Bashas' Saves 13%
In addition to TopSource, a number of food retailers employ Phoenix-based Intesource, another third-party not-for-sale procurement firm, which relies on reverse auctions for most of its procurement activities. Intesource’s buying process generally services the requirements of individual retailers rather than an aggregation of retailers, though it does sometimes bring together multiple retailers for sourcing events, said Len Kaplan, vice president of sales for Intesource.
Bashas’, the 132-store retailer based in Chandler, Ariz., is a member of TopSource but uses Intesource for much of its not-for-resale procurement. Like Bi-Lo’s Watkins, Tony Rinella, purchasing contractor for Bashas’, said that services like floor care and pest control pose the greatest challenges in not-for-resale procurement because their specifications vary among stores. “Our specs for floor care had to be different because we’re in different climates in Arizona,” he said, adding that the chain uses two to three floor-care vendors currently.
Unlike Bi-Lo, Bashas’ employs a reverse auction process to select its floor-care and pest-control vendors. “If we have different requirements for different stores, we can spell that out,” said Rinella. “You have to be clear. If questions arise, they can contact me directly before the auction.”
In the case of pest control, a new buyer’s lack of knowledge prompted Bashas’ to use Intesource to collect information from suppliers on their individual service offerings prior to the auction. Even after being selected, service vendors may have to be monitored to ensure compliance, noted Rinella. Intesource has compiled a database of pricing activity as well as performance characteristics for 20,000 vendors, noted Kaplan.
Other not-for-resale items procured through Intesource for Bashas’ include meat trays, gloves, refrigerant and fire inspections. Bashas’ also uses e-sourcing for some for-resale items, such as generic drugs, pet supplies, cups and plates. The number of bidders in a reverse auction ranges from two to 12 and the average savings is 13%, said Rinella, adding that Bashas’ has an annual contract for an unlimited number of e-sourcing events. “There are events that pay for the whole year,” he said.
Rinella pointed out that Bashas’ doesn’t always select the lowest bidder in a reverse auction. Sometimes the three lowest are chosen and asked to provide product samples or service demos, which are vetted before a final selection is made.
Sometimes incumbent vendors are chosen even if they are not offering the lowest price as long as they are close. Incumbent vendors are not fans of this process, acknowledged Rinella.
However, said Kaplan, Intesource “takes great care and expense in preparing suppliers and training them for sourcing events.”