New Recylcing Emblem

This is the new "corrugated recycles" emblem that should be found on the bottom of each corrugated carton...

http://www.aiccbox.org/News/News_Display.asp?ID=1371

Worth Mentioning....

Two endorsements for ingenuity.

www.zapproved.com
Having trouble finding emails related to a specific project?

www.pandora.com
Better than FM, maybe Sirius, and if you own an IPOD - you should be listening to pandora.

e-collaboration. The new e-commerce

cBoxBid.com is not an auction. We believe collaboration between buyers and manufacturers will ultimately determine value. cBoxBid.com simply gives buyers the power to choose a supplier based on quality, delivery, customer service and price.

This article is more than 3 years old, but the subject matter is just as relevant today as it was back then.

For your reading enjoyment, replace the word 'auction' with collaboration!

Smart Usage of Auctions Can Save Industrial Buyers Millions

September 2005

STANFORD GRADUATE SCHOOL OF BUSINESS—Buyers for some major corporations may be able to shave time and substantial costs from purchasing goods and services simply by employing procurement auctions wisely, says Tunay Tunca, assistant professor of operations, information, and technology. In certain cases, companies can realize improved savings by mixing auctions with negotiations in a systematic way.

Traditionally most large corporate purchases require lengthy negotiations often involving multiple sources—a process that can take months and can be very costly. Today, by embracing online bidding auctions an increasing number of companies achieve savings that amount to hundreds of millions of dollars. Case in point: Sun Microsystems, one of the industry leaders in utilizing online auctions for procurement, realized savings reaching $300 million annually.

"The internet allows a buyer to bring suppliers together simultaneously in online auctions and accomplish a major purchase in less than two hours, but there are questions about the best way to run such auctions," says Tunca, the 2005 Moghadam Family Faculty Fellow at the Stanford Graduate School of Business. Questions arise particularly where companies' procurement needs are so large they must be split up among several suppliers.

While optimal procurement auction structures have long existed in theoretical economics literature, they generally involve such complex implementations that most companies justifiably simply ignore them and instead utilize a simple and often familiar "reverse" auction process, in which a select group of suppliers bids competitively for an order posted by the buyer. The buyer may choose the lowest-cost bid or split the purchase among several of the lowest-cost suppliers.

"This can work well in certain cases, but in others it can be inefficient and the buyer can end up leaving money on the table," says Tunca. Using mathematical models, he and Qiong Wu, a Business School PhD student, have teased out the conditions under which the simple single-stage reverse auction works best, and examined a more effective yet still practical format in cases where it does not.

Buyers can use a simple reverse auction to save the most money when they are in control. This occurs, Tunca and Wu found, when eligible suppliers are plentiful, when suppliers themselves have to spend money to ramp up enough to fulfill the order, and when purchasers have a good sense of suppliers' costs.

But when things are a little more uncertain and complicated—when there are few suppliers, when those suppliers can easily fill the orders without any extra investments, and when buyers are not so sure of what suppliers' actual costs are—then a simple reverse auction makes the purchaser more vulnerable to losing out on pricing. In this case, says Tunca, buyers are better off instituting a two-stage process, in which they hold an initial auction to identify the lowest bidders, but then add an additional contracting stage to negotiate further with those bidders.

"Although the purchaser accrues additional process costs associated with these negotiations, in many cases those costs are more than offset by the price savings they gain," says Tunca. "In some cases, it is possible that the net cost efficiencies obtained from running a two-stage process versus just a reverse auction can run into significant percentages."

Industrial buyers, then, may want to consider employing a two-stage procurement process more frequently, advises Tunca. "However," he adds, "companies also have to be careful about keeping good relations with their suppliers before they decide to implement such a system. Cooperation with suppliers in this decision is important to prevent unwanted disruptions in those relationships."

— Marguerite Rigoglioso

Related Information

"Multiple Sourcing and Procurement Process Selection with Bidding Events," Tunay I. Tunca and Qiong Wu, GSB Working Paper, 2005

"eSourcing Strategy at Sun Microsystems," Charles Holloway and A. Higuera, GSB Case OIT34, 2002

"Sun Shines by Combining Two Supplier Strategies," D. Hannon, Purchasing.com, May 6, 2004

The "Doctor of Sourcing" is in

If your title is buyer, purchasing agent, or procurement specialist and haven't read "the doctor's" blog, you owe it to your self to do so. I spoke with Michael "the doctor" Lamoureux about two weeks ago, he was suffering from the flu and told me so only after our conversation. I was explaining how cBoxBid.com works, and how it can benefit anyone who purchases corrugated packaging. Our conversation was short and after hanging up I really thought I blew it.

The point to this is, even while he was running at half to 3/4 speed, and me stumbling, his ability to listen, dissect information, ask the question, and then find the value is uncanny - and thats the benefit to YOU the subscriber. I remember reading one his blogs that said something like, 'if it doesn't make sense, I dont write about it'! Carry on.

http://blog.sourcinginnovation.com/