Reverse Auctions in Food
Where it all started
Trade Interchange Reverse Auctions was born of the food industry. The founders, Simon Brake and Andy Tyson, each spent the prior two decades as food industry buyers and business managers. When they established the company in 2000, it was with the food industry in mind. Whilst Trade Interchange services all industries, the food industry continues to be the most active for the UK operation.
As in all industries, indirect categories are often the first items to be considered. Typical examples are telecommunications, courier services, stationery, computers, software etc. However in the food industry, direct categories such as packaging and printing are often the first cabs off the rank due to the relatively high level of competition, especially amongst printers who need to keep the presses running.
Some ingredients and branded packaged foods are also candidates for reverse auction. However, they have to be carefully chosen on the basis of adequate competition and a suspicion of more than adequate supplier margins. These categories tend to yield smaller savings, typically in the range of 3% - 10% better than buyers expectations.
Other categories for consideration include those surrounding the production processes such as distribution, diesel, fork lifts, chemicals, maintenance, production equipment, security, recruitment agency fees and protective clothing. As always, it simply comes down to the clarity of specifications and the level of competition.
The bid charts below are just a few examples of actual reverse auctions that have been managed by Trade Interchange for organisations in the food industry.
Packaging and Printing
The auction above, for printed self adhesive labels, was very strongly contested amongst 9 suppliers. 5 of the suppliers fought continuously, ultimately extending the auction by 20 minutes. By the end of the 50 minute auction, more than 100 bids had been received resulting in a 'true market price cluster' of 5 suppliers.
Not only did the buying organisation achieved a saving of 30% against their expected price, they also had the luxury of 5 suppliers to choose from, allowing them to focus purely on qualitative considerations.
The auction shown above was for single use disposable trays on which to sit prepared whole chickens.
The horizontal red line represents a supplier that has submitted a price prior to auction but has chosen not to participate in the auction. This can be for a variety of reasons from unavailability to 'this is my best price' to 'we won't bid'. Whatever the reason, their quotation is still valid and is entered into the system on their behalf. It was a strong opening bid and acted as the price leading target for blue and green. Blue's best and final offer during the sealed bid phase (light grey) was dramatic but not uncommon. This shows the potential power of this element of the auction if it is employed.
Ingredients
Ingredients can be one of the trickier categories to run through reverse auctions. Common reasons for this are limited fields of acceptable suppliers and the critical or unique nature of some ingredients. However, where there is adequate competition and acceptable standards of quality, reverse auctions can work very well, as shown in the bid chart above for
broccoli.
Packaged Foods
When it comes to fully packaged foods, reverse auctions are often used for non-premium or supermarket in-house brands. The example shown above is for tinned tomato paste. Two keen suppliers is all it takes to deliver a successful outcome.
Sausages, Smoked salmon, Soups, Spirits, Styrofoam Cups, Table sauces, Tea, Tea bags, Toffees, Tortilla Chips, Tuna, Vanillin, Vegetable 0iI, Vegetables, Vinegar, Wine, Wafers and Cones, Whisky/gin/vodka, Wine Freight, Wine: Red, Wine: White, Yoghurt
Toner Cartridges, Utilities, Vending Machines, Warehousing, Waste Disposal, Water