Our Top 5 Categories for Sourcing Events: Where Buyers are Saving

Overview

Author: Lewis Barnard – Head of Business Development, Market Dojo | Read time: 6 minutes

Whether you are sourcing stainless steel bolts, packing materials, sustainable energy providers or alternative freight companies you are likely to be facing a common theme – increasing prices. The ability to get the best price, or at the very least market value, from suppliers is a burning issue for procurement teams. 

In the latest edition of our eSourcing in Action blogs we take a look at customer data to give you Market Dojo’s ‘hot’ categories for running a sourcing event and share our best practice tips to make it successful.

What is Category Management?

Before diving into specific categories, let’s take a step back.

Originating from the retail sector, in its simplest form category management is the grouping of products into categories based on how they are consumed or used. Today, the term encompasses any item purchased in an organisation’s supply chain, both indirect and direct spend, and how to maximise the efficiency of this process.

“Category management is a systematic, disciplined approach to managing a
product category as a strategic business unit.”
Source: Wikipedia

So category management is undeniably important for global organisations managing complex supply chains with large spend volumes. But, here at Market Dojo, we are firm believers that any company, large and small, will find significant savings in just about any category of product or service.

In fact, to prove this point (and to have a bit of fun) we created the Market Dojo Periodic Table of eAuction Categories to show the variety of categories that can benefit from online negotiation events and the savings* that have been realised by customers using our tools. 

As the table shows, significant savings can be achieved no matter what you are buying; but, which categories are ‘hot’ in terms of the most advantageous for conducting a sourcing event?

*Please note that the average savings shown represent the eAuctions run through Sourcing Dojo up to 2020 so may not be indicative of current savings given current market conditions, especially in certain categories such as road freight.

Hot Categories for Sourcing Events (based on our customer data)

🪵 Raw materials
🚢 Freight & Logistics
👟 Retail supplies
🔩 Manufactured parts
🖇️ Office supplies

🪵 Raw materials

With shortages and subsequent price rises across many different raw materials this category is a must for your sourcing priorities. It’s an easily definable category that requires relatively high volumes to gain supplier interest yet, when this is achieved, it has great liquidity.

Leaving yourself options for dual sourcing by defining a careful Lot structure might be a way forward. When there are several operations required, you could examine splitting this out into several Lots but also keep a Lot for the combined operations. This will generate more options and improve liquidity for the final online negotiation event.

Raw material suppliers tend to be very large and often refuse to actively take part in an event unless the spend is attractive to them. Remember to talk to them and use the process as a sales opportunity; this can always help to get one more participant on board in a category where there may not be many possibilities. 

Did you know that £50m of raw materials has been tendered through Sourcing Dojo? Learn more about our Global Templates for eSourcing Raw Materials

🚢 Freight & Logistics

Freight and logistics is our next hot category due to the recent supply chain disruptions, high fuel prices, labour shortages, competition from new entrants, and increased focus on omnichannel fulfilment channels. Generally, freight tends to have very good liquidity and is a market familiar with eAuction events.

Defining the specifications can take time as there are no shortcuts and it might involve you heading off to the far reaches of the organisation to speak with the local transport managers. 

Gather information on

• Routes – pick up waiting and delivery times, max/min/average weights, pick up locations and destinations (postcodes), number of pallets, whether packing and loading is required, special requirements such as gensets etc. 
• Costs – DDP, taxes, import/export duties, fuel charges, waiting times, handling charges etc.
• Contingencies – insurance and backup plans in case of an emergency

Once gathered, this information will define the Lot structure for your sourcing event. 

Be aware that although the liquidity is good in this category, poor specifications can turn off the supplier base very quickly and leave you with fewer suppliers or those who have maintained a high element of margin in their quotations.

Other considerations are route optimisation (from hauliers or opportunities with your own routes) which will be largely unknown until you define your specifications and go out to a wide market.

Is freight and logistics part of your procurement responsibilities? 3,500 tender events have been run through our software. Get more tips and advice on running a Freight eSourcing event

👟 Retail supplies

Retail supplies is one of the most popular categories for eSourcing events yet, it is highly competitive even if your spend is low, with many suppliers being familiar with eSourcing events.

In our experience, many procurement teams underestimate the amount of work required to make this category a success. To build a detailed Lot structure, you should

• Obtain your previous year’s annual volumes either from your purchasing systems or from your incumbent suppliers
• Examine breaking the category down into individual sections, although this does depend on your spend and desired outcome
• Create a core list of items (use the Pareto Rule on your spend), an alternative core list and a basket

This Lot structure will give you the opportunity to consolidate suppliers and your requirements. 

We have run 200+ retail supplies events through Sourcing Dojo. To be one of these retailers, run your next Retail Supplies eSourcing event with us.

🔩 Manufactured parts

Another highly profitable category but also highly challenging is manufactured parts. This market has great liquidity but to minimise further supply chain disruptions it might be worth exploring local and national suppliers, or at least exploring how they compare with offshore suppliers.

To get you started, here are our tips

• Create a core list of key parts which represent the majority of your spend and will challenge the suppliers’ core capabilities
• Avoid only negotiating on the ‘meat’ and leaving the complex parts with the incumbent, as this will only end up with cost increases in the future
• Create a representative basket of the remaining parts which can be examined more closely with the top suppliers after the online negotiation event
• When sending out a Request for Participation, include all the differing requirements and ensure supplier quotes can be accurately compared by explaining how you want their bids
• Include detailed up-to-date drawings in the specification to accurately define the product
• Consider any one-off costs, for example tooling and inserts, as these should be handled via amortisation or in a separate Lot
• If you want to accurately compare quotes from around the world, delivery prices should be Delivery Duties Paid (DDP)
• Include any standards which will be required
• For tenders that you will need to run repeatedly, consider supplier agility and the information needed by all parties to move quickly for example process details, machinery used, the Bill of Materials (BoM), and assembly instructions
• Suggest an index linking mechanism to help take some risk out of the equation for suppliers which, in turn, will lend itself to better pricing

Fun fact: One of the most successful eAuctions that has been run on our platform was by an OEM for the automotive industry that sourced non-metallic fasteners saving £40 million on a five year contract. To see what you can save, find out more about Manufactured Parts eSourcing

🖇️ Office supplies

Finally, for indirect spend categories, one of our hottest has to be office supplies. With an increase in hybrid working you might be tempted to focus on other categories, but it’s worth exploring if your spend has increased over the last few years as suppliers try to recoup lost revenue or protect themselves from the tough times ahead.

Here’s how to get started with making this category a success

• Obtain your previous years, or last few years, annual volumes either from your purchasing systems or from your incumbent suppliers
• Break the category down into sub-categories or Lots, for example printer paper, stationery, office furniture, IT consumables etc. 
• Create a core list of items (use the Pareto Rule on your spend), an alternative core list and a basket. Download a sample multi-line item bid sheet template (requires registration)  
• Choose a negotiation strategy that maximises your returns from the high level of competition typical of this category. For help, download our ‘Which Reverse Auction Should I Use’ Infographic

Fun fact: A consultancy company ran a 60 minute reverse auction with Software Dojo saving 60% on their annual stationery spend, equating to over £200,000. 

£50m worth of office supplies has been tendered with Sourcing Dojo. To reduce your spend in this category, run your next Office Supplies event with us.

Does your company have tenders in one of these hot categories?

To see Sourcing Dojo in action either book a demo with our team today or sign up for a free plan to try out our unique sandpit feature which offers the full eSourcing experience, from building events as a host, to experiencing them as a supplier.