Are Procurement Auctions an effective way to select suppliers?

🔥👀 In today’s dynamic business landscape, organizations constantly seek innovative ways to optimize their procurement processes and increase cost efficiency. One such powerful tool that has gained popularity in recent years is the procurement auction. By reversing the traditional auction model, where buyers compete for goods and services, procurement auctions allow sellers (suppliers and vendors) to compete for business opportunities.

Understanding Procurement (Reverse) Auctions:

A procurement auction is an online, competitive bidding process where multiple suppliers vie to secure a contract by offering increasingly lower prices for their goods or services. This approach encourages fierce competition among vendors, driving prices down and enabling buyers to benefit from cost savings. However, utilizing reverse auctions goes beyond simply obtaining the lowest price. It also provides an opportunity to evaluate vendors based on various criteria such as quality, delivery time, and other essential factors.

Main considerations when choosing a supplier through procurement auction:

⭐1. Clearly Define Requirements: Before launching a procurement auction, it is very important to formulate and communicate the specific needs and expectations of your organization. Clearly defining product or service requirements, quality standards, delivery times and other key criteria will ensure that vendors submit accurate and competitive bids.

⭐2. Identify Potential Suppliers: Carry out a thorough market analysis to identify potential suppliers who meet your criteria. Consider factors such as industry reputation, experience, financial stability, and the ability to meet your organization’s unique needs. Invite pre-qualified vendors to participate in the procurement auction to ensure that all participants can meet the requirements.

⭐3. Establish Evaluation Criteria: In addition to pricing, establish comprehensive evaluation criteria that are in line with your organization’s objectives. These may include quality certifications, past performance, delivery capability, and customer service. Assign weights to each criterion according to its importance to your organization to create a comprehensive evaluation framework.

⭐4. Transparent Communication: Promote open communication with participating suppliers. Communicate reverse auction rules and guidelines, emphasizing not only the importance of competitive pricing but also the importance of meeting defined quality and performance standards. Transparency will ensure that vendors understand expectations and can adapt their offers accordingly.

⭐5. Strategic Timing: Choose the timing of the procurement auction strategically. Take into account market conditions, availability of suppliers, and any external factors that may influence the bidding process. Timing can have a significant impact on the competitiveness of bids and the overall success of a reverse auction.

⭐6. Post-Auction Evaluation: Once the procurement auction is over, carefully evaluate the offers received. Consider both quantitative factors, such as prices, and qualitative factors, including the vendor’s capabilities and track record. This post-auction assessment is crucial to selecting the most suitable supplier and negotiating final terms.

⭐7. Negotiation and Contract Finalization: While the procurement auction process often focuses on price competition, it is important to recognize that other contract terms are also negotiable. Once you have selected a vendor, negotiate to finalize the terms of the contract, ensuring that all aspects of the contract, including quality standards, delivery schedules, and payment terms, are consistent with your organization’s objectives.

Summary

The inclusion of procurement auctions in the vendor selection process could be a game changer for organizations looking to optimize procurement and achieve cost savings. However, it is important to approach this tool strategically, taking into account not only price but also other important criteria.

Keywords: #sourcing #supplychain #procurementprofessionals #Construction #Machining #procurement #savings #costcutting

Written by Gert 

Last time edited: 08.02.2024

Test users needed!

Tallinn – 03 October 2023

👉 We are looking for members of a test user group (maximum 20 users) to try our service. We would like to develop and grow with them to the next level. Test users will get a win-win treatment 🤩 using our service for the first 3 months. To apply for test group members, please send this application to: admin@bzcall.eu and highlight the company name and the name of the main user.

Main value propositions using the service

  • Reduction of costs or expenses
  • Saving working time 
  • Fair and transparent competition
  • Fewer cases of nepotism
  • Reduction of lead times

What is BzCall? It is a fully functioning procurement auction platform, where is possible to reduce costs and expenses via the reverse auction method. A properly prepared procurement auction can reduce expenditures by 10-30% or even more. There are no limits on what spending can be cut or any restrictions on industries. The service pricing is reasonable, with no hidden fees,  clear, and straightforward. 

Keywords: #sourcing #supplychain #smallbusiness #procurementprofessionals #Construction #Machining #CNC #sourcingandprocurement #procurement #procurementleaders #supplychainmanagement #savings #costcutting

BzCall Technology OÜ 

Last time edited: 03.10.2023

Controlling the costs & expenses

One of the only ways to make money in the business world is to keep control of the costs and expenses after successful sales assuming that pre-sales quotation calculation is properly done. It is exaggerated, but a valid point is existing here. The profit margin is correlated with controlling the cost and expenses, which means better control for expenditures the higher profit margin received or vice-versa. Yes, everywhere are exemptions, but we don’t focus on them today. Let’s see first, what is the cost and expenses and then how to control them.

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  • Cost is the money needed to buy, do, or make something. It can also be defined as the expenditure required to create and sell products & services or acquire assets.
  • Expense is the reduction in the value of an asset as it is used to generate revenue. It can also be defined as an expense is the cost of operations that a company incurs to generate revenue. Keep in mind that the cost of goods sold (COGS) is also an expense in meaning and nature. 

The key difference between Cost and Expense is that cost refers to the amount spent by the business organization to acquire an asset or to create the assets. In contrast, expense refers to the amount spent by the business organization for the ongoing operations of the business to ensure revenue generation.

CostExpense
Do not reflect company profitabilityImpact company profitability
Asset purchasingNeeded to generate revenue
One time purchasingPeriodically purchasing
No affection for taxTax is deductible when you generate revenue
Impacting the balance sheetImpacting the income statement
Examples: fixed assets, prepaid expenses, inventory, etc.Examples: deprecation, raw material expenses, rent, licenses, etc

The difference between cost and expense table source

So anyway the costs and expenses are expenditures that you will spend or give away money or assets to get something back such as products, services, rights, etc. 

Let’s see how we can control the expenditures. Luckily there are some approaches and methods to make them and let me highlight some of them. I bring out five options but many more methods that can be implemented if expenditures need to be controlled or reduced.

  1. 👉The first and simple method is nothing to spend, but then you cannot run your business in the long term, because offering the services or physical products is more or less needed for some expenditures as well. Yes, sometimes is possible to freeze some operations until the business clime or macro-environment improves, but this is a short-term period and not last forever. Otherwise, in the long run, you may lose your existing market share and customers to the competitors.

2. 👉 In good times businesses will not make strict and clear assessments or distinguish the expenditures, what is needed, and what is nice to have. It is essentially important to get rid of the nice-to-have expenditures immediately if the business environment worsens or the company is losing some key customers and sales. The nice-to-have sample expenditures can be different duplicated software or IT platform usage licenses, actual building rent needs, traveling and/or lodging needs, office coffee machine rent, personal periodical educational training, team events, etc.

3. 👉 Value chain processes and manpower needs should be over-checked from time to time, there is more or less some waste existing even in the best-managed global companies. One of the easiest and quickest steps is to look over MRP (Material Requirement Planning) or ERP (Enterprise Resource Planning) inventory and material reorder points together min/max levels to make fewer expenditures for some periods. By the way, it helps to unlock some money under inventory value as well.

4. 👉 Existing company structure and roles should be assessed critically periodically, is there anything that can be replaced with outsourced services, which can be used short period instead of keeping someone occupied full time? The hired team motivating and leading will require time and effort with hidden indirect costs, which usually managers can’t see or pay attention to. The keyword is focus and if it is most of the time for managing the personnel then we can talk about indirect costs which can outweigh the hired team’s total salary costs and performance outcomes (starting with the lost business opportunities, slow or strange business process changes, bureaucracy creates more bureaucracy, etc). The good news is that you can always outsource all kinds of administration roles such as IT/IS experts, Accounting, Legal, HR, Project management, Assemblers, Marketing professionals, Engineers, HSE experts, and Security just name it. By the way, sometimes is reasonable to outsource extra hands for business peaks times instead of hiring. 

5. 👉 Focusing on products and services COGS, then there are more or less infinite options on how to reduce expenses and costs. Here are some samples such as checking the alternative suppliers on the market, changing the final product or service design, changing components inside BoMs (Bill of Materials), and looking at the existing manufacturing methods, tools, or team needs. Einstein said that if you make every day the same way something then don’t expect to get a changed or different result tomorrow. 

I know that the most critical part is changing the team, but it is vital to do so instead of wasting time and money on training them and hoping that tomorrow everything will be fine. We have good samples from the start-up world, to get something done fast and better growth after changing the team partially or fully. Those businesses that understand that teams need to be replaced fast have been tomorrow’s winners. There is nothing strange if a start-up company changes its own team 2-3 times in one year with or without the pivots. It can be used in old school (conventional) businesses as well and not sitting in the comfort zone 24/7. So, here is something to think about more deeply and carefully.

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Our procurement auction platform BzCall.com can lend a helping hand to control and reduce the expenditures. You can make a procurement auction for outsourced services such as Marketing services, Accounting, IT/IS services or experts, HSE services, Assemblers for production, cleaning services, any other third-party auditing services, etc. Always bring to compete each other at least two vendors or experts (remember that more is better here) and one more tip here, play for hour rate, not the entire project or task value, which helps to lower the service fee. We like it if it is a win-win for every stakeholder end of the day.

Written by Gert 

Last time edited: 10.09.2023

How to set up a procurement auction?

The user guide gives a short and quick overview of how easy is to set up a new procurement auction. It does not take more time than 3-4 minutes (the same time as writing one proper RFQ email), but some can do it faster and some slower, which is okay and real practice reduces that time as well. A few minutes of work can save for some 50€ and another one +100k€ depending on the procurement auction scope, details, and nature. Please also watch the demo clip on YouTube.

Here are highlighted 24 fields, that should be paid attention to making a good procurement auction, which should bring delighted results as saved money and time. 

A procurement auction can be done only after registering an account as a natural or legal person. Same story if someone wants to see the open procurement auctions and participate in bidding.


  1. Before making a new procurement auction, please select the correct role such as a natural or legal person.
  1. The new procurement auction tab can be found in the right top corner.
  1. After clicking the new procurement auction button it opens a new sheet with the status bar “Step 1” which has to fill in the described fields below.
  • Selecting proper category
  • Adding quantity
  • Selecting or defining proper units
  1. Clicking the Save and Continue button will take you to the sheet status bar “Step 2” which has to fill in the described fields below.
  • Adding auction start date and time
  • Selecting procurement auction duration and extended end parameters
  • Selecting auction priority as time vs. cost
  • Write a proper relevant auction name 
  • Add auction description and here is the principle more is better. You can also follow left side checklist points if something can be missed.
  • Upload documents if needed such as technical documents, files, pictures, sketches, etc. The suggested file format is *.zip but it can be used in widely used document formats also like samples can be seen
  1. Clicking the Save and Continue button will take you to the sheet status bar “Step 3” which has to fill in the described fields below.
  • Select the proper delivery method
  • Confirm or change the shipment delivery address
  1. Clicking the Save and Continue button will take you to the sheet status bar “Step 4” which has to fill in the described fields below.
  • Confirm or change the billing address
  1. Clicking the Save and Continue button will take you to the sheet status bar “Step 5” which has to fill in the described fields below.
  • Select the anonymity parameters
  • Invite at least two vendors, Here is the principle More is better
  • Confirm that you know invited friends or vendors
  • You can add your budget number to see later the outcome, but it is not mandatory here and leave it as zero
  • Make the final check for the right side column “Procurement Auction summary” and adjust what is needed
  1. In case all is perfect then clicking the Finish button will activate the procurement auction and invitation emails will be sent out according to the auction start date and time. Here can be wished good luck!

Written by Gert 

Last time edited: 28.07.2023

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