Here is our latest press release, announcing our Samurai release and some of the work we have been doing with Shropshire Council…
Market Dojo helps organisations to save money when negotiating with suppliers. We do this by providing software that enables employees to conduct an online auction. Our service is simple and secure, it’s quick and cheap, and as an example, in a recent auction, one of our clients saved £140,000 on a £500 investment. Purchases have ranged from new vans to powdered milk and brake pedals.
Already proven in the private sector, now Market Dojo is available to the public sector.
We have recently received a grant of £25,000 from the Technology Strategy Board, the government body that aims to help the public sector to cut costs without losing quality of service. The grant was awarded to enable Market Dojo to develop software that would make it possible for organisations within the public sector to tender, legally and with full compliance, throughout the EU.
Shropshire Council’s Integrated Passenger Transport Services team has used Market Dojo’s software to put bus and taxi operators services out to tender through e-auctions. To date the Market Dojo software has saved the council 8% from last year’s prices.
“In our first e-procurement using Market Dojo software we saved over 8% on our contract prices,” says James Willocks, Principal Transport Officer, Shropshire Council. “This was a great success, especially considering the current pressure affecting the transport industry. Market Dojo’s 12 month licence costs no more than running a single event with an e-Auction facilitator. We look forward to future developments with the company.”
Market Dojo was founded in 2010 by two young entrepreneurs from Bristol, Alun Rafique and Nick Drewe, and now they plan to roll out their service to government bodies throughout the UK.
“The public sector is facing major budget cuts and job losses, and if every council can make a significant saving, the taxpayer will save a massive amount of money,” says Nick Drewe of Market Dojo. “Our software is easy to use, affordable and environmentally friendly, and the return on an investment in our e-auction package is very quick.”
Expediting probably took up half of my time whilst acting as a buyer at a large tier one aerospace provider. Three bids and a buy took up the rest. Was I concerned? Unfortunately not. New to the job and having fallen into procurement, I had no better understanding of what I should or could do.
However, in the mid 90’s, strategic sourcing was coming to the forefront. Spend more time upstream thus less time downstream. Seemed like a great idea. The AT Kearney initiative with the seven steps was brought in with vigour: massive process re-design, a plethora of initiatives, and, of course, an ERP implementation from one of the large software vendors. A wonderfully massive and complex system. The managers liked the reporting, the auditability and the control.
But for the purchasing professionals, did it make our lives easier?
Well, we certainly had a process to follow, albeit different from before. We certainly had a system to use where you could put all the information, such as a million different delivery codes to every cost centre under the sun. We certainly had all the information at our finger tips…almost.
The issue was that even though this was this fantastic system to use, it was unwieldy. Yes, you could do anything, but to allow for this functionality and capability there was always a multitude of screens to go through. I was still doing three bids and a buy for the local tooling but my life had become more of an administrator. The time saved from less expediting was taken up with inputting information into more screens. Sure, the managers enjoyed the ability to interrogate the system to any level and run reports, but from the buyers’ side it did not make our lives easier and was certainly not more enjoyable.
Does this matter?
Of course it does. At Market Dojo, we take a view with our software to make it functional and easy to use. A lot of new software today requires no implementation and very little training. It is off the shelf, yet sufficiently customisable (without a raft of consultants) so you can adapt it to your processes, and not vice-versa. Most importantly, it actually makes the buyers’ lives easier whilst still providing the control and reporting to the management.
Why is this so important?
Myself and my colleagues are great believers that however good or bad the plan is, it will fail if the team is not behind it. Asking the organisation what their goal is and having many different replies is a sure sign there is no focus. All software implementations ultimately depend on uptake by the end user.
Systems should not be designed by ‘techies’ with a process to map, but designed in conjunction with the end users. Almost akin to applying Taylorism (theory of management that analyzed and synthesized workflows) to a system combined with improved ergonomics.
This should ultimately be at the forefront of any new system design; to bring the benefits to the end user and not just to management. The system will then sell itself, bringing a more rapid return on investment and creating a happier and more productive organisation.
The new breed of vendors are learning from the world around us and building applications which do just this. This makes the software accessible with fast uptake, just look at Facebook or LinkedIn. Would it not be great to have other users in your organisation say “Can I have that?”, rather than, “I hope they don’t roll that out here!”.
We have just implemented Japanese Auction capability in our software at the recent request of a customer of ours. Despite our procurement consultancy past, this is an auction format of which we have very little prior experience. In fact, how much knowledge and experience is there in the general purchasing community of this approach to negotiation?
For those who are not familiar, here is an excerpt from our website of the Japanese Auction process:
“The Host states an opening price and participants have to accept that price level or withdraw from the auction. Acceptance indicates that the participant is prepared to supply at the stated price. When all participants reply to a certain price, the software lowers the price level by a pre-determined amount and again asks participants to accept or decline at the new price level.”
The process continues in this manner until all participants have ‘opted out’ of the auction.
As you can see, the approach can be very effective at establishing the final price for each participant in turn, regardless of the market competition. Consequently the approach can be adopted in situations where market liquidity is very low or markets which are dominated by a handful of major players, such as dairy or utilities. The Japanese Auction can even be used for a single-source negotiation, which was the major reason our customer favoured the Japanese Auction, ever since they used it to negotiate a significant cost reduction with just a few keen participants involved.
Other situations where the Japanese Auction can be used effectively are when there are large cost differences between bidders, despite both quoting for the same specifications. With your typical Ranked Auction, the participant in first place will unlikely be challenged, even though they may have built in some margin to play with. However, utilise the Japanese Auction and even that participant will be asked to improve their offer.
So far we have outlined a reverse Japanese Auction, i.e. where the bidding comes down in value upon each round. However, we have encountered situations where a Japanese Auction can be used in an upward price direction, such as the negotiation of rebates amongst your supply base. Since it is fairly meaningless to give suppliers market feedback on their rebates, as each supplier could be contracted for different goods and services and different spend levels, the Japanese Auction presents itself as a superb way to negotiate with each supplier individually, yet concurrently in a single auction. For example, in Round 1 the suppliers are asked whether they agree to a rebate of 0.5% of full year spend, with an answer of “Yes / No”. For those who reply favourably, they are then asked in Round 2 whether they agree to a rebate of 1.0% and so on. There is a huge efficiency saving compared to the traditional way rebates are negotiated, as well as the potential for far greater results.
There are of course challenges to Japanese Auctions. Firstly, they are not widely known about, which means that participants will require a greater degree of hand-holding and reassurance. Secondly, they offer little to the participants in the way of market feedback. Nevertheless, post-auction you can certainly provide feedback at your own discretion and to whatever extent you wish. Thirdly they operate in a rigid manner, with participants only able to accept or decline each price level rather than to come in at their own price level. It may mean that some participants have to wait a little longer to submit their final offer but the goal of establishing the market price is still achieved.
If anyone would like to know more, please feel free to contact us and we would be happy to take you through a web demo to show you how it works.
We were recently asked to contribute our on-the-ground thoughts of the e-Sourcing market, as we witnessed it. The original posting can be found here, although for ease we have included it below:
As a new entrant into the already crowded space of e-sourcing during a major economic downturn, it certainly makes for interesting times. After persevering though our first year, we can see many factors actually in our favour (and of course many against, but let’s focus on the positives).
First, procurement continues to gain visibility within organisations, as we know that an efficient procurement strategy can mean the difference between profitability and receivership. Having been both an engineer and a buyer, it is pleasing to see these professions gaining more traction at a board room level, although still maybe not as much as we’d have liked.
Secondly, there is a strong focus on reducing costs. Perhaps that is stating the obvious; however with sales ever tougher under increasing global competition, procurement is the area where you can really recover that lost profit. To quote a figure commonly bandied about during my time at Rolls-Royce, “a one percent saving could increase profits by as much as ten percent.”
Lastly, we perceive a paradigm shift in the e-sourcing market, which is why we chose to develop a SaaS (Software as a Service) application. As an aside, in our opinion, SaaS is just a re-branding of the type of companies formed during dotcom boom, except this time the internet infrastructure can cope with the delivery of their benefits.
The last fifteen years have definitely seen procurement technology come on leaps and bounds. It has evolved from pipe dreams to disparate applications to fully integrated ERP systems. These have been traditionally maintained by the local IT team and supported by a host of consultants with each required change to the interface or operating system costing the better part of an arm and a leg.
The shift that we thought we were predicting was the shift of this technology to online hosting, coupled with the rapid application of these e-Sourcing solutions to the SME and mid-tier market. In many ways we believed we were looking at the commoditisation (or “consumerization” as we learned to call it in the US) of the technology, embedded with more intelligence yet easy to use, professional and openly priced. We had thought that the larger companies were sewn up with the ERP behemoths who, even as we speak, are slowly moving to online hosting by development and acquisition. Parallels could also be drawn to the dotcom boom here, where large multi-nationals swept up the few successful e-providers who survived the bust bubble to give them that dynamic edge.
However, we seem to have got it wrong. We were too early — although we have found that being ahead of the curve is not such a bad thing. What we have hit upon is a lot of interest from large tier one companies desiring a simple, online, and accessible solution which can be used in parallel with or sitting on top of their existing ERP solutions, even if those systems already contain e-Sourcing modules. This is most certainly due to the slower reaction speed and migration period to true SaaS solutions exhibited by the larger providers.
What is the reason for this? Our view would be the need for accessibility and easy adoption. Niche SaaS providers offer uncomplicated, pay-as-you-go products that are easily accessible and have been designed with the end user in mind to deliver very focused solutions. In our case, it is to provide in-house sourcing professional tools for e-RFQs and e-Auctions which can be switched on and off with no implementation costs and very little training. Obviously the large providers are adapting, trying to catch up with different pricing models to counter the competition from the smaller, more nimble SaaS providers. Ariba has demonstrated this most recently with their “free” license option. However, the change in the way software is being delivered, combined with the customers desire for an uncomplicated product, at least lets us put our foot firmly in the door and, in the end, we still have the small and medium tier to approach. All in all, interesting times.