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December 22, 2008

Whitbread cuts costs 16% with e-auctions

Could e-sourcing do the same for your company?

By Jason Stamper

UK hospitality firm Whitbread announced an e-auction it recently ran saved it 16% in a vital area of procurement: the chips, potato wedges and mashed potato it will serve to its 107,000-plus customers in 500 venues each week.


Whitbread said the successful use of e-auctions – the latest was run by eThree using Oracle Sourcing technology – will save it around £400,000 per year.


While such sourcing negotiations can take a week or more using more traditional methods, using Oracle Sourcing and eThree’s hosted platform, Whitbread was able to receive 60 bids from four vendors and complete the entire process within an hour.


“We are delighted with the outcome of this eAuction, because it vindicates our belief that such technology can delivery significant value to the bottom line for our business,” said Paul Farrow, head of procurement, Whitbread. “With commodity prices rising significantly the pressure on margins for the hospitality industry is immense, so we’re particularly pleased to be able to mitigate such substantial cost increases through the use of technology.”

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“It will help us to stay ahead of the competition by managing our costs more efficiently and to continue to pass on value to our customers,” said Farrow.


The system’s simplicity is said to have encouraged prospective suppliers to use it, as it required only 30 minutes to an hour of training, and was supported by access to a range of trial auctions for practice.


Whitbread was able to remove itself from the negotiations by setting the parameters for the bidders and allowing the prospective vendors to evaluate the criteria, then submit bids which were then ranked.


For the participating suppliers it was a clear process, as they could quickly understand if their bid slipped in the ranking and needed to re-enter their bid. For Whitbread the process allowed a complete and transparent overview of the bidding process as it happened without requiring further involvement from them.


Ethree is a member of the Oracle PartnerNetwork, providing delivery of hosted Oracle Sourcing solutions. It’s also a global provider of spend management systems.


“For many organisations eAuctions are still viewed as experimental and an area to explore, but innovative companies, such as Whitbread, are clearly showing today the value it can offer to a business,” said Andrew Douglas, business development director procurement, Oracle Western Europe. “By working with eThree the risk-reward equation for customers swings significantly towards reward and will enable many more companies to understand how this technology can help them to remain competitive.”


Whitbread says it hosts over 107,000 customers at its 500 UK-based Premier Inn Hotels and Whitbread restaurants each week.

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