May 17, 2020

How Online Auctions Can Bolster Your Sourcing Strategy

industry-focus/procurement/how-online-auctions-can-bolster-y
Freddie Pierce
4 min
Online auctions benefit buyers and suppliers

Since online or e-auctions came onto the procurement scene in the late 1990s, their use has been increasing by at least tenfold each year.

This figure...

Since online or e-auctions came onto the procurement scene in the late 1990s, their use has been increasing by at least tenfold each year.

This figure from the Chartered Institute for Purchasing and Supply is evidence that while most e-auctions hitting the headlines are those involving public sector organizations, private sector usage is also growing massively, with firms such as Sainsbury’s (for shop fittings) and Asda (for soft drink suppliers) using the e-procurement system.

E-auction services provider BravoSolution says it conducts more than 5,000 auctions per month for its global clients, seeing an average saving of between 10 and 15 percent. It told Supply Chain Digital that during June 2010, its clients’ auctioned categories included: building works, business travel, car rental, cleaning equipment, machinery and plant, office products, IT hardware and services, maintenance services, marketing and advertising, spare parts and transport and logistics.

BravoSolution account principal Claire Sexton says: “Over the past 10 years we have seen a significant step change in the approach that organizations are taking with the use of e-auctions. In the early days e-auctions were seen as a tool to be used on an ad hoc basis for quick-win cash savings; however, attitudes have now changed and many organizations are taking a strategic approach to factoring e-auctions into as many procurement projects as possible, with a view to delivering wider savings and capturing best value.”

In 2009 NHS Supply Chain conducted 54 e-auctions, one of which, for specialist mattresses, saved more than 66 percent on rental costs. This is just one of thousands of recent examples that demonstrate the rewards that online auctions can bring. Derby City Council saved more than £250,000 on mobile phones in just 52 minutes, a saving of almost 40 percent on the original projected cost. While 40 organizations across local government, health and central government saved £10.5 million on IT hardware through an e-auction.

BUYER OPPORTUNITIES

Islington Council in London uses e-auctions for the procurement of products, including utilities, computer hardware and mobile phones. The borough’s head of strategic procurement, Cliff Youngman, says: “The main benefit of using e-auctions is the opportunity for the buyer to force down suppliers’ prices after they have satisfied minimum quality criteria. Using an e-auction platform also provides a transparent audit trail of price reduction, and can help inform future
purchasing decisions.”

Warrington Borough Council has used online auctions to source wheeled refuse bins — in collaboration with other authorities — and for a managed service for temporary workers. It said on each occasion the e-auction generated savings of up to 25 percent. Stuart Sykes, head of strategic procurement, said: “It is essential to ensure that the evaluation criteria for quality aspects are well defined, weighted and factored into the auction platform. It is also advisable to warn tenderers not to reduce prices beyond the point which they can sustain.”

London’s Brent Council has used e-auctions for the acquisition of IT hardware, including PCs and servers. “E-auctions offer ease of collaboration, transparency of the bidding process for all parties and resultant driving down of the contract costs as bidders compete within the auction timeframe,” says Alison Matheson, head of procurement and risk management.

Dave Starling, head of procurement at Bromley Council in south London, said that e-auctions have saved it money, but had the additional benefit of allowing the council “to tap into sector specific support and expertise”.

Meanwhile Russell Mercer, head of procurement at Yeovil District Hospital, said that in the National Health Service (NHS), trusts are using NHS Supply Chain and Buying Solutions contracts where e-auctions have been used to select suppliers for items such as IT and catering products.

USING E-AUCTIONS WISELY

However, not every procurement programme is compatible with e-auctions, as Youngman explains. “There is a danger that some suppliers may be so keen to win the business that they actually lose money, which means the service you receive is poor or, even worse, they cannot deliver. E-auctions should be used wisely. Generally they work well for supplies contracts such as buying commodities, or for procurements that do not have a huge service element.”

London’s Merton Council believes e-auctions can be inappropriate for certain services.

A spokesman adds: “You have to train the suppliers in how to use them which has to be factored into your timescales.”

While online auctions are not applicable for all contracting organizations, the uptake is still rising as auction providers continue to invest in the technologies required to support competitive and successful events. However, there are thoughts within the industry that e-auctions are not being used to their full potential due to fear and reluctance to make the transition to using them; but in these times of recession, they could provide a perfect solution to making any necessary cost savings.

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Jun 16, 2021

EU and US agree end to Airbus-Boeing supply chain tariffs

supplychain
Boeing
Airbus
tariffs
3 min
Supply chains embroiled in Airbus-Boeing dispute will no longer be impacted by $11.5bn tariffs imposed on food and beverage, aircraft and tobacco

The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic. 

Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years. 

It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC. 

The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn. 

In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products. 

Boeing-Airbus dispute by the numbers  

  • The dispute began in 2004
  • Tariffs suspended for 5 years 
  • $11.5bn worth of goods affected by tariffs
  • $3.3bn in duties paid by businesses to date 
  • 15% levy on aircraft and 25% on non-aircraft goods suspended

Both sides welcome end to tariffs 

European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.

“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.

Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”. 

The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."

This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.

Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”

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