Wow, industries that mainly benefit from procurement auctions

Procurement auctions, which can increase cost efficiency, increase supplier competition, and streamline processes, are applicable to many industries. While the benefits are universal, certain sectors are particularly well-suited to reap the benefits of procurement auctions. Let’s take a closer look at the eight most important.

🏭 1. Manufacturing and Raw Materials industries


Procurement auctions play a key role in manufacturing, especially for companies dependent on raw materials. By fostering competition between suppliers, organizations can secure cost-effective sources of raw materials while optimizing production costs. This is particularly important in industries such as automotive, aerospace, and electronics, where material costs have a significant impact on the overall cost structure.

🏗 2. Construction and Infrastructure


In the construction and infrastructure sector, where projects are often capital-intensive and time-sensitive, procurement auctions offer a simplified approach to sourcing materials, equipment, and services. This can range from the procurement of steel and concrete to specialized services. Tendering speeds up project timescales and ensures that the best suppliers are engaged, contributing to overall project efficiency.

📡 3. Information Technology (IT) and Telecommunications


In the fast-paced world of IT and telecoms, where technology is evolving rapidly, procurement auctions can help with the procurement of hardware, software, and services. By encouraging suppliers to offer the most competitive prices and innovative solutions, companies can stay at the forefront of technological advances. This is particularly important for companies looking to optimize their IT infrastructure or procure services such as cloud computing.

🏥 4. Healthcare and Pharmaceuticals


The health and pharmaceutical industries, characterized by high-quality standards and regulatory requirements, benefit from transparency and fairness in procurement. In addition to cost savings, auctions facilitate the procurement of quality medical supplies, equipment, and medicines. This is important for healthcare providers and pharmaceutical companies aiming to provide patients with cutting-edge care and develop cutting-edge medicines at reasonable prices.

🛣 5. Energy and Utilities


Procurement auctions are important in the energy and utilities sector, covering areas such as renewable energy projects, equipment procurement, and maintenance services. Procurement allows organizations to procure energy-efficient technology while ensuring compliance with environmental regulations. In addition, auctions can facilitate the procurement of components or raw materials for energy production and distribution.

🏬 6. Retail and Consumer Goods


Retailers and manufacturers of consumer goods can use procurement auctions to optimize their supply chains. Whether sourcing raw materials to manufacture products or selecting suppliers for finished goods, auctions provide a platform to balance cost efficiency and quality. This is particularly relevant in industries where consumer preferences and market trends are dynamic and require companies to adapt quickly to changing demands.

🚢 7. Transportation and Logistics


In the transport and logistics sector, where efficiency is a key priority, procurement auctions contribute to the procurement of vehicles, equipment, and services. Air carriers, shipping companies, and logistics service providers benefit from the cost savings resulting from tendering. In addition, auctions facilitate strategic sourcing by enabling organizations to create flexible and adaptable supply chains.

🏛 8. Government and Public Sector


Public procurement offers governments and public sector entities a transparent and accountable means of procuring goods and services. From infrastructure projects to public services, auctions ensure taxpayers’ money is used efficiently. The competitive nature of auctions also helps to select vendors on merit, promoting fair and open procurement.

Recap

In essence, the adaptability of procurement auctions makes them valuable in different industries. While the specific benefits may vary, the overall impact is to increase efficiency, reduce costs, and promote innovation. As technology continues to play a central role in shaping procurement practices, those industries that exploit the potential of procurement transformation are likely to gain a strategic advantage in today’s competitive business landscape.

Youtube: https://www.youtube.com/watch?v=v31eo-TUApg&ab_channel=BzCall

Keywords: #sourcing #supplychain #procurementprofessionals #Construction #Machining #sap #procurement #ERP #sapbusinessone #savings #costcutting

Written by Gert 

Last time edited: 29.11.2023

Did you know that there are hidden risks in the prices of products and services in long-term contracts?

Did you know that there are hidden risks in the prices of products and services in long-term contracts? Let’s look at the five main risk moments:

1. Cost Inefficiency

👉 The first main risk is cost inefficiency. Without constant or regular price comparison, your organization may be overpaying for goods and services. Prices in the market can fluctuate due to economic changes, industry developments, and competition. If you’re locked into a long-term agreement with fixed prices, you may miss out on cost-saving opportunities. Regular benchmarking helps identify cost inefficiencies and renegotiate agreements when needed.

2. Market Changes 

👉 The second main risk is market changes. Markets are dynamic, and prices for products and services can change significantly over time. Long-term agreements might have been negotiated at a favorable rate initially, but market conditions can shift. If you don’t keep tabs on these changes, you may pay more than the current market rate. Benchmarking ensures that you adapt to market shifts and maintain a competitive edge.

3. Supplier Performance 

👉 The third main risk is supplier performance. The quality and performance of suppliers can change over time. While you may have entered into a long-term agreement with a supplier who met your requirements at the start, their performance might decline or improve. With periodic benchmarking, you will have a clear picture of how well your suppliers are meeting your needs. This lack of insight can lead to suboptimal performance and possible missed opportunities to improve service or reduce costs.

4. Technology and Innovation 

👉 The fourth main risk is technology and innovation. Technological advancements and innovation can significantly impact products and services. If your long-term agreements are based on outdated technologies or practices, you could miss the benefits of newer, more efficient solutions. Regular benchmarking helps you identify opportunities to leverage technological advancements and innovation to your advantage, improving your operations and competitiveness.

5. Neglected Contract Terms

👉 The fifth and last main risk is neglected contract terms. Long-term agreements often come with multiple contract terms, such as service levels, quality standards, and performance guarantees. Without consistent benchmarking, these terms might be overlooked or forgotten. This can lead to compliance issues, as both you and your supplier may not be meeting the agreed-upon terms. Regular benchmarking helps you stay on top of contract compliance and ensures that both parties fulfill their obligations.

Recap

In summary, failing to regularly price benchmark long-term agreement products and services can result in cost inefficiency, leaving your organization vulnerable to market changes, supplier performance fluctuations, missed opportunities for technology and innovation adoption, and neglected contract terms. To mitigate these issues, it’s crucial to implement a robust benchmarking process that continuously assesses the cost, quality, and performance of your long-term agreements. This proactive approach ensures that your organization remains competitive, adapts to market dynamics, and maximizes the value derived from your supplier relationships.

Youtube: https://www.youtube.com/watch?v=fEcDvSu0bI0&ab_channel=BzCall

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

Written by Gert 

Last time edited: 07.11.2023

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

We are open!

Tallinn – 22 September 2023

We are happy to finally announce that our procurement auction web application prototype BzCall.com is ready for use. It is a fully functioning platform, where is possible to reduce costs and expenses via the reverse auction method. Please see a short overview of how it works. A properly prepared procurement auction can reduce costs and expenses by 10-30% or even more. There are no limits on which expenditures can be trimmed or no limits for industries. The service pricing is reasonable, with no hidden fees,  clear, and straightforward. 

Main value propositions using the service

  • Reduction of costs and expenses
  • Sourcers will save working time for other tasks
  • Fair and transparent competition
  • Fewer nepotism appearances
  • Reduction of lead times

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

BzCall Technology OÜ 

Last time edited: 22.09.2023

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