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Sourcing Additional Suppliers for Complex Materials

The buyer, a large manufacturing company, needed to source important and complex material for steel production at competitive prices while maintaining the 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. The buyer needed an approach that balanced the interest in finding new sources of supply with the need to protect the supply chain for a key commodity. This situation highlighted the eAuction key benefit: Expanding the pool of bidding suppliers will expand the competition and savings.

Divide and Conquer

  • The buyer divided its volume into 3 bidding lines and invited suppliers to each line depending on how much experience the buyer had with the supplier:
    • Line 1: 50% of volume – only suppliers with significant buyer experience could bid. Full commitment (award) to the winner
    • Line 2: 25% of volume – the above suppliers and suppliers with some previous buying 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 the buyer to the winning supplier
  • Line 3 served two purposes:
    1. Line 3 had many bidders yielding high competition; buyer further increased competition on line 1 and 2 via Scanmarket’s ”Linked Lines” functionality
    2. Line 3 also provided the buyer an opportunity to test the competitiveness of new suppliers without the requirement to make a full award to the winner

Success - New Supplier Identified

  • The 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
  • The buyer was able to introduce a new supplier into a critical supply chain category