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Financieel Dagblad aug 05; "Elektronische veiling werkbaar" (Jan M Hebly)

Beschaffung Aktuell dezember 03; E-Sourcing; Der Preis ist nicht Alles

Financieele Dagblad 11.11.03: Ziekenhuizen besparen op inkoop ....

Negometrix delivers more than expected savings to KLM In-flight Services

While planned before September 11, 2001, this case became more critical as last fall KLM was actively cutting cost in all area's of business to adapt to the temporary airline market downturn.

KLM, a leading European air carrier, www.klm.com, is a known and active participant in innovative e-sourcing technology. The last few years, KLM tested several e-procurement solution vendors as well as successfully executing several publicized e-sourcing projects. The buttercup e-sourcing project has, as far as we know, generated the largest savings though e-sourcing for KLM to date.

The Electronic auction generated 36.3% or € 89.920 savings
KLM wanted a new supplier for 10 gr. buttercups served on many of the KLM flights. At the same time, they wanted to bundle the purchasing needs with that of NorthWest's European operations. The electronic negotiation for a 1 year supply contract held on October 11, 2001 at KLM In-flight Services involved 5 suppliers totaling 8 competing offers. The target project saving was 10%; the result, was 36.3%; far beyond of what the purchasing team held as realistically achievable.

6 weeks were needed to find, evaluate select and invite 7 acceptable offers to the negotiation: The projected started on august 21, 2001 with a kick-off meeting with all internal KLM participants jointly setting a brief action plan. Overall, we were able to stick to the 6-week preparation time typically needed. During this 6-week period the following activities were executed:

Seven potential suppliers were contacted by KLM, 3 from Holland, 1 from Germany, Belgium, Austria and Sweden; 2 of the 7 were identified by KLM and the remaining 5 by Negometrix.
77 (!) specific purchasing criteria for the 1-year delivery contact (grouped in 10 families of criteria) were determined by KLM on which the potential suppliers of the buttercups were evaluated. The results were entered in the Negometrix comparison engine. (see table 1 for an overview).
2 suppliers were eliminated because they came short in meeting all criteria set forth by the KLM's strict quality standards necessary in in-flight food services.
2 suppliers entered the comparison phase with more than 1 proposal resulting in a total of 8 competing offers.

Comparison results: (Table 1)

The quality aspect as depicted in table 1 was set at 15% while price contributed for 85% in the "best buy" recommendation algorithm. The low relevance of the quality aspect was partially due to the late 2001 airline market downturn.

Prior to October 11, each supplier was contacted by Negometrix's helpdesk to explain the negotiation system and to conduct a test negotiation while supported by telephone.

The negotiation lasted 2 ½ hours during which 75 bids were made:

On October 11, The negotiation started as planned at 12.02 hrs while closing at 14.31 hrs. In 21 bidding cycles, 75 offers were evaluated by the model resulting in 21 "best buy" recommendations.
Based on these "best buy" recommendations, KLM changed their commitment 17 times during the negotiation.
There were no technical issues / problems during the negotiation.

Please review table 2 for the complete bidding data:

Evaluation:

On November 2, 2001, the negotiation was evaluated between KLM and Negometrix. The unanimous conclusion was that the auction was successful. The system proved effective and robust and can be used for almost any type of purchase as long as there are 3 or more competitive suppliers. It was noted that in the future, defining a lower number of evaluation criteria could save preparation time and energy. On the other hand, careful preparation is key to successful negotiations.
Below please find the evaluation from the suppliers when asked by email to rate the quality of the system on a scale from 1 - 10 (10 is best):

Announcement & invitation 8.3
Technical training 9.0
Login, data entry, feedback 9.3
Technical support by telephone 9.3
Contents of screen during negotiation 8.3
Overall concept 8.8
If invited, would you participate again ? 100% yes
Would you suggest the system to your purchasing department ? 100% yes