Florence Diss looks at how one company has used electronic sourcing solutions to continuously improve its relationships with suppliers.

Linde Gas, a business segment of Linde AG, is Europe's largest producer of industrial gas products and maintains a global presence with subsidiaries in the US, South America, the Middle East and Australia.
Through its numerous production and distribution sites and with over 3100 employees in Germany alone, Linde Gas provides its products to over 210000 customers in Germany, generating some E900million in annual revenues. Linde's management realised early on the strategic dimension and value e-business could deliver to the enterprise. The challenge was to continuously improve supplier relationships by closely aligning supplier's capabilities with Linde's requirements.
A carefully selected set of e-business solutions became the enabling device in order to realise the vision of a seamlessly integrated, end-to-end process. Linde's international strategic sourcing group got in the driver's seat and spearheaded initiatives within the -Sourcing area.
Linde Gas has been employing Portum's e-Sourcing platform for electronic tenders and auctions since 2001. Initially, emphasis was laid on online-tenders (eRFx), where targeted supply base extensions generated savings of up to 25 per cent. While eRFXs, the electronic sibling of the classic tenders, were well understood by Linde's procurement departments, the introduction of online-auctions was revolutionary. Accordingly, initial scepticism was high throughout the organisation.
On the other hand, the results this new methodology promised to deliver made it a compelling proposition worth trying. As part of an extensive evaluation of providers from the US, Northern and Central Europe, Linde compared their ability to cover comprehensive process chains, stability, functionality, as well as user-friendliness and ultimately the individual cost-benefit ratio. Linde chose Portum's Enterprise Sourcing Cockpit.
The initial scope, online-tenders, was soon broadened in early 2002, when online-auctions were introduced as a fundamentally new component within the company's e-Sourcing solutions framework. Linde decided to introduce Portum's solutions on their own and developed a guideline for Power Users based on previous experiences. Each country site appointed and trained an ae-Sourcing Champion' responsible for online-tenders and auctions. Since 2003 the various sites develop e-Sourcing plans, carefully monitoring and reporting aggregate trade volumes, negotiation timelines and target prices, thereby sustaining and continuously expanding the benefits for the organisation.
In order to respond to industry specific market dynamics, broaden e-Sourcing's applicability, and to ultimately maximise the client's savings potential and return, Portum developed an auction design know as the aDutch Auction'.
The procurement professional defines a starting price below the expected market price, as well as the monetary increment by which the system automatically increases this starting price at a pre-set pace (typically 60 seconds). In a running Dutch auction, bidders can choose to accept the displayed price at any given moment. Should no bidder accept the current price, the system automatically increases the price as defined by the procurement professional. As a result, this auction type ends as soon as a bidder accepts the displayed price.

Even in strategic product segments and under unfavourable market conditions (oligopoly), Linde managed to realise savings of 8percent on top of already lowered prices, propelling the aggregate savings related to Portum's platform into the double-digit percentage range. Following Portum's advice, Linde developed -Sourcing-Etiquette, a set of rules designed to increase supplier acceptance. For example, suppliers that emerge as awinners' in e-Auctions, are rewarded contracts within 24 hours after their bids have been accepted. -Sourcing has become an integral part of Linde's daily business in subsidiaries throughout the US, Italy, Spain, France and the Netherlands with further expansions already under way in South America and Eastern Europe.
Since the introduction of e-Sourcing, Linde has achieved an average of 10percent savings on a traded volume of E50 million.

Florence Diss is with Portum AG, Frankfurt am Main, Germany. www.portum.com