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e: Sourcing/RFx Process Overview

e: Sourcing/RFx Process Overview South Central Ohio Minority Supplier Development Council (SCOMSDC ) December 7, 2011. Largest Traditional Grocery Retailer 2010 Sales - $82.2 Billion 338,000 Associates. 2439 Supermarkets, Price-Impact Warehouse and Multi-Department Stores in

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e: Sourcing/RFx Process Overview

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  1. e: Sourcing/RFx Process Overview South Central Ohio Minority Supplier Development Council (SCOMSDC) December 7, 2011

  2. Largest Traditional Grocery Retailer 2010 Sales - $82.2 Billion 338,000 Associates 2439 Supermarkets, Price-Impact Warehouse and Multi-Department Stores in 31 States under nearly two dozen banners, 796 C-Stores, 1067 Fuel Centers, 363 Fine Jewelry Stores and 40 Manufacturing Plants, in addition to other services such as Kroger Personal Finance, The Little Clinic and I-Wireless

  3. Corporate Business Strategy: Mission • To be the leader in the distribution and merchandising of food, pharmacy, health, personal care, seasonal merchandise and related consumable products and services…. • We will conduct our business to produce financial returns that reward investment by shareowners and allow the Company to grow…. • We value diversity and will strive to reflect that diversity in our workforce, the companies we do business with and the customers we serve....

  4. Corporate Business Strategy: Goals • Increase sales and profits • Meet customer needs/expectations • Customer 1st Strategy and Associate 1st • Offer high quality products and services • Gain a competitive advantage • Control efficiencies and reduce cost • Achieve sustainability and safety objectives • Contribute to the economic growth of the communities we serve

  5. The History of Auction • Recorded as early as 500 B.C. in Babylon • 193 A.D. Roman Empire was auctioned off to highest bidder Didius Julianus (an early sad case of the “winner’s curse”… Septimius Severus • Early England (ascending) “ English auction used “auction by candle” for goes and leaseholds • Oldest auction house in the world- Stockholm Auction House in Sweden, founded in 1674 • Civil War- war goods auctioned by the Colonel of military division ( unofficial title carried today • Christie’s, Sotheby’s, Reynolds, Freeman’s and numerous “local” auction houses exist and thrive

  6. Uses of Auction • Collections (art & antiques), wine, real property, industrial machinery, commodities (oil, livestock, wool, tobacco, fish, electricity, natural gas), autos, thoroughbred horses, legal (public), radio spectrum, timber, timber allocation, environmental, debt, treasury bills, foreign exchange, mineral rights, etc. • Flowers (Tulips) - Netherlands – “Dutch” Auction (descending) • FRB Chairman, Ben Bernanke suggested using auction to valuate assets…($2 SOB – Bear Stearns) • Sale of office wall art for Lehman Bros by Freeman’s (doubled expected value)!

  7. The History of “ Reverse” Auction • The proliferation of the internet + the 90’s “.com era” = ebay, Bidtopia, Bidville, GunBroker.com, etc. • B2B electronic marketplace to negotiate pricing for goods & services, where many sellers exist • Freemarkets: 1995 - Glen Meakem (G.E./McKinsey) • Y2K: Global Net Xchange was born (Sears, Kroger, PPR, Carrefour, Coles-Myer, Metro AG, KQ, Sainsbury, & Oracle) • GNX + WWRE merger = Agentrics (2005) • Current Agentrics membership generates over $1 Trillion in revenues annually

  8. Comparison /Contrast Kroger e:Sourcing is not ‘like’ ebay!

  9. Different Types of e:Sourcing Events (refer to Supplier ezM tutorials) • RFP: Request for Proposal • Generally, an auction format, with • Ranking Provided, Re-bids allowed • Can be a “Blind, one-time bid (no re-bids) • RFI: Request for Information • NOT an auction format • Generally, no pricing requested • No Ranking Provided, No Re-bids allowed • RFQ: Request for Quote • NOT an auction format • Pricing requested • No Ranking Provided, No Re-bids allowed

  10. Auction: Why Kroger Uses e:sourcing • Competition in a free market = Fair Market Pricing • The constant search for “perfect” market information in a dynamic world market • Every qualified participant brings additional knowledge to the market/event • Knowledge given to the market is a powerful driver for growth • Agreement Term can provide stability for the supplier(s) • Feedback during/from an auction is valuable to suppliers • Process saves time and expense for suppliers, and Kroger • Integrity of the process/Company Values (Code of Conduct) rigidly adhered to (Kroger events are NOT like eBay) • World-wide, over 10,000 active ezMarket-registered Kroger suppliers

  11. A Supplier’s Comments on being successful in e:Sourcing events (Gartner Studios): • Thorough preparation is key: “Know your costs, your suppliers, and your market (tiny details can make the difference in winning/losing; being profitable, or not)” • The results of these preparations have allowed Gartner to decrease production and shipping costs by almost 30% • They have more than doubled their sales in 3 years (2003 – 2006) • Increased profits to an all-time high • “I know most people don’t look at reverse auctions positively, but we see them as a process that makes you better. If companies don’t look at it that way, they’ll lose to somebody who does.”

  12. Top X “to do’s” for Suppliers (refer to handout) • Resources: • Kroger GNX Team • Agentrics/ezMarket CSS Team • Project Preparation: • Invitation Email & Project Documents • M/WBE Certification • Plan Ahead • Communicate • Be Prepared • Establish your strategy • Award of the business

  13. Abe’s wisdom is timeless! “Give me six hours to chop down a tree, and I will use the first four to sharpen the axe.” -Abraham Lincoln Contact

  14. Questions??? Contact us http://www.thekrogerco.com/supplier/supplierdiversity.htm Contact

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