The National Association of Paper Merchants

Organisations responsible for managing auctions may not be familiar with the complexity of paper merchanting and, as a result, there may often be a wide gap between the products and services required by the ultimate customer and the products and services bid for by the merchant.

It is easy for the smaller details; drop sizes, special packaging, credit terms, multiple drop destinations etc., to remain unspecified and therefore not be costed in by, or expected to be required from, the merchant.

The aim of a "Best Practice" procedure is to ensure that this knowledge gap is bridged and that all those involved in the process are better assured of a satisfactory outcome.

It is believed that, if merchants adopt a "best practice" approach to reverse auctions, the valued services that we offer will be given the prominence they deserve during the auction process.

It needs to be realised that a very high percentage of reverse auctions result in the incumbent supplier being re-awarded the business, but often at a lower price.

It is not yet apparent whether reverse auctions are here to stay or whether they will, after delivering some initial benefits, fall from favour in the paper sector.

a. Merchants should seek, prior to the auction process, to obtain from the customer, directly and not just via any appointed agent, a complete understanding of the requirements of the business. This will include: -

- Volumes

- Drop sizes

- Special wrapping requirements

- Payment arrangements

- Understanding the present qualities and pricing structures needed; having been provided with samples for benchmarking

- Meeting the key personnel and forging a relationship

- Being given the opportunity to present the capabilities of the merchant and their differentiation in the market.

In summary, fully understand what is being asked for.

b. Having ascertained the customer’s needs, decide how to manage the business and prepare a bid that both reflects the competitive offer required but also recognises all details of the customer’s purchasing criteria.

c. Work together with the customer, or the customer’s agent, to ensure the auction process provides a format that accommodates all the various aspects of the proposal covered in (a) above.

d. Be prepared for the auction process. Discuss with the customer, or the customer’s agent, prior to the auction exactly how the procedure is to be followed and be sure that all personnel are fully prepared.

e. Do not have any advance discussions or agreements with any other bidders or merchants about the terms of your or their bids as doing so will amount to a serious breach of competition law.

2. During The Auction Process

a. Ensure that the pre-auction discussions and details of the proposal are clearly and accurately recorded and bid accordingly.

b. Avoid falling into the "Las Vegas" trap and losing sight of the proposal details and all the intricacies required by the customer.

c. Watch out for changes in the pre-auction proposal e.g.:

- Increase/decrease of drop sizes

- Improvement/deterioration of qualities requested.

Be prepared to amend the proposal in such event.

Often the lowest bid made at the auction is not accepted and merchants are then invited to attend a post auction meeting at which the benefits of the deal, services and qualities, can, once more, be stressed. Again, you should not discuss your bid or the levels to which you would be willing to lower it with any other bidders or merchants.

At this stage check again that the "bid and the offer" match!

It is not the intention of this "Best Practice" to limit any merchant’s competitiveness; rather, by recommending a "Best Practice", to ensure that the needs of the customer are best addressed and that the discussions between the customer and the chosen merchant after the bid has been accepted do not reveal a wide gap between customer demand and merchant offering.