The system of auctions

A new trend is the use of auctions when choosing a supplier for road transport.

       1.Pochemu we can write about it.

Our company back in 2011 by own IT-department as part of Trans-Lit introduced online auction trading system, much earlier than s2b. We conceived the project of Trans-lit LardiTrans as an alternative, which in our opinion is extremely inconvenient service to the poor customer service. Although at the moment the project Trans-Lit frozen due to the fact that it is not our core activities and we are not willing to invest in his company’s profits. However, we received invaluable experience in the use and application of such systems, both for the customer and by the carrier, we want to share this experience with members AIFFU.

       2.What are auctions and how they work.

Immediately need to take into account the fundamental difference between online auctions and tenders are completely different things. Tenders are held, when choosing a supplier for a certain volume of traffic under certain conditions, with the provision of the entire tender documents and crisp as the most important task and that the cost of freight is not the only factor in winning the tender. Auctions little different, in fact it is trading in line with the help of special software or an online resource for each transportation among the suppliers who have signed the contract with the client. Currently, only the cost of the freight only possible criterion for victory in each auction. The auction lasts for a certain time, starting, for example the day before the shipment and lasts two hours, who in the meantime will offer a minimum price that will be the winner. Everything is transparent, you can see all bids, kickbacks lay unrealistic. Freight Forwarder is very difficult to win in this auction and thus lay their normal rate of return. However, with the right approach it is possible, but more on that later. You can also share the auctions, which the company conducts with its own service, for example Dneproplast and with a special auction sites, such as playground s2bi auctions Coca-cola. The first way is not the best choice for the company in such a method to information about flights and on auctions can be accessed only last for companies that are accredited with the client, and this leads to a lack of transparency in the auction system and the possible manipulation of the selection of a winner. The second case, in which all public service users see information about each auction, but uchuvstvovat can only approved vendor clients, leading to a more transparent competition and openness of the client when choosing a supplier.

       3.System auctions will inevitably come to the market.

Let’s start with the fact that the system of auction bidding will inevitably come to the market and those freight forwarding companies, which are adapted to use such a system, but still receive a profit or will be forced to leave the market or be pressed down and only work with medium and small business. How slowly and uncertainly it was, however, our country is on the path of civilized development, and business owners are beginning to take their money, and the last time it touched even the state-owned enterprises. Auction bidding system allows you to really honestly choose a service provider and still pay him the lowest possible price in the market. Use such a system will only companies with regular and projected traffic (and when used in international traffic, auctions more efficiently), who organize competition among their suppliers online. Even now it is done – Coca-cola, Biosphere, Intrepayp, Chumak Omegaavtopostavka and others, many of these companies are our old customers, and we know the system works with them. You can state the fact that after the use of auctions of freight costs fell by about 7-15%, many companies have benefited from sliding schemes. I as the owner of the business is very pleased with this trend. On the market comes the real competition, not cronyism and self-interest. After 3 years of virtually any business system is the system described above supplier selection.

       4.How to adapt to the auction system forwarding company.

Of course, not all companies will be able to work with the client through a system of auctions. Be able to work only those forwarders who most effectively built their business processes and have the opportunity to work on a large volume of traffic to major customers and system. While maintaining a minimum percentage of revenue from the deal, according to our calculations it is 1.5-3.5% of the freight charges for international traffic, and 3.5-7% of the freight in domestic transport. If a company such as each earned a freight spend UAH 95 kopecks. (Wages, taxes, operating costs, etc.) that its system of work is not effective and it will not be able to withstand competition in the auction system and lay a minimum level of income from freight her destiny to work with other clients. As you remember the winner of the auction is the company offering the lowest cost of freight, the competition is very fierce and dempingerov always enough. However, they are in the market for a long time do not stay, they fall off in the long run is not worth it. And, of course, not all flights goes up for auction, such as Coca-Cola (according to Vladislav Karpets, head of the design department of the Logistics Department) puts only 30% of its flights into the system, the rest are transported on an annual contract basis directly by carriers or forwarding companies. At the most prestigious annual forum logistics in Ukraine SUPPLYCHAINLOGISTICSFORUM very actively discussed the implementation and use of auction systems when choosing a supplier of transport services, in fact all the customers using these systems indicated to reduce the cost of shipping after implementation, transparency, and ease of use when choosing a supplier. Also, in order to be effective and to have the opportunity to earn while working at the auction must offer certain services and carrier service, namely, timely and predictable that the most important thing for prompt payment. The system uses the business is basically a delay in payment of 15 to 60 days upon delivery of the products, not all of the carrier have sufficient working capital to be able to work on such a postponement. To provide a level of service only by a major expedition with enough working capital. To be honest, we work with auctions, the so-called taburetochnikam or small companies do not make sense, for the most part they can not even sign a contract with the client and it will not pass the security service (although there are exceptions, some companies let their auction is all we conducted an experiment). In most cases, the auctions are fighting only large forwarding companies and carriers. Panic mood forwarding companies in relation to the auction system, I think it totally unjustified! The market needs of the expedition, providing quality service, at this stage of development, the market without them can not, however, can only survive economically efficient companies, which even at the auction system will still allow the customer to reduce the number of relationships with suppliers, will act as guarantors of financial payments for artists will take on insurance risk and other operational costs and thus make a profit by investing in its own development and improve the quality of service or expand the scope of services. For the market, such cleaning is a good thing, the competition will stimulate development and innovation.

       5.Nedostatki auction trading system.

Of course, like any system in this rather flaws, some of them are very important, but first things first:

– These systems are not suitable for all customers. For example, for a company that transports pharmaceutical drug (Badme Venta), the system will not work due to the fact that the choice of carrier is very carefully (sanitary certificate, very expensive goods, etc.) and signed contracts with the carrier for at least six months. Also, these systems are not suited for companies that have irregular supply and various spontaneous direction of traffic.

– In fact, the only evaluation criterion for selecting the winner is the minimum cost of freight, and therefore a possible choice is not a reliable single carrier.

– Often it happens that the person who won the auction for various reasons have not filed a machine to boot, then the client urgently have to find an alternative. At the tender system or the old system of dealing with multiple vendors on a regular basis will solve this problem easier.

– Much more efficient auction system operates on international routes, the time when trading is not reduced to 1-2 hours and lasts for several days, then the customer has the opportunity to choose the best option. With domestic flights are often many just do not have time to give your suggestion.

– No rating companies, such as a Neolit Logisticshic (all shipments are insured, 100% of the liability to the customer for timely delivery and safety products, etc.) and the company PP Petrov (actually a one-man company that takes on the flight any car brand taken from Lardy, or somewhere else that) have exactly the same rating in all tenders S2b. Suggest PE Petrov at less than 100 USD in transit to Kazakhstan in the amount of freight to Rs 50,000 he would be the winner. Creating such a rating will make the system safer and more reliable. By this company necessarily pass away later, but if not, it is our duty to help them do that.

– At the moment, the monetization of the company that provides the trading system (s2bv particular) comes from the carrier or the expedition, not the client, which in my opinion is not true there must be mutual interest.

       6.Vyvody

Auction trading system will inevitably come to market it to a greater or lesser extent, all customers will enjoy a transportation system would require about 3 years. It really helps to save customers money on shipping their products in the first place, taking away from the chain sliding scheme. Forwarding companies need to re-engineer their business processes in order to be able to operate at the minimum margin at high speed, in this case, the expedition will be useful for the carrier and the client. This system will change the market and will take away from it is not effective players. This system should be seen as a boon for expeditions and are not afraid to spread it, because it is competition makes progress.

Pavel Ivlev