A major international bank operating in the Hungarian market asked one of our leading specialists to analyze any potential savings they could obtain using our online auctioning tool. The request came after the bank had tested the system in one of their procurement processes.
We discussed with the client that the online auctioning technology would enable them to:
- Efficiently analyze the market and define their prices dynamically
- Gain immediate, long-term competitive edge with lower costs
- Carry on negotiations simultaneous with all bidders and increase competition to significantly reduce purchase pricing
- Standardize and automate routine processes
- Centralize procurement competences dispersed across the company.
In our work, we also conducted a portfolio review on procurements planned for the given year. In our study, we found:
- Lists of products where it would be worth using an auction tool to support procurement – that is, auctionable products
- Potential savings were quantified
- By prioritizing items that can be auctioned in procurements (product and service groups) and set up an implementation schedule as well as define the type of auction particular for each product.
The project became a comprehensive overview of savings potential, its distribution and schedule feasibility. The three-week study was submitted to the responsible member of the board, by the procurement department.
The bank started to use the auction system and realized 60 percent of savings potential by the end of the year, despite that
- They had already spent part of their annual budget and supplier contracts had already been signed
- There were a number of areas where a framework contract had been in place with validity of several (generally 2-3) years and could not be made subject to a new tender in that year
- The bank deployed the system gradually
- In certain cases, savings was generated only on large-volume or high-quality purchases made from a given available budget (in other words, cost centers spent the savings)
- Intensity of the auctions accelerated after the expiry of annual contracts and any subsequent savings were recognized in the following year.
Price decrease is not a one-time effect. Prices will remain low in the subsequent periods, too. Theoretically, savings could be best determined with a perpetuity formula.
Not only price advantages were calculated in our study, but also potential savings in staff resources.
The bank's management was satisfied with the results and with our services. They also recommended the service implemented into the parent company and the all European operations.