Thorntons extracts 'significant savings' from online auctions

Thorntons has been working with e-procurement specialist Wax Digital for about two years, senior buyer Allan Edmondson told FoodManufacture.co.uk: “To start with, we bought some ‘managed events’ from them, whereby they sat with us and we ran the auctions together. One of the first was dairy-based and it generated a surprising saving.​

“Basically, they worked so well for us that we bought the platform and now run the auctions ourselves.”​

He added: “You still need to put in all the preparatory work on specifications, quality and service, but once you’ve done that it’s very quick to set up and run an auction. ​

"From the suppliers’ point of view, we’ve had a mixed response, but all have participated and I think they are fairer because everybody has the same information and can see where they stand.​

“There are also different types of auction and different levels of information that participants can see, for example, where they are in the rankings or what the lead bid is. We’ve used them for raw materials, indirects, bought-in goods and capex projects as well.”​

Cost savings​

Food manufacturers were routinely achieving savings of 10-35% on indirect sourcing costs and 5-20% on direct sourcing costs through online auctions, added Paul Layzell, head of sourcing at Wax Digital.

While e-auctions had proved controversial when they were first used in the sector, they had since evolved into far more sophisticated buying tools, and were now being used for buying everything from stationery, IT hardware, signage and packaging to butter and other dairy products, claimed Layzell.

“We’re seeing growing interest from the food industry as buyers at firms from Twinings to Finsbury Food Group are beginning to see how much money and time they can save.”​

He added: “I think the tools have become a lot more sophisticated now, but also the users. It’s been a learning curve for everyone. Certainly online auctions have taken some people out of their comfort zone, and they are not suitable for every purchasing decision, but when used properly, they can help you make significant savings on time and money.​

"Some manufacturers have really embraced them and use our self-service auction platform to purchase a wide selection of raw materials and services. It’s a strategic tool for them now. ​

“Others have approached us because they want to use our managed service and work with us on one particular event, working with us to qualify and engage with suppliers and ultimately run events with them. For them it might be a more tactical thing.”​

Reverse auctions​

Most food manufacturers used English reverse auctions, whereby a group of pre-vetted, pre-qualified suppliers competed on price, he said.

Typically, those with three to 10 competing suppliers worked the best, he said. “Suppliers say they like the visibility and transparency e-auctions offer – it’s particularly good for new suppliers to a given market.”​

Online auctions were just one of a number of services food manufacturers working with Wax Digital were using, said Layzell, with some firms using the platform to manage payments and accounts and others using a full suite of services from reverse auctions to tools that streamline the tender process, allowing buyers to electronically create, distribute, collect and store tender documents.