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They have been branded the scourge of the print industry or the best way to eke out a few extra pounds of savings. But whatever your view on e-auctions, they are becoming part of everyday life for both printers and buyers.

At the most basic level, an e-auction is a way of procuring any service or type of goods via an electronic online auction.

It might sound like eBay, but there’s one big difference: as the auction progresses, the price goes down.
The principle is simple. Firms wanting to win a contract up for tender log on to a specific website at a specific time. A starting price for the contract is set, and over a defined period, often just 20 or 30 minutes, the hopeful companies bid progressively lower prices for the work. At the end of the allotted time, or when there is only one bidder left, the firm that has offered the lowest price wins the work.

Direct competition
Supporters of e-auctions (or reverse auctions, as they are also known) argue that at worst, they save time on complex and lengthy negotiations and at best, they offer savings on jobs of well over 50%. Participants are able to see prices offered, although they don’t know who bidders are.

Jeremy Weidenbaum, group commercial director at HH Associates, sums up the theory: “By allowing the suppliers to compete directly with each other without intervention creates a very competitive environment, which creates a downward pressure on prices.”

Those supporters are legion. Government departments on Whitehall, where the drive to save public money is paramount, have been pushing for the use of e-auctions for around five years, but they first started making an impact on the print market in 2005. The Greater London Authority first flirted with e-auctions for printing that year when it tendered production of its newspaper, The Londoner. At around the same time, the BBC put in the region of £1.8m of print work up for tender by e-auction.

The private sector also began to take notice of e-auctions in 2005. Many print management firms, including Communisis, Adare, and HH Associates, now use them, while charities and publishers have dipped their toes in the water.

Those experienced in running e-auctions argue that the method is just a tool to get the best procurement results. “There’s a misconception that the event is about a price for the goods, but it’s all about the preparation.” says Alan Martin, general manager of Communisis Sourcing.

Julian Coghlan, executive director for purchasing at Adare, agrees. “Unless an auction is carefully planned, the results are meaningless.”

First, a buyer will need to get hold of the key tools to run the auction – that is, the software or a consultancy firm using it. Suppliers include Scanmarket, Curtis Fitch, TradingPartners and Ariba, which produces some of the market’s most widely-used procurement software. For public-sector buyers, the Office of Government Commerce has also set up a framework covering e-auction suppliers.

The real key to a successful auction is to draw up clear requirements for the job, including timings, volumes, environmental requirements, necessary print processes and specifications of the work. Printers are then invited to tender, often through first filling out a pre-qualification questionnaire (PQQ) and then potentially supplying samples of work or meeting the buyer. “You have to have integrity in what you’re telling the suppliers,” says Martin. “Otherwise, they will make assumptions, and bid for different things on the day.”

The various criteria on which bidders will be judged needs to be taken into account. While price is the immediate basis of the e-auction, on the day other factors such as quality and service levels can be given weightings. The software calculates these to create a complete picture of the overall best-value supplier.

Be prepared
Depending on how familiar the buyer or the suppliers are with the process, the last stage before running the e-auction may be to run a ‘dummy’ event to make sure that everyone involved knows exactly what they need to do on the day.

Finally, the e-auction takes place, but even then the process is not complete. Martin says that while the lead-in to the e-auction can take up to three weeks, a buyer must count a similar period after the event.
Equally, the auction is not necessarily the end of the decision-making process; it may be that the final price achieved is still perceived as too high, and the buyer can still walk away from the process.

Clearly, getting the keenest price in a transparently competitive environment is the number one benefit of opting for an e-auction. But there are other reasons why the process can be useful for buyers.
Adare’s Coghlan says that well-planned e-auctions can help to understand and benchmark the market. “By carefully structuring an event, we can understand the elements of cost much better and begin to make better-informed decisions,” he says. “You can see differentials in printing, material and distribution costs can therefore buy more effectively.”

Despite a strong resistance to e-auctions, printers’ worries are evaporating. One printer compares moaning about online tendering to moaning about supermarkets killing off small businesses, saying: “We all dislike it, but we use supermarkets for everything from socks to sex aids.”

Communisis’ Martin agrees that acceptance both from printers and buyers is replacing the initial fear. He says: “At first, people organised or participated in them from their heart rather than their head, and made some bad decisions. We used to stand around a screen, saying ‘wow’. Now we run them regularly from a laptop and they’re much more accepted.”

The bigger picture
HH Associates’ Weidenbaum, though, admits that e-auctions, while effective when used well, are a “very clinical” method of procuring print, and should only be part of a procurement strategy. “Maintaining
a good relationship with your suppliers is key,” he says.

And buyers now argue that, in an increasingly cost-oriented print market, most types of job can be bought using an e-auction. Coghlan says: “The traditional model would be a standard product, large volume and many suppliers. However, our tools are much more nimble and slick so we use them in many ways; sometimes it is just to test other processes and confirm our decisions.”

So e-auctions are not quite the scourge some people feared when they became common­place; they’re just a tool, and a useful one at that. Print buyers need to remember to keep suppliers in the loop.

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GOLDEN RULES
Prepare E-auctioning experts say that the process is simply part of a wider strategy. That means that you must prepare pre-qualification documents and audit potential participants in exactly the same way as you would for any other job. The onus is on the buyer to make sure the printers know exactly what they are bidding on.

Make it competitive Ensure that the contract in question will attract competition – make it a job that at least seven printers will want, and be able to produce to your requirements. As a guide, invite seven printers to participate in the e-auction. Of these, five will probably take part, creating good competition.