Energy buyers: Are you ready to go to market?

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April to June is a traditionally busy time of year for energy buyers, as they look to re-contract their supply from 1st July. Historically, the markets have taken a bit of a dip around this time of year across all energy markets and whilst this conventional wisdom is changing, nevertheless organisations are preparing themselves to run a sourcing exercise.

If you are in this position, just how well prepared are you?

BidEnergy surveys buyer process in every market we operate in. In Australia, on a scale of 1 to 10, buying organisations average around 4 when it comes to being ‘always’ ready to goto market. The most common shortcomings we find are:

One Don’t have ready access to ‘clean’ energy data required to run a sourcing/tender process anytime. This has a number of flow on effects but the key one is time delay in gathering the necessary information to run an effective process.
Two Don’t evaluate the total cost of ownership. The amount on the bill is not the whole story and unless an organisation understands the impact of energy supply on their operating costs and risks, it is hard to be clear about what you want from your supply contract.
Three Don’t understand switching costs. Many organisations have only a vague sense of switching cost. Underestimate it and some real costs can hit the bottom line. Overestimate it and there is a reluctance to move supplier – even if an alternative offer is at a better price.
Four Don’t track supplier performance. Most organisations don’t have an accurate supplier scorecard that can be used to evaluate non-price criteria during the sourcing process.
Five Can only evaluate a limited range of offers. BidEnergy now has extensive data on the interaction of economies of scale and scope in the energy supply markets, and the simplest options (e.g. 1 supplier, national deal) is frequently the least efficient outcome.
Six Time to evaluate offers and contract. Markets move and having an offer open too long adds risk to the retailer which the Buyer bears. Worst case, offers can be withdrawn, leaving embarrassed buyers and boards exposed.
Seven Pre-set go to market timing. Markets are increasingly dynamic and the old rules of thumb on the best time to go to market are being challenged, which undermines the idea of scheduling a sourcing process on a set date months or years in advance.

So, what can you do about it? 

You can start by moving all your data onto a cloud based platform and automating the process of keeping the data complete and accurate on an ongoing basis. Having ready access to all your energy data will allow for agility in sourcing and contracting.

An integrated source to pay platform will speed things up even more as you evaluate supplier offers in real-time and consider all possible supply configurations at the touch of a button.

By automating much of the transactional sourcing and payment process, the category manager is allowed to focus on strategic activities like engaging stakeholders in change management, tracking market energy price movements and driving supplier performance improvement initiatives.

  • If you have any questions, please email ops@bidenergy.com

 

About Author

Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

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