Analyzing 2017 E-Sourcing Savings and Trends with Scanmarket

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Last week I touched down in London to attend and speak at Scanmarket’s eSourcing Exclusive Summit. Scanmarket is a provider of strategic sourcing software and over the years has developed a particular expertise and customer following based on its reverse auction capability and formats.

On many levels, Scanmarket has assumed the intellectual (and product) leadership mantle from FreeMarkets and others who came before that positioned the reverse auction as a centerpiece of sourcing technology. Even though the solution offers much more than auctions, it excels functionally and is passionate about this particular area of sourcing technology. Today Scanmarket has approximately 300 customers, the majority of whom use its solution as their go-to reverse auction technology (and often to support end-to-end strategic sourcing initiatives, as well).

Henrik Balslev, senior vice president of operations for Scanmarket, gave a presentation at the event on e-sourcing and reverse auction trends. Given the above context, I thought it would be valuable for Spend Matters readers to hear some of the data Balslev shared.

Savings Trending: Reverse Auction Usage (Way) Up in 2017, Savings Percentage Down

During his talk Balslev noted that the period from January 2017–June 2017 saw a 118% increase in the use of reverse auctions compared with the same period in 2016. Some of the largest savings numbers from reverse auction activity (compared with baseline pricing) during this six-month period include:

  • Iron and metals (tools, spare parts, cables, screws) — 17.6% savings, down from 22.8% average savings in 2016
  • Freight and transportation (sea, land and air) — 4.69%, down from 7.1% average savings in 2016
  • Construction and repair (flooring, damage control, engineering, rebuilding) — 18%, down from 12.6% average savings in 2016
  • Ingredients for food production (additives, flour, sugar, vegetables) — 1.68%, down from 3.9% average savings in 2016
  • Services categories (contingent labor, cleaning, IT services, security services) — 9.32%, down from 17.36% average savings in 2016
  • Electrical and telecommunications equipment — 24.1%, an increase from 19.7% average savings in 2016)
  • Packaging material (cardboard, foils, tape, pallets, labels) — 21.73%, an increase from 20.1% average savings in 2016)
  • Marketing materials (brochures, advertising printing, promotional items) — 20.4%, down from 23.81% average savings in 2016

A Decline From 2016 Savings Numbers

Overall, the average percentage savings from reverse auctions declined to 9.4% in 2017 from 12.3% in 2016. Going back 11 years, the year Scanmarket first started tracking overall savings numbers from reverse auction activity, the highest level of average savings was in 2009, peaking at 15.3%, with the lowest in 2008 (8.5%) and 2015 (8.7%).

The Largest Companies are Saving Less (on Average)

The largest companies tend to save less on average from reverse auctions. Savings in the first half of 2017 from auctions break out as follows by company segment:

  • More than €10 billion: 6.2% savings
  • €5 billion–€10 billion: 17.6% savings
  • €1billion–€5 billion: 9.4% savings
  • Less than €1 billion: 10.9% savings

Summertime Savings

I’ll leave you with a final statistic today, from some older Scanmarket data.

Based on historical average savings, what is the best month to conduct an auction?

It’s June. Data from 2006–2013 show June savings average 14.4% from reverse auctions.

And the worst month? Savings “fall” to their annual lows in October, dropping to 8.6%.

I’ll follow up with some additional commentary and learnings from Scanmarket’s global eSourcing Exclusive Summit in the coming days. But in the meantime, if you have a sourcing event planned this month, you may (just maybe), based on savings levels, want to wait until November, a month when savings levels from reverse auctions increase by over 10% from October levels, to 9.8% overall.

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