Krinati Solutions

  Procurement teams often face a scenario where they have to compare bids from suppliers that aren’t exactly similar. What do we mean by that? Here are some scenarios where bids received from suppliers aren’t comparable. Shipping costs are incurred by the buyer and are different for each supplier i.e. supplier provides goods ex-works and the buyer is responsible for the transportation of goods. Payment terms are different Quality and esourcing services levels are different Switching costs are incurred with a new supplier Preference is given to incumbent suppliers plus others If we need reverse auctions to be conclusive in themselves, then they cannot be applied in such scenarios. This can be a challenge for companies trying to establish reverse auctions as a norm for supplier negotiations. The way to address this is via Transformed Price bidding. How does that work? The bids placed by suppliers are transformed by applying ‘Price Transformation Factors’, thus normalizing the bids r...

  Reason 1: Inviting unqualified suppliers to the auction event Auctions should ideally be the final step in the negotiation process. Negotiating with suppliers post the auction is a big no-no. Similarly, qualifying suppliers post the auction has its demerits too. Assume the lowest-ranked supplier is disqualified post the auction. The next ranked supplier will doubt the veracity of the event and will likely be peeved. Reason 2: Poor supplier management Suppliers would much rather compete in a transparent and fair market, where their capabilities can be fairly evaluated. They prefer to participate in auctions with similarly capable suppliers. They doubt an unclear selection and shortlisting process. Having a simple auction tool is critical to ensure suppliers aren’t discouraged from participating in online auctions. Some common supplier queries are the following: Why is the buyer even conducting a reverse auction? We have serviced them well over the years and delivered terrific valu...