An Innovative Strategy Gets More Bidders Active

Situation

  • A large manufacturing company needed to source important and complex material for steel production at competitive prices while having flexibility to try new suppliers
  • While there were multiple qualified suppliers in the market, the customer only had direct experience with a few and could not transition all of their demand to a new supply base
  • Needed an approach that balanced the interest in finding new sources of supply with the need to protect a key commodity’s supply chain
  • eAuction Rule of Thumb: Expanding the pool of bidding suppliers will expand your competition and savings

Solution

  • Client divided its volume into 3 bidding lines and invited suppliers to each line depending on how much experience client had with the supplier:
    • Line 1: 50% of volume – only suppliers with significant client experience could bid. Full commitment (award) to the winner
    • Line 2: 25% of volume – the above suppliers and suppliers with some previous client experience. Full commitment (award) to the winner
    • Line 3: 25% of volume – all identified suppliers, including new potential suppliers, could bid however no commitment from client to winning supplier
  • Line 3 served two purposes:
    1. Line 3 had many bidders yielding high competition; client further increased competition on line 1 and 2 via Scanmarket’s ”Linked lines” functionality
    2. Line 3 also provided the customer an opportunity to test the competitiveness of new suppliers without requirement to make a full award to the winner

Result

  • eAuction strategy yielded high bidding dynamics and attractive prices for the full volume while still protecting the supply chain
  • Over 350 bids received
  • ”Linked Lines” functionality further increased competition
  • Customer was able to introduce a new supplier into a critical category