Influence of Digitization on Procurement : Part 3

In our previous article, we have explained the objectives of E-Procurement. The e-tender is a central operative procurement activity between the purchasing department and the group of bidders, which can be processed electronically. The exact specifications will be sent electronically to the supplier or bidder. For this it is necessary that the supplier has an interface that enables him to receive and send back information about the protocol and data structure defined by the copying company. Vendors are asked to make an offer on an inquiry. Access to this request can be either open or closed. The open tenders are characterized by the fact that the tender documents are publicly accessible on the platform and every interested supplier has the opportunity to submit corresponding offers. This type of tender is mostly used to identify new suppliers.

The opposite is the case with a closed tender, where only selected or selected suppliers have access to the tender documents. The advantages of this type include better protection of company know-how and less effort when evaluating the offers.

E-Auction

Essentially, an e-auction is a fast, stringent and structured procedure for conducting negotiations in pricing processes. A necessary condition for conducting an auction is therefore that all components of a contract must be clearly defined and standardized in advance, so that the price is the only variable remains.

These auctions serve as a substitute for conventional price negotiations. In the context of the auction, the price pressure plays a special role, as the participants are forced to react to the bids of the other bidders. The great advantage of electronic bidding compared to conventional auctions lies in the fact that the auction participants do not have to be brought together at the same auction location.

English auction is considered to be the oldest and most widespread form of auction. It is characterized by the fact that the suppliers bid for a predetermined order and this is progressively improving. The auction is won by the supplier with the last and thus best submitted offer. Japanese Auction is turn-based. In each round, the supplier with the worst bid must underbid the best bid. If this is not the case, he must be removed from the auction. The increment is usually determined by the buyer. The auction is only recognized as ended if a supplier is still left.
Dutch auction: the price is not approached from above, but from below. Characterized by the fact that the buyer sets an unusually low starting price, which is gradually increased until the first supplier is willing to accept the price quoted.

Brazilian auction is characteristic of ascending bid. Before the start of the auction, the buyer indicates how much he is willing to pay. The suppliers then start to increase the order by constantly improving the order volume. The Supplier who bids the largest volume for the specified amount is awarded the contract.

An essential requirement for the e-auction is that the offers of the suppliers can be made comparable and the price is the only remaining award criterion. If this is not the case, the auction result may be distorted in such a way that the bidder with the cheapest price wins the auction rather than the best offer. In order to ensure comparability, in practice there is often a call for tenders before an auction, in which product details and specifications are coordinated. The use of e-auctions results in two decisive effects: the implementation of favorable purchase prices and the increase in buyer productivity. Because of the shortened negotiation phases, buyers can handle more procurement processes or use the time gained for other activities.

E-Collaboration

In contrast to other e-sourcing solutions, where the competition between the supplier and its competitors is decisive, e-collaboration focuses on the particularly intensive cooperation with the supplier.

As already recognized by Stoll, e-collaboration is a supplier-oriented procurement process whose positive effects in intensive cooperation exceed the price advantages resulting from competition.

Compared to the traditional forms of cooperation, e-collaboration differs in a high degree of information-based networking between the participants or in the actual subject of the cooperation. This occurs mostly in the form of an information-intensive project task which, for reasons of time and cost, can only be fulfilled by distribution via extremely specialized companies.

Cooperation is possible on both an economic and a technical basis, and in the economic area e-collaboration integrations between the back-end solutions of the partners are often implemented with the aim of optimizing demand planning and supply. Cooperation on the technical side, on the other hand, is characterized by the early involvement of suppliers in development projects. This means that the know-how of the suppliers is already used at the beginning of the product development phase.

Typical examples of this type of e-collaboration are systems for the exchange of design data, documents or project plans. The high degree of integration required on the part of the purchasing company or the supplier is directly related to the technical support. The construction of such solutions is therefore usually very time-consuming and expensive.