Keelvar Blog

Mega-Bids: the good, the bad and the ugly.

May 29, 2019

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Mega-Bids: the good, the bad and the ugly.

How large sourcing events can turn into a Fyre Festival style disaster when preparation is overlooked.

Large enterprises like to pool spend and run large sourcing events that attract wide supplier interest and maximize competitive tension. It makes complete sense but comes with a health warning: if you fail to prepare yourself for a flood of bidders and a deluge of bid data then chaos will ensue.

Given the thousands of large sourcing events that have been conducted using our software we compiled a list of how things can go badly or even horribly when procurement over-extends and doesn’t prepare sufficiently, but also how well this can go when preparation and data management is given the respect it requires.

The Fyre Festival ruination was a Netflix and Hulu hit illustrating what can go wrong when big events are marketed very effectively but completely lack the planning and execution necessary to deliver a successful outcome.

What went wrong at Fyre Festival and what similar Procurement disasters have been brushed under the carpet?

Sold as a luxury weekend of music and partying in paradise, the Fyre Festival was to be the most daring, celebrity infused music weekend at a luxurious Caribbean island where paying guests would be transported via private jets to this exclusive getaway. The social media marketing in the build-up grabbed the public imagination and ticket sales rocketed. This was to be the best music holiday experience ever created.

But the required planning and delivery was sadly lacking. Organizers never thought through the pragmatic requirements in hosting a large and complex event. When guests showed up and were met with a disaster zone of no power, hurricane shelter tents and a shortage of supplies, the celebrities quickly bailed out and the end result was the worst experience imaginable for guests with a scramble for tents, stranded guests at airports and massive reputational damage for the organizers.

Similar disasters have happened in large ‘mega-bid’ events but haven’t received the Netflix treatment and are instead quietly swept under the carpet. Increasingly frequently, we are approached by procurement teams explaining how a variety of large bid events have gone horribly wrong and led to embarrassing failures in negotiations with suppliers.

Certain spend categories have a large number of qualified suppliers such as trucking, MRO, packaging, IT services, materials where large bid events can be orchestrated by sourcing teams aiming to maximize competitive tension. The trouble is that all these suppliers arrive at a bid event simultaneously leading to a spike in demand and that is when you see whether your software system can withstand the pressure. If you are using an old eSourcing system (and most of them are 10+ yrs old) then you may be facing server crashes, bid upload failures and frustrated suppliers all simultaneously complaining with widespread panic that bids can’t be submitted in time. These disasters happen more frequently than you might think.

Large truckload events have led to the most spectacular failures. Some of these mega-bids have several hundred carriers competing (and the largest can be over 1000 bidders). In just the last six weeks, Keelvar has received enquiries from sourcing teams at some of the world’s largest manufacturing companies to complain that their mega-bids have become mega-failures due to older sourcing solutions crashing when faced with peaks in demand. Some of these procurement teams were advised to stagger the bid closure times for groups of bidders so that no more than a few dozen bidders were simultaneously uploading responses. This entails a hornets’ nest of ethical considerations as market conditions can change so if you have hundreds of suppliers then the delay between the first bids collected and final bids collected could be a material disadvantage for some bidders. In most cases, the procurement teams reverted to collecting bids via Excel and email and then taking months to analyze the offers and failing to adequately consider package bids, capacity constraints or internal constraints and preferences adequately as an optimization engine would do. Besides the cost of awarding suboptimal outcomes, losing potentially tens of millions of dollars in savings, the frustration and despair felt by all concerned tends to dissuade businesses from repeating mega bids in future thus increasing the losses.

So how can large enterprises, running complex, time sensitive events with hundreds of carriers and thousands of lanes, take measures to ensure their events are not a Fyre Festival 2.0? How can unplanned, increased spend and critical time loss become a thing of the past?

Choosing the correct Sourcing Optimization platform is largely dependent on a software vendor’s experience and proven track record. A solution that is fit for purpose is built in modern infrastructure as a service (e.g. Amazon Web Services) with elastic computing capabilities to autoscale hardware to meet a spike in demand. Poor infrastructure architecture with dedicated servers that cannot load balance across other servers leads to crashed servers.

Software that can seamlessly, consistently handle hundreds of simultaneous uploads is the bedrock of a successful Mega-Bid event. With this level of infrastructure, things can go very right. Add in features such as robust data validation, automated data aggregation, open and expressive bid formats, demand broken down into smaller lots, package bids, conducting of scenario analysis, securing of best downstream outcome for the buyer and suppliers’ ability to play to strengths and improve their efficiency. This is the recipe that will ensure your optimization platform with yield better and faster results for your organization.

Keelvar’s Sourcing Optimization and Sourcing Automation platforms are developed and powered by experts in the e-sourcing field. Furthermore, there is no reason to ditch existing systems when considering Keelvar. Keelvar’s motto is start small and build sustainably- simply Move Forward.

Please contact s.straub@keelvar.com for more information or to request a demo. Keelvar is intended for use by Procurement teams within large enterprises.