'Be prepared and obey rules or forget savings' warning

10 April 2002
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11 April 2002 | David Arminas

Online auctions can save money on streamlining procurement processes but only if the buyer and the sellers are properly prepared and obey strict rules, delegates to a major automotive conference were told.

A major pitfall for buyers and sellers is when either side insists on further negotiations after a well-run e-auction, said Uwe Vander Stichelen, e-business manager at Delphi Automotive Systems Europe.

If a supplier wins the auction, award it the business, he told the International Automotive Conference in Sunderland.

"We've had auctions where the customer came back after we won for further negotiations," he said. "In effect, they copied the old process over the new and the savings went."

Laurent Bourrelier, vice-president, business-to-business, at Renault, agreed that rules, such as no further commercial negotiation on price after the auction, are essential to the process.

"You must know what will happen after you have selected a supplier," he said. "The main thing is it shortens the process from three or four weeks to a few days. You must tell your suppliers you will not continue negotiations after the auction.

"Don't do an auction just to test the market; ensure you will actually purchase something."

Renault will increase e-auction activity in 2002 to reach f2 million (£1.2 million), which is around 5 per cent of its overall purchasing.

Peugeot UK will hold auctions only with known suppliers, according to Denis Monguillet, its director of UK purchasing.

He told SM: "We have taken time to explain the process. You must be sure all the technical standards are similar so you can select any of the suppliers."

Christopher Macgowan, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said cost reductions by first-tier suppliers were likely to put cost pressures on second and third-tier firms.

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