Google’s Secrets to E-Auction Success

Google’s procurement has sure changed a lot from the early days of the company. According to David Natoff, head of procure-to-pay at Google, the company has experienced “hockey-stick growth” that looks like the shape of a hockey stick on a graph. Total spend has shot upward since 2009 when the economy tanked. The only problem was the purchasing team was operating on a transactional basis. Payments were slow to reach suppliers, and it was far from strategic sourcing. To keep up with fast-growing levels of spend, procurement had to seek efficiencies and streamline processes. Outsourcing to third-party providers and automation of processes worked wonders, but e-sourcing was clearly going to be the key to world-class supply management for this global Internet giant.

Suppliers compete in real time in e-auctions, and the process is quick, transparent and results in fair market prices from suppliers. As long as the sourced item has clear specifications and there are a minimum of two competitive suppliers, an e-auction can be a great solution for sourcing everything from professional services to temporary labor and construction/maintenance services.

“We created an eSourcing Center of Excellence because our stakeholders want answers quickly and we want standard processes,” said Bernd Huber, Ph.D., head of Google’s Global Sourcing Center of Excellence. “It also enables our training for suppliers in e-sourcing, and provides project management and documentation throughout the process. Data is king.”

Today, e-auction penetration of total supplier spend is at 21 percent.

If you would like to increase e-auction spend in your organization, here are some tips from Google’s experience:

  • Gain senior-leader sponsorship.
  • Hire collaborative-minded sourcing professionals who are open to the e-auction concept. There’s likely to be some resistance within the procurement function, as well as with some of the stakeholders; try to counter it with proponents of e-sourcing.
  • Spend time with stakeholders and other business units that have used e-auctions, and find out the best ways to build your e-sourcing strategy from those who have gone before. No need to reinvent the wheel!
  • Start small, with low-spend items, and focus on getting that first “win” in one category. Once you have that one win, you can market the concept much easier to move on to other categories with higher spend.
  • Keep strong documentation and make sure all activities measure up to the highest ethical standards. No phantom bidding or other dishonest practices allowed.
  • Invite senior leaders to come in and witness an e-auction in real time.
  • Reward key individuals/teams for success, or if they are early adopters of e-auctions.
  • Create a competitive spirit and celebrate e-auction culture.

In time, you can be successful with e-auctions and will find they can be a tool to gain value (reduction in costs, etc.).

“In Google’s case, other business units now support the e-sourcing of certain items that wouldn’t be sourced in this way before,” said Natoff. “There’s ongoing potential for more value the more you run e-auctions.”


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