Increasing Competition on Olive Oil

The buyer, a large Nordic retailer, wanted to conduct an eAuction on different kinds of olive oil. A thorough RFP revealed that there was good competition between the suppliers on the individual products, but not on the total order. The current annual spend was €2,049,036.  Previously the retailer had 1 supplier for all olive products and they wanted to keep it this way, but they wanted to increase competition on the total order.

Reducing Price on Total Order

  • 4 suppliers were pre-qualified for the eAuction based on a thorough RFP and product testing
  • Although one supplier was by far the cheapest overall he was not the cheapest per product. As a result, a Cherry Picking eAuction was chosen to exploit the good product line competition
  • The new suppliers had a switching cost of around 0.5% added to their cost price to ensure fair competition on the total cost
  • Thorough supplier training was conducted to ensure that all suppliers understood the buyer's preference for having one supplier for all products despite product line competition in the eAuction

Identified One Supplier

  • High bidding activity - 182 bids submitted
  • The eAuction lasted 97 minutes including 41 extensions of 2 minutes
  • €125,147 (6%) saved compared to the current price
  • One supplier found for all olive oil products