JDPi is an automotive manufacturer and it has been operating a particular IT system for the past 5 years for some of its administration and payment arrangements. More recently though, it has been hit by an increasing frequency of system breakdowns and consequent periods of down-time. This has led to increasing loss of data and de-motivation of operating staff.

JDPi has decided to replace the existing system with the latest version. A business case was produced and approved at the appropriate levels of management. The supplier who had sold JDPi the existing system (Capgemini UK PLC) was asked to provide a feasibility study to assess how the system could be upgraded with a view to several objectives being satisfied, namely:

• Significant (and measurable) improvements in its general efficiency/effectiveness
• Response times being speeded up considerably
• Integration with other IT systems operating within the company to allow for sharing of information internally and externally with several suppliers and customers

The head of procurement, Ben Clegg, has formally stated that a competitive tendering exercise should be done to create a competition for the new software in accordance with JDPi's procurement policy. A dispute between the head of human resources and Ben has arisen as the head of human resources was unable to understand why JDPi cannot negotiate a deal with Capgemini UK PLC and why there is a need to delay things so that other quotes can be received.

Ben replied that 'It is our normal policy for purchases costing in excess of $5,000, which this will be on a yearly basis, to run a competition between suppliers. This ensures we have a proper, fair competition in accordance with our procedures. I will need your help in developing a plan for sourcing this service from interested suppliers as we will need to create appropriate selection criteria that prequalifies interested suppliers. We also need to create award criteria as we should consider other factors in addition to the price for licensing the software. We should then operate a competitive tendering process in our normal way and ensure compliance with any necessary technical standards such as data protection issues'.

The stakeholders of JDPi have indicated that they will support the new tendering exercise as they have heard about an e-auction (reverse auction) system which is used to obtain bids on line and believe that this could save valuable time.

Your Task

1. Discuss the benefits for JDPi of using a competitive tendering approach (as well as the use of e-auction) to source the IT system. What common challenges faced by procurement and supply chain managers can be overcame? What other ways/strategies can be used to minimize those challenges?