Consignia to Use Online Auctions

“Consignia plans to use online auctions for half of its GBP 1.5bn annual purchasing budget. The former Post Office’s decision marks one of the largest commitments to the ecommerce technology yet seen in the UK. The company, which lost GBP 1.1bn in its last financial year, says auctions could result in annual savings of 10 per cent – some GBP 75m. ‘Consignia is in the worst financial trouble it has ever seen. The drive from the chairman is to reduce costs,’ said Peter Stevens, head of procurement development at Consignia. ‘We’re being conservative. I’ve seen estimates for savings as high as 75 to 80 per cent, which makes you ask: ‘what are you spending in the first place?’ Consignia is initially using forward and reverse auctions on a limited basis, as an extension to an online purchasing system running on SAP software that it deployed 18 months ago. Stevens says the company is experimenting with standalone auctions supplied by specialist external providers. It is to conduct trials worth GBP 120m between now and March to decide whether to continue with the ‘pay-as-you-go’ service, or to buy its own in-house capability. Consignia is looking to buy services such as air freight, electricity, and vehicle services, but Stevens says there is no limit to what can be put through the auction process.”