26 August 2004
Telecoms firm mmO2 will conduct more e-auctions after pilot runs saved £4.5 million.
Five auctions have been held since March covering cables, generators, office supplies, laptop computers and hotels, said Simon Lee-Smith, chief procurement officer and head of procurement for the UK division.
"We ran the first auction in March for cables, and we buy 725 kilometres of cables a year," he said. "We saved 42 per cent and that paid for our investment in the Ariba e-auction process."
In the next couple of months, e-auctions are planned for recruitment agencies and furniture.
But Lee-Smith has had to rein in an enthusiasm for e-auctions heightened by the pilots.
"Everyone has the buzz about e-auctions," he said, "but it is not just the 30 minutes at the end of the process that we are concerned about, but weeks of hard work beforehand in terms of understanding the category."
He said that purchasers must thoroughly understand their markets and categories before running an e-auction to determine if benefits are possible.
"I am sure that if you ran an auction without understanding what you are auctioning you'd be in danger of paying more."
The auctions are part of a major change in procurement at mmO2 since January, where purchasers now focus much more heavily on category management and strategic sourcing.
The company has an annual purchasing budget of ?5 billion, of which ?2.2 billion is spent by the UK arm. It employs 80 people in procurement.