Where next for Where Next?

One day a long time ago I was trying to convince my CEO  to start a company blog; he ended up convincing me to try one myself. To see what would happen.

So I did. And looking back over these past 20 months I  can say it’s been great fun. And a very positive experience in a number of ways:

1. I’ve met physically and now count among my friends some great individuals who are as passionate about what they do, as I do about what I do. Like Jason who I have the good fortune now of crossing paths with whenever I’m in Chicago.

2. I’ve learnt about new technologies that are now making TradingPartners more effective at product development. In particular Rails (which we use for prototyping) … thanks Doc for posting about Coupa.

3. I’ve learnt a lot. “When Doc Searls first talked to me about blogs being provisional, I learnt something important for myself. Being unsure is a useful prerequisite for learning.” Thus spake JP Rangaswami and he’s right. Blogging ideas, and discussing them is (for me) a great way of thinking my ideas through properly, developing the good ones and jettisoning the bad ones.  

4. It’s also been very flattering to discover that I made it onto page 1 of Google for a search on “eauctions” (in the US only, admittedly – from Google in the UK I am nowhere but even so let me have my moment of glory)

However, it has been over a year and a half that I’ve been doing this. Like so many other people with a technical bent, I have a fairly short attention span and always want to figure out how to do/make things better. So while I was on holiday recently – in particular whilst spending an afternoon walking round the near-deserted remains of Rome’s ancient port, Ostia Antica - I had a chance to mull over the direction of the blog and try to figure out where next for Where Next.

Net result: I’m thinking about forking the blog into two: of taking one blog down a supply chain route while focussing another one on the life of a tech company CTO.

With two blogs in play I’d be posting even less frequently than today. But it would mean each would be more focussed which would be more satisfying for me, and hopefully also more usable for readers.

I’ve come up against 2 issues:
1. If I want to use my own domain name then can I still host on WordPress or would I need to arrange my own hosting?
2. What a pain it is to get a domain name. They’re all being squatted, or have been registered and then forgotten. I’ve dropped 2 emails to registered owners of (apparently unused) domain names and have yet to receive any kind of reply. Not even a “No, it’s not for sale”.

Any thoughts?

What’s good for Ariba is good for eProcurement (and eSourcing)

http://money.cnn.com/news/newsfeeds/articles/marketwire/0396537.htm has a list of the Top 100 Most Influential Technology Vendors for 2008 (via Deal Architect).

Ariba is at at a respectable 38.

Interestingly Netsuite is only at 85 (Salesforce is at 8). Shows that despite all the attention heaped on the CRM guys, that there are plenty of other players out there adding value, quietly. For example - check this graph from Compete.com which bizarrely enough shows (relatively) masses of hits for Netsuite, a smaller number for Salesforce.com and a “hey, who the heck are you anyway?” line in blue at the bottom for Ariba.

Vinnie Marchandi raises his eyebrows  at the results , well … it is an Aberdeen report so what do you expect ?

Nevertheless any publicity that gives a little more recognition to Ariba, and by extension eProcurement, is a good thing as far as I’m concerned. Perhaps as an industry we aren’t as sexy as a Salesforce or a Netsuite in terms of hits, but we can hold our own in terms of value.

eAuctions in the news

Always good to see some  (positive) coverage of eAuctions in the trade press. Here’s an article from Purchasing.com about BlueBird’s use of eAuctions. For non-US readers, Blue Bird make those iconic yellow N. American school buses.

Blue Bird procurement uses an e-auction tool to help consolidate the company’s supply base and transform purchasing.

Whose e-Auction tool? TradingPartners’, of course!

 

But you have to read the article carefully to get the full story. On the one hand Purchasing says

In the year since he assumed his current post with the bus manufacturing company, Marshall has used an e-auction tool of Trading Partners in Chicago to negotiate pricing with suppliers of safety supplies, crib supplies, corrugated packaging and office supplies. While the lowest bidder doesn’t necessarily get the contract—quality and delivery are equally important criteria, he says—the tool has helped to reduce costs in some spend categories by 30%.

Read this paragraph and you’d get the impression that Blue Bird bought a license to use a piece of software to run their auctions on.

 

But later on Purchasing says

Marshall, who has more than 30 years experience working in purchasing in the auto industry, views Trading Partners, which has conducted more than 20 e-auction events for Blue Bird, as an extension of his purchasing team and sought its expertise when analyzing the company’s spending. Blue Bird’s database is huge—there are approximately 30,000 part numbers on an average bus.

In other words - it’s the service that Blue Bird has bought into, not just the software.

 

This is an important distinction.

 

If you buy software for your e-auctions (which may well be pretty cheap), then unless you have some pretty dedicated people on board, you will struggle to achieve the adoption levels you hoped for. Strategic Sourcing (and, by extension, Auctions) is a very different beast to processing purchase orders. Strategic Sourcing is much more of a “Barely Repeatable Process”, to use Sig’s phrase than the kinds of “Easily Repeatable Process” that ERP-biased software houses build their software around.

 

So, until some BRP-style software for eAuctions turns up you should consider carefully whether what you really need is the software, or whether what you really need are the results. If it’s results you are after then think seriously about buying the service rather than just buying the software.

 

 

On Reverse Japanese Auctions

Paul Ferraro recently left a comment asking about reverse Japanese auctions.

I can only scratch the surface in a single blog post, so if you’d like to discuss this more then please leave a comment and we can continue the conversation. Also - I run workshops at TradingPartners every month (and also occasionally at CIPS) so if you want to dig further into different types of reverse auctions feel free to drop me a mail.

In brief the question was: “Are reverse Japanese auctions only appropriate when there is a small number of suppliers bidding?”.

Briefly the answer is “In theory a reverse Japanese auction will work just fine, all the time. But in practice you’re best off keeping to Japanese auctions where there are fewer suppliers.”

Some initial comments regarding reverse Japanese auctions:

1. I once saw an eAuction manager just after he’d run a reverse Japanese auction with 8 suppliers in. Haggard is a good way to describe him. The reason is that you have to collect up to 8 bids at each price level before decreasing the price. What with internet connections, technical issues at the supplier side etc you can pretty much guarantee that one supplier will need additional coaxing and assistance to prevent them from missing a price decrement. A reverse Japanese auction can be pretty hard work for the eAuction manager to run because it relies on the eAuction manager to drive the competitive element.
2. I was talking to a UK body recently who are intending to run a reverse Japanese auction on a supply base of 200 suppliers (due to the vagaries of the category). I hope that with a bit of investigation a better way of running this auction as a reverse English auction will transpire.
3. We are seeing a lot of success with reverse Japanese auctions at TradingPartners but I do wonder sometimes whether weighted auctions would be better in some of the cases where a Japanese auction was used. (e.g. in my example below where you could apply a weighting to reflect switching costs).

But to get back to Paul’s questions. I’ll use a highly simplified example to illustrate what I mean when I say that reverse Japanese auctions are most appropriate when there are fewer suppliers:

Suppose you have 2 potential suppliers, Incumbent Supplier and New Supplier. You are currently buying from Incumbent Supplier and she knows full well that it is going to cost you about €30,000 to switch supplier, not to mention the hassle factor involved from your side of things if you have to switch. New Supplier, on the other hand has no idea of what these numbers are.

First let’s run this as a reverse English auction, with an opening price of €400,000.

New Supplier wants to win the business so places a bid of €390,000 early on in the auction. What happens next? Incumbent Supplier won’t bid - she knows the business is still safe with her. Nor will New Supplier bid more aggressively - he thinks he’s in the lead. So the auction ends, Incumbent Supplier keeps the business and New Supplier is left with a bitter taste in his mouth about this whole auctions business.

Now let’s run this is a reverse Japanese auction, again with an opening price of €400,000.

Buyer drops the price to €390,000. New Supplier and Incumbent Supplier both have to accept this price level, without waiting to see who else accepts first. And they both know that they need to accept the price level to stay in the auction. They both accept. The buyer then drops the price to €390,000. etc etc.

Now let’s change the scenario. Instead of 2 potential suppliers there are 20 potential suppliers. Even in a reverse English auction you’ve now got sufficient competition amongst all the suppliers to encourage competition and to bring the incumbent into that competition

Obviously the example above is a trivial but I hope it gets the general point across - that reverse Japanese auctions are most use when you have a small-ish number of bidders. (In reality you might use messaging, for example, to stimulate competition even with only a small number of suppliers).

Off on holiday

So I’ve been a bit quiet recently - but will now be completely silent for the next week and a half or so. I am off to Rome on holiday. See you in a couple of weeks.

All the best

Alan

Reverse Auction workshop updates

I’ve been doing Reverse Auction workshops for CIPS (UK equivalent of ISM) for quite some time. These cover general issues in running a successful reverse auction and a fun game that is designed to show buyers the differences between English (aka descending bid), Japanese (aka descending clock) and Weighted (aka multi attribute) auctions.

Yesterday I did the first one of these events hosted by TradingPartners at our London office. It was a good session so we’ll be doing these workshops every month.

If you’re a bit sceptical about what a good reverse auction can do for you, or if you’ve only ever seen a reverse English price-only auction then there’s going to be something interesting in it for you. It’s also a good opportunity to network with buyers from other industries and to share reverse auction experiences with other buyers.

So far in the diary we’ve got 15th May and 19th June (both start at 9am in TradingPartners’ London office). Send a mail to me or check http://www.tradingpartners.com/europe/events.page and look for “free Understanding eAuctions workshop” for more details.

 

Reverse Auctions in a downturn (2)

Lisa Reisman over on Metals Miner has a rather more sophisticated analysis of reverse auctions in the current economic climate than most. Worth a read, but for the impatient (and click-averse), here’s the conclusion:

I would argue a reverse auction in a stagflationary environment can achieve benefits for the buying organization, more for further worked products containing metals than for semi-finished or raw materials. And though we still predict some prices to drop further this year, there is nothing like a reverse auction to show exactly where the market really is…

Web 2008 = Rock n Roll 1968 ?

The BBC may have written this in 2006 but I only just got it recently. Here are some quotes

If Web 2.0 is the new rock ‘n’ roll, who are the one-hit wonders and who will still be playing to packed stadiums in 40 years’ time?

The comparison isn’t quite as ridiculous as it may appear. Forty years ago, music was leading a social revolution, disrupting the establishment and empowering a new generation.

Today’s web technology and social media, known as Web 2.0, or the second wave of the internet, are leading a similar challenge and the long-term effects are likely to be greater.

Once again we are divided into those who get it and those who don’t. There is hyperventilating on the blog barricades about the end of the old order and the birth of the new counter-culture, information anarchy.

It was a recent posting on Confused Of Calcutta about Facebook that did it for me. JP is a long-time believer in the power of Facebook in the enterprise - but that’s not what I want to talk about here. Here are a couple of comments, one after the other, that really attracted my attention:

Ross Mayfield:

Part of what makes Facebook work across enterprises is it is new. That wont last. Part of it is fragmenting modalities, that will continue. Part of it is the trend towards the personal, but socially connected, and you know where that is going. Make things trend towards the transparent and you gain serendipitous discovery, and memory.

Ayesha Lakhani

But i guess..networking sites like facebook..if taken seriously can bring about a dramatic change in the appearance of the society.

I just came across one such group on facebook and i got to the positive effects of these applications..these are the highlights of the group:

Be the first generation to end poverty by 2015 with the United Nations’ Eight Goal Millennium Campaign.

1. End Hunger

2. Universal Education

3. Gender Equity

4. Child Health

5. Maternal Health

6. Combat HIV/AIDS

7. Environmental Sustainability

8. Global Partnership

Ross’s comment isn’t completely anti-Facebook. (The really anti-facebook people don’t spend time on the web reading and writing blogs). Yet there is a very clear difference in emphasis between Ross and Ayesha. On the one hand: Facebook is useful largely because of its novelty, which will wear off. On the other hand Ayesha’s wide-eyed enthusiasm does seem a touch, well, hippy-ish. Just as the BBC described.

And then here’s a comment on Sourcing Innovation about the power of social networkiness:

I am a recent Grad, who landed into the procurement industry extremely green (pun intend). I have found great uses for facebook, linkedin and recently www.iprocurement.org to help me network in this small but exciting industry. Due to the amount of Baby Boomers running around this profession, I believe this your reason for lack of new content and daily bloggers.

Now contrast this comment with the stated view of Sourcing Innovation’s owner in that post who is resolutely staying off Facebook (for example).

OK, I’m sold. But here’s the interesting point for me. If the Web in 2008 is equivalent to Rock’n'Roll in 1968 then .. well we’ve had our Monterey Pop Festival (1967) - but we’ve still got our equivalent of Woodstock to look forwards to.

a

Bid rigging and e-sourcing

The Office Of Fair Trading claims to have uncovered more and more evidence of bid rigging in the UK construction industry. See here from Yahoo news today, here from The London Times Online on March 22nd.

The OFT press release here gives some more detail on the substance of the claims:

The investigation has uncovered evidence of bid rigging activities which include cover pricing, where companies obtain a price from a competitor in the tender process which is not designed to win the contract but is intended to give the appearance of competition. The Competition Appeal Tribunal has fully endorsed the OFT’s decision in its investigations and confirmed that cover pricing is anti-competitive and contravenes the Chapter I prohibition. In some instances the OFT has also found evidence in the current investigation of compensation payments or ‘bungs’ being passed between competitors in exchange for a cover price.

The construction industry has a reputation for resisting e-sourcing in general and e-auctions in particular as suppliers. I wonder how much of this reticence is down to a fear that e-auctions (in particular) make it harder for cartels to operate? Certainly, if you read this article from the World Bank  about an e-rfp system implemented in Andhra Pradesh, India (hat tip to Andrew Moorhouse for passing it on) - there is a view out there that e-sourcing systems may be a good way to combat cartels and collusion. According to the document there were some pretty blatant abuses in the manual system. One of which was:

Cartel formation to suppress competition: Through dubious means, the participating bidders would gather the list of prospective bidders for a procurement request. They would use this information to lobby for formation of syndicates or cartels and bid at higher quotations.

 

Reverse Auctions in a downturn (1)

Procurement Leaders opened its latest issue with the words “Good news, we’re in recession”. I’ve long agreed with this view, as you know, so it’s good to hear the likes of Jason Smith, Principal Advisor of KPMG’s procurement advisory service, reported in Procurement Leaders on the subject:

“Increasingly people are looking to procurement to deliver results,” says KPMG’s Smith. “They can’t actually increase the top line so it’s ‘how can we save money from within the business?’”

Smith points to e-sourcing, strategic sourcing and outsourcing as basic tools to help cut costs. KPMG estimates there is a typical saving of between 5% and 35% using e-auctions and 10% via strategic sourcing. But he believes there’s much more mileage in these techniques.

“The leaders are starting to adopt these tools but they’re not taking them beyond pilot categories such as office supplies. But how can they use those tools on the more strategic indirect purchases? There’s still a long way for even the leaders to go,” he says.

A good question to ask. From my (probably biased) perspective I would imagine a big part of the reason for failing to take these initiatives beyond the pilot stage is largely down to a lack of resource and focus within the buying organisation. Any other views?