% Frozen Veg 6% Fuel DERV 5% Fuel Gas Oil 5% Fuel Kerosene 21% Fuel Transportation 62% Glasses 6% Gloves and Linen 43% Hand and Cutting Tools 39% Hydraulic and Engine Oil 26% Incontinence Products 30% International Freight 32% Landlines 19% Lease 22% Lifts maintenance 25% Lorry Tyres & Services 11% Mattresses 40% Mech and Engineering 13% Mobile Phone 17% Mount 54% Oils and Lubricants 37% Operating Theatre Products 19% Parts Haulage 31%

Plastic bins 26% Pasta 36% Plasma Torch Consumables 19% Pocket Pack Tissues 62% Postage 16% Power Cables 26% PPE 37% Printer Consumables 40% Printing 47% Project Manager 16% Quantity Surveyors 13% Rehabilitation Consumable 19% Risk and Value 13% Rock Salt 24% Shirts 47% Specialist Batteries 5% Stainless Steel Sheets 9% Stationery 64% Steel 15% Steel Storage / Furniture 8% Tarpaulins 27% Temporary staff 16% Thomas Bins 14% Tissues 66% Trailer 22% Trailer Hire 16% Urology Consumables 7% Welding 45% Wound Management 15%

Examples of savingsExamples of savings(a small part of our 30% average)(a small part of our 30% average)

Positive points re an RAPositive points re an RA(for the buyer)(for the buyer)

Improves the cost of products/servicesImproves the cost of products/services

Reduces negotiation process timeReduces negotiation process time

Is an easy process to repeat with other productsIs an easy process to repeat with other products

Encourages development of closer supplier relationshipsEncourages development of closer supplier relationships

Raises competitivenessRaises competitiveness

Positive points re an RA Positive points re an RA (for the supplier)(for the supplier)

Improves discipline in the tendering processImproves discipline in the tendering process

Encourages transparency of pricing and ability to react to Encourages transparency of pricing and ability to react to competitors' pricescompetitors' prices

Reduces negotiation process timeReduces negotiation process time

Low entry costs & raises competitivenessLow entry costs & raises competitiveness

Negative points re an RA Negative points re an RA (for an incumbent)(for an incumbent)

Risk of loosing a contractRisk of loosing a contract

Have to explain how the contract worksHave to explain how the contract works

Potential loss of margin and profitPotential loss of margin and profit

Brings tension to a relationshipBrings tension to a relationship

Example Example Pan Pan European TransportEuropean Transport

The contract covered: The contract covered:

The movement of general stores and medical equipment The movement of general stores and medical equipment between the UK and Germany, including a daily express run between the UK and Germany, including a daily express run

from Bicester in the UK to Dulmen in Germanyfrom Bicester in the UK to Dulmen in Germany

The movement of stores within North-West EuropeThe movement of stores within North-West Europe

The provision of transport services for the movement of stores from The provision of transport services for the movement of stores from the UK, to Germany and to the Pan-Balkan States.the UK, to Germany and to the Pan-Balkan States.

Client quote “Following the auction, it was clear to those Client quote “Following the auction, it was clear to those involved that the realised savings were far greater than expected”involved that the realised savings were far greater than expected”

http://dld.bz/cA74C

Example Example The London UndergroundThe London Underground (saved $5 million on hourly consultancy rates)(saved $5 million on hourly consultancy rates)

Tube Lines was owned by Bechtel & Amey and were in partnership Tube Lines was owned by Bechtel & Amey and were in partnership with London Underground rebuilding the with London Underground rebuilding the

Jubilee line, Northern line and Piccadilly line.Jubilee line, Northern line and Piccadilly line.

Andrew Geffryes, Head of Corporate Procurement commented:Andrew Geffryes, Head of Corporate Procurement commented:

““As Tube Lines had no direct previous experience we looked for a reliable and trusted As Tube Lines had no direct previous experience we looked for a reliable and trusted partner to lead us in the use of reverse auctions.partner to lead us in the use of reverse auctions.

We chose GSA and the initial trials proved very successful, this led to us extending We chose GSA and the initial trials proved very successful, this led to us extending

our use of GSA to run a series of reverse auctions in both the traditional commodity our use of GSA to run a series of reverse auctions in both the traditional commodity type areas as well as more specialist ones, achieving saving up to 42%”type areas as well as more specialist ones, achieving saving up to 42%”

Example Example First UK Central Government RAFirst UK Central Government RA

66% savings ($1+Million)+11% betterment66% savings ($1+Million)+11% betterment

http://dld.bz/cA7mF

A resounding success for the client!A resounding success for the client!

““This is a fine example of a reverse auction achieving tremendousThis is a fine example of a reverse auction achieving tremendous

success and the DCG is delighted to have made such significant success and the DCG is delighted to have made such significant

savings. The commercial staff adopted a dynamic approach in savings. The commercial staff adopted a dynamic approach in

selecting this method of purchasing and we will certainly be using selecting this method of purchasing and we will certainly be using

the process again in the future when and where appropriate. I canthe process again in the future when and where appropriate. I can

thoroughly recommend the procedure ….”thoroughly recommend the procedure ….”

- Brigadier Little, Head of the Defence Catering Group- Brigadier Little, Head of the Defence Catering Group

Example Example AV auctionAV auction

We competed three existing contracts for the supply and installation of audio We competed three existing contracts for the supply and installation of audio visual & equipment associated support services and video teleconferencing visual & equipment associated support services and video teleconferencing

(VTC)(VTC)

The participants could bid on some 200 lines and we had structured 1,000+ The participants could bid on some 200 lines and we had structured 1,000+ price factors in the cost model.price factors in the cost model.

Circa 1,700 separate bids were placed across the baskets.Circa 1,700 separate bids were placed across the baskets.The saving was over $6.3 million this being some 33.5% of projected contract The saving was over $6.3 million this being some 33.5% of projected contract

value compared with historic costs.value compared with historic costs.

The auction ran for nine hours into the extension periodThe auction ran for nine hours into the extension period

http://dld.bz/cA7q9

Some clients I introduced to the RA:Some clients I introduced to the RA:

AramarkAramark AmaryllisAmaryllis Acquire ServicesAcquire Services Alternative NetworksAlternative Networks BMW (UK)BMW (UK) Barnet Enfield and Haringey (NHS)Barnet Enfield and Haringey (NHS) CalumetCalumet Cheltenham CouncilCheltenham Council DBC FoodserviceDBC Foodservice European Metal RecyclingEuropean Metal Recycling Gloucester (GPP)Gloucester (GPP) Grant ThorntonGrant Thornton Hammersmith (NHS)Hammersmith (NHS) London TaxisLondon Taxis

ETC - ETCETC - ETC

Mayflower Vehicle SystemsMayflower Vehicle Systems MilklinkMilklink Ministry of DefenceMinistry of Defence The University of OxfordThe University of Oxford Newham (NHS)Newham (NHS) North Middlesex (NHS)North Middlesex (NHS) OGC Buying SolutionsOGC Buying Solutions Pall CorporationPall Corporation P&OP&O RUH Bath (NHS)RUH Bath (NHS) Schneider ElectricSchneider Electric Sims RecyclingSims Recycling ThyssenKrupp AG (UK)ThyssenKrupp AG (UK) Tube LinesTube Lines UK HydrographicsUK Hydrographics University of ExeterUniversity of Exeter Whittington NHSWhittington NHS

Testimonials

"I allocated a member from my team to work with GS to"I allocated a member from my team to work with GS toidentify areas of possible cost savings. At each stageidentify areas of possible cost savings. At each stage

of the process, GS summarized their findings for approval.of the process, GS summarized their findings for approval.From the initial analysis that GS made, we agreed thatFrom the initial analysis that GS made, we agreed thatthey would focus on the product areas of safety wear,they would focus on the product areas of safety wear,packaging, oils & lubricants and welding. GS made apackaging, oils & lubricants and welding. GS made a

forecast at this stage of the likely cost savings."forecast at this stage of the likely cost savings."

We were very pleased with the results. The savingsWe were very pleased with the results. The savingswere 29% of the total tender value."were 29% of the total tender value."

Robert Soen,Robert Soen,General Manager - ThyssenKrupp AutomotiveGeneral Manager - ThyssenKrupp Automotive

Testimonials

"I would like to thank Group Supplies for their support"I would like to thank Group Supplies for their supportand assistance to date and I look forward to workingand assistance to date and I look forward to working

collaboratively with you on promoting reverse auctionscollaboratively with you on promoting reverse auctionsas an alternative route to acquisition in delivering realas an alternative route to acquisition in delivering real

value for our forces.value for our forces.

Where the auction process has been utilised within Where the auction process has been utilised within MoDMoD

it has consistently delivered results"it has consistently delivered results"

Grant Morris whenGrant Morris whenDirector General - Commercial (Project Delivery)Director General - Commercial (Project Delivery)

Testimonials

"Group Supplies has developed a unique procurement"Group Supplies has developed a unique procurementprocess applicable across the whole spectrum ofprocess applicable across the whole spectrum of

procurement. They have successfully completed an initialprocurement. They have successfully completed an initialproject in liaison with our buyers, which produced savingsproject in liaison with our buyers, which produced savingsand are now involved in reviewing our activity relating toand are now involved in reviewing our activity relating to

lubrication oils. lubrication oils.

We are in the process of identifying a thirdWe are in the process of identifying a thirdcommodity for assessment as we develop our relationship.commodity for assessment as we develop our relationship.

The approach contrasts with traditional cost saving methodsThe approach contrasts with traditional cost saving methodsin the depth and scope of research and culminates in anin the depth and scope of research and culminates in aninnovative live trading floor generating cost reductionsinnovative live trading floor generating cost reductions

against bespoke tenders."against bespoke tenders."

David J Russell, Purchasing Manager (Indirect), David J Russell, Purchasing Manager (Indirect), Swindon Pressings Ltd - a BMW Group CompanySwindon Pressings Ltd - a BMW Group Company

Testimonials

To Dr Phillip Mason a colleague and a fellow director:To Dr Phillip Mason a colleague and a fellow director:

"I would like to thank both you and Charles for all your"I would like to thank both you and Charles for all yourhard work associated with this challenging project.hard work associated with this challenging project.

The solution you have come up with exceeded myThe solution you have come up with exceeded myexpectations and I am sure without your experienceexpectations and I am sure without your experience

knowledge and support we would not have been ableknowledge and support we would not have been ableto get the proposal to market in such an innovative to get the proposal to market in such an innovative

way."way."

Simon GoswellSimon GoswellFuels Category Management TeamFuels Category Management Team

Defence Fuels GroupDefence Fuels Group

ConclusionConclusion

I believe that the RA is an essential process for buyers to consider I believe that the RA is an essential process for buyers to consider If you click on the link it will take you to myIf you click on the link it will take you to my

white paper on this subject.white paper on this subject.http://dld.bz/c4E9d

I am happy to help with any procurement or operational needs so if you would I am happy to help with any procurement or operational needs so if you would like a chat drop me an email and I’ll get back to youlike a chat drop me an email and I’ll get back to you

charleseddolls@cygnetconsultancy.com

(All detail and discussion will be confidential).(All detail and discussion will be confidential).

http://www.cygnetconsultancy.com/