[Case Study]: How RFQs and eAuctions achieved 50% savings on packaging categories

How RFQs and eAuctions achieved 50% savings on packaging categories

Bruce Beavis from Beavis Consulting is a practitioner for supply chain and procurement consulting. Based in North America, Bruce primarily works in the manufacturing space with a variety of mid-market clients who often look for how they can jumpstart an improvement program and how they can generate immediate savings to reinvest in the business to get the virtuous cycle going. A common trait is that the client’s ERP has not been correctly implemented. Bruce’s client base tends to present basic P2P transactional-side work as well as looking more at strategic and overall supply chain architecture. 

Bruce explains how Sourcing Dojo helped overcome procurement challenges within the North American market. 

Challenge 

One of Bruce’s clients in the building products industry lacked procurement and sourcing infrastructure. They had multiple plants with all purchasing completed on a plant level. The prevailing belief was that at the plant level, sourcing was working well with no further savings to be found. Bruce’s remit as the consulting team was requested at the corporate group level to explore the opportunities for improvements. 

Solution 

Bruce has experience of using various e-sourcing software since 1999. He had heard about Sourcing Dojo through contacts at his previous employer in the Australian and New Zealand markets.

What appealed to Bruce over and above other e-sourcing software was Sourcing Dojo’s usability. He found Sourcing Dojo, which includes RFQs and eAuction functionality, intuitive and flexible. Bruce commented: “If you choose to go down the route of going for an ‘out of the box’ auction, you can be up and running in minutes compared to weeks or months with other eSourcing software tools.”

Due to the nature of Bruce’s consultancy and working on time bound projects, he used the on-demand, ‘pay as you go’ model. This allowed Bruce to demonstrate what Sourcing Dojo could achieve for his client, without the need for the upfront investment of an annual licence. 

Sourcing Dojo allowed Bruce to communicate to all parties in the process. Bruce commented: “It was clear that the ‘old days’ were over and that we were running the procurement process openly.  that everyone was being treated fairly and that we were creating a market that contained both visibility and liquidity. Sourcing Dojo enabled me to build credibility in an environment that had not experienced procurement like this. It is hard to believe that even large US Fortune 500 and 1000 companies haven’t encountered an eSourcing software tool and so demonstrating Sourcing Dojo blew them away. 

Within the packaging category, Bruce ran a seven-region bid event on wooden pallets; wrap for pallets; strapping; plastic poly bags; shrouds that would go over pallets as well as other plastic sheeting – these projects all received great results with an average of 50% saving on each of the categories. Aside from the financial savings, time-saving was also a huge factor post-event when compiling the results, alongside building credibility amongst the vendors. 

With real-time bids, Bruce found it especially useful to assess the information submitted as it’s happening rather than two weeks later when the spreadsheets would be typically compiled, this saved finding incorrectly submitted quote lines after the event has ended.

Bruce commented: “I found that once the suppliers get over their initial fear, using Sourcing Dojo makes life easier for them, in that the communications on what they have to do is structured. Having used spreadsheets many times previously, vendors will often restructure the spreadsheet by putting an extra column in or changing the headings. The idea of structuring the event how you want it, sending it to suppliers and them having to respond in my structure back to me, makes the comparisons far easier and quicker. We then handle the other interesting and esoteric stuff some other way. So that’s a huge advantage.”

Results  

“I think in all cases, Sourcing Dojo is a huge time-saver and a credibility builder with the vendor base. That’s where I found a big value, it saves a huge amount of time post-event when compiling the results. Also the ability to see the results as they’re coming in is hugely valuable. You can see if a vendor has made a mistake for example the price for one item, when they need to provide the price for 12 in a box, allowing you to rectify that immediately.”

Bruce commented: “We found far more savings than anyone dreamed were there, certainly on the client side. I suspected that we had a very strong savings case following a two week diagnostic phase. I saw all the indicators of large unrealized savings, however you don’t know exactly what opportunity there is, until you go to market with an RFQ. Through using Sourcing Dojo with the client we got in the region of 50% savings on several packaging categories, and there were more available on the second pass through consolidation and matching supplier specs more closely to actual client needs.”

Bruce’s client had 25 year relationships with the distributors they were buying their packaging from, whereby the distributors provided them with ‘free equipment’ to wrap the pallets – they thought they were getting a good deal. However, due to the length of the relationship and lack of market research, the client had not checked the market value of the items they were buying for two and a half decades. Equally, the grade of wrap was not taken into account, in terms of the performance characteristics, because it’s actually an engineered plastic product. The client was fundamentally buying the goods off the peg, paying what the distributor dictated – unfortunately this existed in each of the client’s plants.

In Bruce’s experience, he stated 10-20% are typical savings if you go from the distributor relationship to a direct manufacturer relationship, that is where you’re buying $1 million of goods. Bruce was also aware from experience that the price of polyethylene had dropped by around 20% in price over the last four or five years, there have also been improvements in packaging performance, something that had also been missed by not carrying out market research. Much of this is taken care of as part of the upfront effort when analysing a category, understanding the technical specifications ahead of running a RFQ. 

“I think it was a great example of taking a category that had been just completely and utterly unmanaged from both a technical and commercial point of view, and then putting it on the right track using Sourcing Dojo and knocking 50% of the cost out. We did that across four packaging categories.”

“I think Sourcing Dojo provides incredible value for money.  For $775 a month, the service is fantastic. And the great thing is, once you’re up and over the learning curve, you don’t need that much help to be quite honest, the tool is so intuitive. And I’ve found the online help and support chat really, really good.” v

“Value for money, I don’t think there’s anything out there that can even remotely approach it in the market. If I’m honest, I’ve not seen anything that even comes close to this type of value.” 

If you’d like to hear more from well practiced eSourcing users, visit the Market Dojo Community. It’s an open forum for Market Dojo users to discuss their usage of the Market Dojo suite of tools as well as anything procurement related. Whether you wish to share best practice, ask other users for hints and tips or request advice on which categories work best at auction, our community page is here for you to get the most out of our tools. You can check it out here.