Recently, FreiLacke, an internationally operating company in the surface coating field, has begun to bank on online auctions in the solvent field. Contrary to past practice in which queries for daily updated prices were handled manually with significant administrative effort, today, routine auctions quickly and effectively replace the price negotiations.

Positive user reports submitted by purchaser colleagues were one of the reasons why Roland Bäurer, Purchasing Manager at Emil Frei GmbH & Co. KG, decided to implement online auctions using the fairpartners procurement platform. "After we screened the market and providers, fairpartners was right among the top three. The excellent cost-effectiveness of this provider's platform was crucial in making the decision," reports the purchasing manager.

According to Bäurer, "In the solvent business, it makes no difference which of our suppliers finally delivers the product. There are some suppliers that meet our specifications and guarantee the corresponding quality. These closed groups of suppliers take part in our online auctions. The price, that changes daily, is the only decisive factor in awarding the contract of sale."

Fair Cooperation with Suppliers

"We involved our suppliers in the new process from the very beginning," explains the purchasing manager. Before we decided to use the procurement platform, we conducted a survey among the suppliers using questionnaires on the process. After a 3-month test phase, we collected their feedback again. Some of the suppliers already had experience with procurement platforms as a sales channel. We had to convince some of the suppliers. "After all, suppliers have to pay an annual fee to register in the platform, although the fee is comparatively modest. In the case of this relatively special product, they register primarily to take part in our auctions. We also need to consider this as a purchasing organization," comments Bäurer. "It was clear to us from the very beginning, that if we decide to utilize this type of purchasing method, then the suppliers must cooperate as well. And that's why we supported this undertaking with an especially fair approach: We paid the costs of a three-month test phase for all bidders so they could become familiar with the platform," reports Bäurer. "We also continue to cover the costs of annual registration for very small companies as we know that the margin for solvents is very small. However, starting with a certain sales volume, the suppliers pay the annual fee themselves. In the meantime, all participating suppliers appreciate the benefits of the auction," says Bäurer. "Because, even if they can't always compete on price, by participating in the auction, they gain valuable, daily updated data about the market and competitors."

If well prepared, it runs by itself

The basic format of the auctions always appears the same. Together with his employees, Roland Bäurer determined the corresponding settings using test auctions. Then they saved sample auctions that are repeatedly used as templates and just have to be copied. To ensure that auctions also ran smoothly on the supplier side, the suppliers also had the chance to practice and get comfortable using test auctions. In addition, all important auction steps were summarized again in a document that was provided to the suppliers. "Even though working with the fairpartners platform is pretty much self-explanatory, our good preparation of the suppliers is certainly one of the reasons why, up to now, we haven't had any problems with the auctions," adds Bäurer.

At FreiLacke, a standard auction takes 45 minutes. That's a relatively long time period for an auction, but that helps suppliers to be more relaxed than if they were under heavy time pressure. In the meantime, even multiple auctions are frequently conducted in parallel on a single day. The second auction already starts while the first auction is still underway. Suppliers quickly got used to the auction process, and parallel price negotiations minimize their time loss as far as possible. Roland Bäurer is convinced that he made the right decision. His conclusion: "In the meantime, auctions have become routine in our Purchasing Department where a lot of administrative effort was needed in the past. We never would have made this improvement any other way."