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Reverse Auctioning at the University of Pennsylvania

Reverse Auctioning at the University of Pennsylvania. SUNY Purchasing Association Fall Conference October 9, 2003. Presentation Agenda. About Purchasing at Penn Business Opportunity Motivation for Change What is Reverse Auction? How Does It Work? What are the Challenges?

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Reverse Auctioning at the University of Pennsylvania

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  1. Reverse Auctioning at the University of Pennsylvania SUNY Purchasing Association Fall Conference October 9, 2003

  2. Presentation Agenda • About Purchasing at Penn • Business Opportunity • Motivation for Change • What is Reverse Auction? • How Does It Work? • What are the Challenges? • What are the Benefits & Drawbacks? • Penn Events • About Procuri Incorporated

  3. About Purchasing at Penn • Distributed point-of-demand purchasing environment • Over 1,900 Oracle Financials users – Purchasing (iProcurement), Payables & GL • Delegated approval authority for transactions <$5,000 • EDI, Document Imaging & Reverse Auction technologies used to compliment eProcurement system • Annual purchase volume of $700 Million • Consistent & on-going senior management support for strategic purchasing, cost containment, supplier diversity & eProcurement initiatives

  4. Business Opportunity • Purchasing has always used traditional competitive bidding initiatives for annual volume requirements • Solicitation of bids for one-time capital equipment purchases was usually conducted in Schools & Centers • Post-bid negotiations always resulted in additional savings • Realization was that there had to be a better way to leverage Penn’s buying power • Market assessment was conducted to identify an alternative to traditional competitive bidding

  5. Motivation for Change • Senior management support for implementation of emerging technologies • Success of formal cost containment program increased pressure for new savings opportunities • Pressure to maximize potential of existing supplier relationships • Emerging technologies that increase performance and efficiencies • Staff compensation based on performance and accomplishments

  6. What is Reverse Auction? • Secure online competitive bidding tool to leverage spend • Opposite of auctions such as eBay, low price wins • Does not impact or change current business requirements (pre-bid meetings, specifications, quality analysis prior to contract award) • Buyer creates bid specifications, identifies authorized bidders, event and award dates • All event activates are recorded and reports are available to buying organization for audit purposes

  7. How Does It Work? • Buyer identifies requirement, develops RFP, selects invited bidders, and schedules online event • RFP/RFQ documents distributed electronically to invited bidders • Invited suppliers are trained by business partner to use the Reverse Auction tool (Procuri Inc. for Penn) • Event duration and extensions are based on commodity (usually 20 minutes with 3 minute extensions for Penn) • Buyer and suppliers can communicate via e-mail during event • Award can be made at the end of event or after review of bids

  8. What are the Challenges? • Acceptance of new procurement tool by purchasing staff and other Penn ordering units • Reluctance by some suppliers to participate in an initiative that may dramatically reduce their GPM • Payment for service, decision on buyer or supplier payment options • Ability to distribute the technology to the campus community for spot buys

  9. What are the Benefits? • Easy to use web-based tool to streamline the competitive bidding process • Reduces time and effort related to RFP/RFQ creation and distribution • Speeds up competitive bidding & contract award process • Promotes fierce competition for Penn’s business • Average events savings is 12% • Great use of technology

  10. What are the Drawbacks? • Requires careful selection of targeted commodities as the technology is not useful for all purchase requirements • Some suppliers may elect not to participate in a Reverse Auction event • May impact supplier relationships if not used appropriately • Dramatically reduces supplier profit margins

  11. Penn Events • Collaborative buying event for HVAC Filters • Collaborative buying event for office supplies • Event for cost-per-copy copier contract in development • Event for copier paper in development • Process for bidding vehicle requirements in development • Process for leveraging content position in the Penn Marketplace in development • Discussion with Penn Facilities for possible use for new construction projects (steel, concrete, drywall, etc…)

  12. About Procuri Incorporated WWW.PROCURI.COM

  13. Conclusion Please visit the Penn Purchasing Services Reverse Auction web site for additional information www.purchasing.upenn.edu/about/bidding.php

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