Maersk eSourcing Success – A Highlight From the Trade Extensions Event

We are asked reasonably often to give our opinion in terms of which organisations are real procurement "leaders". It is a tough question to answer, as the view you get from outside an organisation is often very different from the reality as seen from the inside. The other factor is that there are many different aspects  to procurement performance, and pretty much nobody gets everything absolutely right.

So one organisation might have done some interesting and successful work on collaborative partnerships, another has used spend analytics in ground-breaking ways, a third has a great procurement education programme for staff.

However, after one presentation at the recent Trade Extensions customer conference, we will be confident in answering the question "which organisations are leaders in eSourcing"? And certainly one answer is Maersk. Lars Harkov Hansen, eSourcing manager from the huge transportation firm gave a very impressive presentation, outlining their approach to eSourcing. Their strategy, which has driven this success, is that  "every negotiation that ends in a contract should use an eSourcing solution".

As well as some substantial and informative content,  he also had other memorable soundbites in his presentation. "eSourcing is a lifestyle not a diet".  And how about, "technology is the easy part; it is the people who apply it that is the difference".

eSourcing really started in Maersk in 2008, and by 2012 the firm was top of the Google ratings if you searched on "eSourcing", a sign of the work they have put into the programme and their efforts to promote it, including an article in the Wall Street Journal.

But, as Hansen says, and Maersk has demonstrated, if you want to succeed then "awareness, branding and training never stop".  Training and certification of staff goes way beyond the basic "how to use the system" that you might expect; it includes how to structure events and even material around understanding of game theory and how that might play into tendering processes and structures.

The firm runs some 2000 auctions a year, and is a user of the Trade Extensions TESS platform for the most complex sourcing exercises. Hansen talked about a contract for re-painting the Maersk shipping fleet. We had no idea painting ships was quite so complex!

It requires different and multiple layers of paint, whilst different areas of the ship require different paints - logical when you think about it.  With 45 vessels in the fleet, there were many opportunities for suppliers to propose  the sort of conditional offers that TESS can handle - ranging from basic volume discount to a more complex "if we win all the work for layer 1 and layer 2 on the underwater sections we can offer another 5% saving".

Hansen wants to move on to network optimisation and even more complex projects next, which go beyond "traditional" procurement altogether. Optimising movement of containers and the associated costs might be one example - something for next year's conference maybe.

In the Q&A after his presentation, I asked him whether using auctions for what we might consider more strategic contracts risked damaging the relationship and the potential for collaboration with the supplier. He had a rather neat answer for that.

"It is not Maersk that is pushing suppliers for lower prices in an auction situation - it is their competitors who are doing that". I liked that, and it is quite true when you think about it, so use that next time a supplier moans about the use of an auction! And Maersk does use combinatorial auctions (as well as more standard eRFX processes) where factors other than cost are taken into account in the selection decisions.

All in all, a very impressive story, and we will come back in a further article to look at how Maersk are using "money ball" type analysis to make their eSourcing programme even better.

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