World Energy approached the automotive corporation to hold an auction for the natural gas needs of its auto parts division. The company’s procurement consultant recommended against an online auction, instead planning to send a paper RFP to the top five suppliers. The corporation agreed to allow World Energy to contact our network of suppliers and conduct an online auction on the same day that the RFP pricing was due, thereby testing the efficacy of the auction event. The suppliers bid in competition over a few hours, each pushing the others’ price down and, knowing that the contracts would close immediately, were able to offer prices that did not contain the risk premiums involved in holding a price long enough for the paper RFP responses to be read, compiled, analyzed and evaluated. With its induced hyper-competition and the real time price transparency of its process, World Energy substantially outperformed the consultant’s process. Result: Going head to head, the World Energy Exchange beat the paper RFP process by 18%. In a competitive industry where cost savings count, World Energy gave the client an advantage while proving the superiority of a transparent online auction over an opaque, manually intensive paper RFP. Back
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