E-Catalogues

An e-catalogue is an online presentation of information on products and services that are offered and sold by an organisation.

Many businesses offer a range of products or services, often with various options and models. Typically, these have been presented in a printed brochure or catalogue. The Internet provides advantages over the printed brochure by making a catalogue available to everyone, any time of the day or night, anywhere in the world.

The benefit of e-catalogues are reduced marketing cost without printing expenses and distribution costs, improves customer service level with instant catalogue availability and updated information, time and cost reduction in maintaining an updated and accurate product catalogue, improved access to product catalogues by standardising and providing multiple search criteria to be easily found, can be coupled with online payment system encouraging sales and assisting cash-flow.

One of the negative aspects of e-catalogues is if the business has a large range of products or services that change prices or availability often, then the e-catalogue requires a sophisticated website solution which can have a high cost to establish and maintain. For a company to have full benefits of having an e-catalogue, it is necessary to coordinate its customer and product databases, stock and inventory systems and financial systems to ensure that they are integrated into a common platform to optimise the process.

The functionality of e-catalogues through a procurement point of view is slightly different, it is mainly used to purchase indirect materials for processes such as operations, sales, maintenance and administration, items such as office supplies, computer/communication equipment, cleaning solvents, office furniture, travel related items and transportation services are most likely to be found in an e-catalogue managed by the procurement group of a company. Such systems allow organizations to distribute purchasing decisions to people across the organization. Moreover, automated links to suppliers allow buyers to reduce the paperwork and overhead associated with the buying process and shorten the purchasing cycle. Only those suppliers connected to a buyer’s e-procurement system are visible to the buyer. The systems catalogues contain generalized product and service database fields rather than catalogues based on product and service specific to product types. A main limitation of e-procurement systems is that they are closed and cannot support automated searches and comparisons across all suppliers, which secure the process and frame agreements negotiated by the strategic sourcing group at the time the project ran.

3.10 E-Auction

3.10.1 Definition

According to EU Directive 2004/17 Article 1(6), e-auction is defined by “a repetitive

process involving an electronic device for the presentation of new prices, revised downwards, and/or new values concerning certain elements of tenders, which occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods. Consequently, certain service contracts and certain works contracts having as their subject-matter intellectual performances, such as the design of works, may not be the object of electronic auctions.”

Electronic commerce enables stronger relationships between buyers and suppliers and new ways of buying from existing suppliers.18

E-auctions are a more efficient and transparent way of doing business as part of a full procurement process. It means that the time spent to carry out competitive negotiations is reduced. The purpose of e-auction is to identify the best possible price for a set quality; online competition allows bidders to underbid19 the bids of their competitors.

3.10.2 Types of e-auctions

There are three different types of e-auctions, which are:

Reverse e-auction: This is the most common e-auction type where the buyer controls the

market because the item is offered by “x” number of suppliers. The price offered by the suppliers continues to decrease until a reasonable market price is set. The basic idea of a reverse auction is that a sufficient supply exists and suppliers’ profit margin is sufficient to

18 _{Pucihar, Andreja. Gricar, Joze. Environmental Factors Defining E-Marketplace Adoption: Case of Large}

Organizations in Slovenia. 2005

19 _{The underbid is used for reverse e-auctions, which is a new trend in the procurement sector. At the time of}

offer reduced prices. The normal downwards auction is generally the most effective auction type in a competitive normal market.

Forward e-auction: is when the supplier offers a product to numerous buyers, this is the

most common type of auction, where the supply and demand sets the price and the supplier controls the market because a product is being offered to “x” number of buyers. The price offered by the buyer continues to increase until a reasonable price is met. This can be used for discount rates, sales etc.

Transformation/factoring e-auction: Simply an auction where weighting is included. You

transform the submitted bids with either a multiplier or an adder (e.g. switching costs etc.)

Auctions are usually used in sectors in which bids can easily be evaluated, considering the aspects of prices, delivery time, specifications, in competitive markets, in cases with ample supply and/or in mature markets.

3.10.3 Benefits

One of the main benefits of using an e-auction is the time saving compared to running normal negotiations. E-auctions created a shift in power and resources, shown in Figure 4 below. The module illustrates that the negotiations take hours instead of days/weeks.

S S S S S S B Traditional Negotiation S S S S S S B E-auction

Figure 4 – Power Game Shift

B: Buyer S: Suppliers

Another essential factor is that you have the opportunity to invite more suppliers into the sourcing project since the number of suppliers does not cause the equivalent extra amount of work as illustrated in Figure 5 below.

This factor combined with the direct competition an e-auction facilitates, creates potential larger savings than would be achieved through traditional negotiations.

3.10.4 Supplier feedback

For every e-auction conducted, it is quite important that the buyer considers what kind of feedback will be given to the suppliers during the process. Some of the parameters that can be used are:

• Lowest price bidding, no rank feedback: This is a good strategy when the buyer has a very competitive field with few suppliers.

• Rank bidding, no price feedback: An effective strategy when the prices are scattered and the buyer does not want to scare suppliers off.

• Best/not best: When the rank is shown, the buyer needs to be aware that the number of participating suppliers might be obvious to them. So, for instance if the event only has 3 suppliers the best/not best feedback might be a better solution.

Supplier Qualification Initial negotiations (RFP/Q) Final negotiations Traditional Sourcing eSourcing eRFI eRFP/eRFQ eAuction or multi round eRFP/eRFQ 8 4 8 4 8 4 4 2 4 2 2 1 2 1 20 15 20 15 20 15 15 10 15 10 10 1 10 1 Figure 5 – Improved competition

The above mentioned parameters can be varied and combined in a numerous ways, all depending on the number of suppliers, variation in prices and the particular market.

3.10.5 Award decision

A decision the buyer needs to take prior to the e-auction is how he/she wants to award the suppliers after the event, what the strategies and goals are and so on. There are some options to be considered:

Supplier qualification: The e-auction is used to shortlist the supplier base. Suitable for

situations where there are, for example, 10 suppliers for the auction but the strategy is to reduce this number to 3, these will be the three suppliers the buying company will continue to further negotiations, and when more than one supplier is needed.

Supplier negotiation: this awarding decision is for when the buying company wants to

conduct an e-auction for the final price negotiation and that further evaluation will be conducted afterwards. It is suitable when the sourcing group needs further approval from stakeholders and can not commit to taking the winner.

An example of this type of award decision would be a Fuel Sourcing in the US; the initial number of suppliers (truck stops/fueling stations) is 11, the objective of the sourcing is to end-up with a maximum of 3 suppliers per region in the US. The auction is conducted to identify which are the 3 remaining suppliers that can be invited to further negotiations, where the first best, second best and third best suppliers will be identified within the coverage region.

Practical example

An example to this situation would be e-auction for business fleet (corporate vehicles), the e-auction is conducted to identify the best supplier to the specification provided. After negotiations, the buying company needs to get approval or further details on the

contracting product.

Winner takes all: this is normally the auction type that gives the most competition and the

most price reductions, which can be applicable to all sourcing projects. This is the type of awarding that generates better savings because the buying company is compromising the volume to the participating suppliers.

There are some other parameters to consider when conducting and structuring an e- auction. For instance what the starting prices should be, should the items be split by lot, should the buyer have a reserved price, and so on. Generally these decisions need to be based on the particular market, suppliers and strategy conducted prior to the auction.