A.T. Kearney employs Internet Technology in Business-to-Business Competitive Auctions

Internet Auctions streamline purchasing, reduce costs for Visteon, Sprint; "All you need is a Web browser"

CHICAGO, Illinois (September 2, 1999) With leading companies in the automotive, telecommunications and other industries, global management consulting firm A.T. Kearney is employing Internet technology in business-to-business auctions that are helping clients achieve multi-million dollar savings and
reduce purchasing cycle times, while sourcing products and services globally from larger networks of suppliers. A.T. Kearney recently assisted Visteon Automotive Systems with conducting an Internet bidding opportunity for 17 pre-qualified suppliers from around the world. The suppliers were vying for nearly $150 million in contracts to produce four different types of printed circuit boards. The 90-minute auction, and the qualifying process that preceded it, reduced costs and shaved weeks off
the sourcing timeline.

Earlier this year, Kearney conducted an Internet-based auction for Sprint that attracted 85 qualified suppliers vying for more than $75 million in telemarketing services contracts for the global
communications company. The four-hour auction streamlined the negotiation process by at least three weeks, facilitated the introduction of additional diversity suppliers and improved the average proposal prices by five percent through the real-time, online bidding process. As a result of the sourcing process, Sprint expects to realize many benefits including significant overall cost reduction and service improvement. A.T. Kearney's innovative Internet Auction process is the only business-to-business downward auction using the Internet, making it easier to use than other online auction methods, some of which require suppliers to purchase software or pay connection fees in order to bid. With Kearney's Internet Auction, suppliers don't need special software or fee-based connections-only a Web browser and a password. Any laptop connected to the Internet will link the supplier to the auction.

That means participation by more qualified vendors. Internet bidding also means that buyers and suppliers aren't dependent on corporate networks, which are sometimes subject to failure. "Not only are the savings greater, but Internet Auctions are far more effective than traditional snail-mail paper negotiations for our clients and their vendors. Both sides say A.T. Kearney's Internet-based process is easy to use," said Thomas Slaight, vice president and a leader of the firm's Strategic Sourcing
practice. "Our Internet Auction approach will revolutionize business buying, just as Amazon.com has revolutionized buying books online." A.T. Kearney developed the Internet Auction as part of its Strategic Sourcing program, based on the firm's deep understanding of how supply markets work. The Internet Auction replaces traditional round-one negotiations with suppliers, cutting 70 percent from proposal cycle times. Since 1995, Strategic Sourcing has helped Kearney's clients address $62
billion in external spending, resulting in $10 billion in savings. Buyers also reap additional savings because more suppliers are involved and the real-time auction spurs competition, causing even incumbent vendors to provide better pricing. New suppliers see value in obtaining business for lower selling costs, while incumbents see the opportunity to increase their business from a broader appreciation of their value.

Although the Kearney Internet Auction uses downward bidding to promote competition, the lowest price doesn't always win. Quality and service factors are used to pre-select suppliers before the auction, then become tie-breakers after the auction is completed. Suppliers benefit because auctions facilitate efficient market-making -- reducing their cost of sales, providing a level playing field for qualified competitors, introducing them to potential new customers and helping them better understand the markets they are selling into, Slaight said. "The Internet Auction provides a 'gateway to the world' that enables remote suppliers to participate as easily as local ones. Because auctions are non-emotional and prevent favoritism, the level playing field enables smaller companies to compete with larger rivals and newcomers to take on incumbents," Slaight said. The flexibility of the Kearney Internet Auction allows it to be used at all stages of the sourcing lifecycle, including category sourcing, category re-sourcing and for recurring bids based on available production capacity. "In addition to streamlining the purchasing process and broadening a company's potential supply base,
Internet bidding identifies real supplier interest instead of flashy sales messages. Open communication from the beginning helps a company create the type of fact-based relationships with
suppliers that can lead to breakthrough ideas and true competitive advantage," Slaight said. A.T. Kearney is one of the world's largest and fastest-growing management consulting firms, with 1998 annual revenues of U.S. $1.234 billion.

With a global presence that spans major and emerging markets, A.T. Kearney provides strategic, operational, organizational and information technology consulting and executive search services to the world's leading companies. A.T. Kearney (www.atkearney.com) is a unit of information services leader EDS.

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