E-sourcing to become an essential buying tool

Finding suppliers on the internet is set to become a major trend throughout the food and drink sector, helping firms make massive savings.

Confectioner Thorntons recently made a six-figure saving when e-sourcing specialist Wax Digital (WD) masterminded several managed reverse auctions for the business. WD believes other firms could benefit from the service.

The process is similar to that used by eBay, with suppliers bidding against each other to win a contract with the processor. “A lot of large manufacturers are starting to test the water,” said Daniel Ball, business development director at WD. “I’d be surprised if all large food companies aren’t doing it within 24 months.” He admitted it was difficult for smaller firms to make an attractive offer for suppliers, but claimed that this was about to change. “Within the next five years, you’ll see more collaborative buying from smaller businesses on items such as direct commodities like cereals.”

Ball explained that many suppliers were interested in reverse auctions because it was a very transparent proposition, enabling them to check out the competition and avoid cost of sale.

But e-sourcing hasn’t always been popular. “People have made mistakes in the past,” said Ball. “There was an initial surge of interest two or three years ago, but it was a very immature market and many vendors and buyers were inexperienced, which lead to poor results.”

However, Ball claims the market is now ripe to deliver benefits to food manufacturers. In Thorntons’ case, the firm had already identified a number of suitable companies to supply, install and maintain its air conditioning equipment. By taking the contract to internet auction Thorntons was able to save 15% more than the best offer available using traditional paper- and telephone-based methods.

WD has since managed sourcing events for Thorntons on categories including diesel and hazelnuts. “Working with WD has been very successful in helping us realise better value from our sourcing activities, ultimately delivering significant cost savings,” said Thorntons.