AUCTIONS HELP AMERICA WEST OFFSET SLOWDOWN.

Navigation: Main page

Author: Moozakis, Chuck

America West Airlines is looking forward to 2002, but not solely for the reasons you might expect. The Tempe, Ariz., carrier not only hopes to put its Sept. 11 woes behind it, but also expects to achieve cost savings from the deployment of e-procurement and auction technologies.

Reverse auction tools have already lopped as much as 40 percent off the price of some goods and services the airline obtained during the past several months, says Mike Inman, director of general purchasing.

America West began using MaterialNet Inc.'s browser-based reverse auction software in late summer to help it reduce the price it pays for nonstrategic commodities, Inman says. The nation's eighth-largest airline sorely needed to find ways to control the financial losses it was experiencing even prior to the Sept. 11 terrorist attacks.

"We're a $2 billion company, and we were spending more than we were taking in," Inman says, declining to disclose how much the airline spends each year on direct and indirect goods. Many companies spend upward of 50 percent of their revenue to buy equipment and other goods that fuel their businesses.

America West rolled out MaterialNet's Custom Auction Tool Kit to about 20 of its buyers, targeting suppliers of indirect goods such as hotel rooms, office supplies and literature. The application lets America West set up and conduct reverse auctions independently, without requiring the aid of a third party to bring the airline and suppliers together.

Before America West used the app, negotiating a price with a supplier could take as long as three weeks, Inman says. Reverse auctions, in which suppliers offer ever-lower bids until one is accepted, have reduced the time to about 20 minutes.

"It's a great way to save money," he says.

Inman expects the airline to conduct as many as two reverse auctions per day next year, up from little more than one a week since America West began using the app. The number of supplier participants should grow from the current few dozen to several hundred, he says.

Inman anticipates adding MaterialNet modules to America West's foundation to handle other e-procurement activities, such as electronic negotiation. America West will also add MaterialNet's eRFI app, which will let the airline request and collect information from suppliers bidding on a specific project.

In the future, Inman may also use MaterialNet's sourcing and analytic modules so that his 20-buyer staff can further automate the process of finding the right supplier for a particular item.

MaterialNet's apps, which run on either a Windows 2000 or Unix platform, are offered to users on a hosted basis. Custom Auction Tool Kit is priced at up to $300,000 for an unlimited number of users conducting an unlimited number of events.

Reverse auctions cut prices as much as 40 percent, Mike Inman says.

~~~~~~~~

By Chuck Moozakis