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Posted on Mon 20 Jun 2005
(9415 reads)
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Tender or reverse-auction is where a single buyer invites a multitude of suppliers to quote through the process known as a Request for Quotation (RFQ). This is the exact opposite of an auction, where there is a single seller and many buyers.
Click here to view a graphical illustration of TenderSystem's procurement process.
Required items are sourced by sending out a Request for Quotation (RFQ) to a pre-approved supplier panel by email with an optional SMS notification
Suppliers quote by replying to the RFQ email or by submitting the quote online
When all suppliers have quoted or the closing time has been reached the RFQ is closed, emailing a report to the user as well as to all suppliers that quoted stating their positions according to price.
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User awards the sale to the successful supplier which automatically sends out a purchase order via email as well as an optional SMS to the client
A notice will be sent to the administrator if the user's settlement mandate has been exceeded
Supplier authenticates the purchase order and arranges delivery or collection of the item(s)
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Feedback request sent to supplier to determine transaction status (PRO)
Supplier responds to feedback request requesting invoice to be generated (PRO)
Invoice generated and sent to user
User organisation pays invoice on receipt or per Bordereaux agreement
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Reports
- Closed - calculate savings on a continual basis
- Audit Trail - view complete procurement process
- View by Quote - view quotes in a supplier basket
- Transaction Fees - view service fees generated
Supplier management
User management
Area management
Category management
Tender management
Statistics (PRO)
Daily, weekly and monthly email reports (PRO)
Contract Management (PRO)
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The advantages achieved by procuring through an electronic tender process must be viewed from two perspectives, namely measurable and un-measurable benefits.
Measurable benefits is the actual price savings achieved by leveraging the age-old principle of supply and demand by obtaining quotes from multiple suppliers. Savings are further increased by grouping the purchasing power of many buyers through a structured market, such as TenderSystem. Savings achieved by competitors working together, when purchasing non-differentiating items, are extremely large, with audited savings of more than 20% achieved on TenderSystem.
Un-measurable benefits are the savings that cannot be reliability quantified such as:
- Employee and telephonic expenses to source, award and administrate purchases;
- Management costs associated with the procurement process;
- Payments for non-delivered purchases;
- Costs associated with incorrect purchases or replacements; and
- Ultimately the elimination of fraud, which is rife in any procurement scenario.
Products that can be purchased effectively through tender are items that can be described, without having to be seen, by using a make and model or technical specifications. Examples are electronic products, computers and laptops, stationary, etc.
The most important aspect of an electronic market is having a good quality supplier panel and ensuring that they all benefit. The best way to achieve this is by:
- Limiting the amount of suppliers. 3 to 4 suppliers works well with low value purchases, increasing with the contract or item values.
- Paying suppliers as promised and making the payment process as easy as possible. Deferring payments places financial strain on supplier that affects the service quality and may increases future prices.
- Grade suppliers firstly according to the service they offer. Uncompetitive suppliers are automatically eliminated from the panel when they do not receive business and will then stop quoting.
- Bring in a new supplier from time to time to prevent the possibility of the panel colluding by increase their prices together. TenderSystem also offers the added functionality of comparing non-panel prices on a continual basis.
- Eliminate suppliers that have a loss leader strategy in place by providing them with so much business that it becomes uneconomical for them. Their aim is to decrease competition by deteriorating the panel and if they have enough resources to sustain and extended loss remove them from the panel.
- Sufficiently training staff so that tender invitations are of good quality. The more information provided in the tender the better the quality of quotes and quicker the response.
- Suppliers must believe in the credibility of the electronic marketplace. TenderSystem has built in best business practises to ensure credibility and transparency, but management must take ownership of the process and manage the initial resistance that is present in a changing environment. Explain the benefits achievable by all parties to suppliers and staff.
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