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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Case Studies – 10 Insightful Examples

Table of content

• Amazing vs Wholefoods
• Vaccinate Nationalism
• Golden Donut Chain
• East China Sea
• Apple vs Samsung
• RJR Nabisco Tabacco
• Microsoft vs Nokia
• International Longshore and Warehouse Union
• North Korea vs South Korea
• Largest Ponzi Scheme

Frequently asked questions

Key take-aways

• Whether in international relations, business disputes, or organizational conflicts, parties must invest time in building trust.
• Cultural differences can significantly impact the negotiation process. Understanding the cultural nuances of the parties involved is crucial.
• Even individuals with strong ethical values can inadvertently engage in deceptive practices driven by the desire for high profits or personal gain.

Negotiation occurs naturally when parties are dealing with one another to form an agreement. It is the first step in developing or creating an agreement that both parties will mutually benefit from. However, not all negotiations end up in a good way. Sometimes, a dispute is created when both parties are invested in the negotiation. 

For this article, we will check ten negotiation and procurement case studies that can give you insight into how to negotiate with the other party. We will explore how they tackled the situations in which parties are in dispute. 

After reading this article, you will have an insight into how to negotiate with someone through these negotiation examples . You will learn how to tackle disputes in a negotiation without harming the other party’s reputation. So without further ado, let us start delving into these ten insightful cases.  

Example 1 — Price negotiation between Amazon and Whole Foods

Actual case:

The case study is based on a real-life price negotiation between Amazon.com and Whole Foods Market. 

Whole Foods Market has been declining in performance in the market for the last two years. Due to this, the activist hedge fund that owns almost 9% of the common stock is pressuring the former. 

The activist hedge fund is eyeing the reform of the management style of the executive officers as it asserted that they are the ones responsible for the poor results achieved by the Whole Foods Market. In other words, the CEO of the Whole Foods Market is in trouble of losing his position

In light of the pressure that comes from the activist hedge fund, four different equity firms send separate inquiries to Whole Foods Market. One of the equity firms offered a share cash price of $36.00. This is in line with the historical share price of Whole Foods Market. Private investment in public equity (PIPE) is the shortcut for companies that are in need. 

However, pursuing this will put Whole Foods Market at numerous disadvantages. The result of the buy-out might make shareholders quickly sell their stocks. If a large number of stocks are sold at a lower price, the private equity firm may pressure the company. Additionally, it may claim ownership of the company. 

A few days ago, Amazon’s CEO reached out to Whole Foods Market. It was expected as many news outlets reported that Amazon is interested in acquiring the latter for opportunities in the retail sector. 

The reason why the Whole Foods Market is a good candidate for Amazon to acquire is its attractive value and strategic deal. Amazon expects that it can guarantee a substantial premium. The first signal of commitment by Amazon is the face-to-face meeting with the Whole Foods Market’s CEO. Moreover, Amazon just launched a new service called AmazonFresh that fits perfectly with what Whole Foods Market has developed which is the local-based fresh-goods delivery system. 

Before the prospect of acquiring Whole Foods Market, Amazon has another candidate which is Silvia’s Market. The strategy of this company is focused to become the best supermarket that a middle-class family can trust. However, looking at the collaborative opportunity of the two parties, you will start to have some doubts. This is because Silvia’s Market’s mission is too far away from the core value of Amazon which is Innovation. 

That is why the most attractive option is to choose Whole Foods Market rather than Sylvia’s Market because the synergies between Amazon and Whole Foods Market are the best option. 

One core aspect of Amazon is high-velocity decision-making. However, this strategy does not line up with Whole Foods Market. That is why Whole Foods Market suggested the decisional strategy of disagreeing and committing. 

Most negotiators face challenges within themselves thinking about what to offer, what is the reasonable agreement to accept, and the real interest in the negotiation. For this, you would need high-velocity decision-making because time is important in negotiations and the time you will need to decide is crucial.

Whole Foods Market needs to know that Amazon is not used to long bidding wars. It needs to be interested in Amazon’s proposal exclusively or else Amazon will find another company for opportunities in the retail sector. 

In the negotiation, Amazon has the upper hand as it has the capability to inflict damage on Whole Foods Market by not pursuing the negotiation. The threats looming the Whole Foods Market will cease if it collaborates with Amazon.

Additionally, Amazon demands secrecy. Any leakage will force Amazon to terminate the negotiation. In bidding situations, secrecy is important. Any leak of confidentiality will have disastrous outcomes regarding the agreements. A non-disclosure will allow Amazon to have steadiness, speed, and information symmetries in the negotiation.  

Final Deal:

The limits of the offering price for each party are laid out in the agreement which makes them able to compute their reservation price (RP).

When Amazon first bid, it evaluated the historical value per share of Whole Foods Market which is about $35.00 per share. At first glance, the $42.00 per share bidding price of Amazon seems too high. However, the calculations of Amazon were totally inclined with the prospect of growth of Whole Foods Market in the case of an acquisition. 

The Whole Foods Market’s attempt to counter-offering the bid with $45.00 per share was just to hold onto the financial resources of Amazon. Although we must take note that Whole Foods Market does not expect Amazon to be willing to bid at a higher price. Simultaneously, Amazon expects Whole Foods Market to accept its high offer. The expectations of both parties have coincided with one another which makes the negotiation reasonable and advantageous for both parties. 

Additionally, a profitable outcome depends on how negotiators deal and discuss during the negotiation process. Being an active listener and discussing issues is pivotal in the negotiation to be successful.  

Finally, after rigorous research and consideration between one another, Whole Foods Market approved the deal with Amazon which acquired the former for $42.00 per share which amounts to $13.7 billion including its debt. 

What can we learn from it?

We learn from this case study that both parties must make an effort to retrieve data from both sides to quantify and evaluate the outcome of every possible solution. 

Another is that a good negotiator can anchor the positioning battle around the other party’s reservation price . It is important to consider the other party’s perspective to take action in their situation rather than our own. 

This will help negotiators to obtain information and interest with the other party while also building trust and a fruitful negotiation process management. 

Lastly, we can learn from their negotiation that a final outcome can be reached once both parties meet on the same ground or terms. Both sides must be convinced that there is no use to retreat when the outcome will be good and that the negotiation is about to end.

Featured Download : Want to get better at negotiation skills? Click here to accelerate your career: Negotiation Preparation Toolkit template to help you prepare for your upcoming negotiation.

Example 2 – “Vaccine Nationalism”: A lose-lose negotiation strategy

The onslaught of the pandemic has made national governments across the world face the challenge of securing enough safe doses of COVID-19 vaccines when it becomes available.

A coordinated global plan is sought to promote fairness and efficiency. However, it may be a little too late, especially for least developed countries. 

This case study highlights the best and worst practices when pursuing limited resources through negotiation. 

In the early days of the COVID-19 pandemic, many drug manufacturers around the world focused on developing vaccines that can provide immunity to the virus without any harmful side effects. 

The governments of developed countries began negotiating with drug manufacturers to ensure that their citizens will get the vaccine first. The competition was on with developed countries while poorer countries were left on the sidelines. 

Many nations bought more than what they needed because they know that only a few vaccines will likely be safe and effective; Vaccine hoarding has now begun. 

As wealthy nations begin to outsmart each other through negotiation because of their limited resources, poor countries are left to wonder how they can protect their citizens. 

The World Health Organization (WHO) came up with a plan that aims to ensure that the vulnerable populations in the world will have access to the COVID-19 vaccine. 

On August 24, 2020, WHO announced that 172  nations that comprise over 70% of the world’s population had made commitments to participate in the COVID-19 Vaccines Global Access (COVAX) facility. 

COVAX is a global initiative to secure two billion doses of safe and effective COVID-19 vaccines from companies such as Pfizer, AstraZeneca, Moderna, etc. for the vulnerable population worldwide. 

At first glance, COVAX seems to be a charitable enterprise founded by wealthy nations. However, this is not the case. Wealthy nations see this opportunity as a win-win situation for them. 

Wealthy nations will be guaranteed access to the world’s largest portfolio of vaccines. Additionally, they will negotiate as part of the 172 nations which will bring the price of the vaccines down. 

A week after the announcement of COVAX, the previous Trump administration said that it would not be joining the global effort. The decision was inclined toward “America First”. 

Kendall Hoyt, a professor from Dartmouth’s Geisel School of medicine, said that backing out or not joining the global effort of COVAX is like passing an insurance policy. Because if none of the vaccine candidates that the United States has proved to be effective, then the nation will be left unprotected. 

Many nations that cannot afford to purchase the vaccines directly have made creative deals with other countries. For example, Pakistan has allowed China to conduct vaccine trials on its citizens in exchange for enough doses to vaccinate its citizens, especially its most vulnerable population.  

Each country has negotiated with drug manufacturers without thinking of other countries. This is normal, especially when you are procuring scarce resources. However, the problem with the vaccines can be handled better if countries have cooperated with each other instead of negotiating by themselves with drugmakers. 

In order to encourage coordination when allocating scarce resources, countries must plan ahead, show the benefits of cooperation, and take a broader view of the problem. 

When emotions are running high amidst a crisis, it is difficult to keep in check your behavior. If the perception of your country is that the others will hoard, your country will also hoard. The time to negotiate the outlines of an agreement is before the start of a crisis and not in the middle of it. 

Negotiators usually think that when they lose, the other one wins. However, this is far from the truth. Professor Max H. Bazerman from Harvard Business School explains that to move beyond this mindset, one must show what one can gain from cooperating with one another. 

Organizations always feel the special duty to protect and look out for those they represent. This is true but we should also take time to consider how our actions can affect other people. This includes the most vulnerable population in the world. 

Ingroup bias does not stop solutions that can benefit others. As a matter of fact, you can expand it by considering what those people outside of your organization can provide that will benefit you too. 

Ecologist Garrett Hardin shares the parable of a group of herdsmen who graze their cattle in the same pasture in his 1968 article.

In the parable, all herdsmen are motivated to increase the size of their respective herds to increase their profits. However, the increase in the number of cattle would mean that the pasture will be destroyed due to overgrazing. 

We can learn from his parable that the best solution to the dilemma of the herdsmen was to negotiate with one another to limit the size of their herds. 

With a finite resource at stake, those that are involved will usually have better long-term outcomes by negotiating to divide the resource equitably rather than trying to claim the biggest piece for themselves. 

If we just imagine that all the leading economies in the world agree to put all their budgets for vaccines in the COVAX or a similar global effort and not sign bilateral deals with pharmaceutical companies, then the efficiency of the coordination will help lower the cost and streamline the production and distribution. 

If countries just broaden their views in negotiating with other countries to strive for coordination, then many lives would have been spared by the pandemic.

Example 3 — Negotiation Case Study: Sincerity’s Power in Negotiation

Actual Case:

The golden donut chain, a Philippine-based company, has faced difficulty in negotiating with its labor union. The donut chain and the labor union have talks regarding their problem. 

When the donut chain’s management team arrived late with the said talks, the labor union stormed out in protest to show great dismay over their delay in the negotiation. 

In order to continue their talks with the labor union, the management team of the donut chain has sent a letter that includes an apology.

However, from the perspective of the labor union, the apology is insufficient to forgive the inconvenience that the donut chain has caused. The labor union refused to meet for talks and continue with their strikes. 

This case study has focused on how to convey your sincerity when apologizing in a negotiation. How can one deliver their sincerest apology that the other party will accept? 

The case with the golden donut chain and the labor union has ended in a bad way. Due to the lack of concession due to the insufficient apology from the donut chain, the labor Union has brought it into court. 

When both parties brought it to the courts, it took years before a party was compensated. In this case, the labor union has won the case against the donut chain. 

Professor Edward Tomlinson and Professor Roy Lewicki from Carroll and Ohio University have found out that people view apologies to be sincere when it includes internal attributions of harm. This simply means that people will see your apologies as sincere when you own up to your mistakes. 

The credibility of a person has a significant factor in making apologies sincere from the perspective of the other party. 

A study showed that unfulfilled promises, deception, and breaking the trust of the other party are some factors that a negotiator cannot work out in giving their sincerest apology. Moreover, giving assurance even if you cannot attain or fulfill it is counterproductive in a negotiation. 

Many negotiators advance their case by persuading the other party or listening to their side. But sometimes, the greatest thing you can do in a negotiation is to straightforwardly admit your mistake.

Many apologies have failed to achieve their aim—to be forgiven. The delivery of some people is usually the culprit why apologies are not accepted. 

The importance of an apology in a heated argument or negotiation cannot be overstated enough. When the other party thinks that your apology is not sincere enough to make amends, the heat in the negotiation will rise further—leaving both disliking each other. 

The power of apology in negotiation and dispute resolution is significant to fixing relations between parties. It is important to apologize and own up to your mistakes to make the other party feel that you are sincere. 

We must remember that if we cannot fulfill or attain our promise, we must not push it further to the other party. Doing so will only aggravate the emotions of the other party. Because we all know that no one wants to be left hanging—so do not promise during a negotiation that you cannot follow through. 

Example 4 — The East China Sea Dispute

Actual Case: 

In November 2013, China established an air defense zone over the disputed Islands on the East China Sea. This has been seen as an act of aggression in an escalating international dispute.

Japan and China are both claiming the islands. It is known as Senkaku in Japan and Diaoyu in China. According to CNN, the islands are believed to be rich in oil. Additionally, the islands are said to be an advantage for military defense strategically which is why the dispute on the islands is hard to resolve. 

China began patrolling the islands and its plane has come near the international airspace of Japan several times. When this happens, Japan launches its fighter jets in response to the tactics of China. Additionally, Vietnam and the Philippines had made claims to the islands as well. 

The conflict over scarce resources can be tricky and difficult to resolve. In the business field, negotiators that face this conflict are able to avoid the conflict by considering and thinking about every party’s contributions and claims with the resources. However, in our own business negotiation , how can you convince the other parties that concession is possible?

Japan has bought the disputed islands which have enraged China. Today, the tension has increased and no negotiation has been settled. In 2019, Japan built military bases to keep China from further developing its military capabilities in the region. 

All negotiators must keep in mind that the first thing they need to work out is building trust with the other party.

First, when you are negotiating with a new party or the negotiation with them in the past has not gone as planned, you cannot expect them to trust you right away. 

You must give them time to adjust. Additionally, you must let them tell their concerns, and past grievances, and apologize for any actions that have created mistrust from the other party. 

Second, when negotiators discuss agreements, they must devote a lot of time to asking questions to tackle all the issues circulating the agreement. 

By asking the other party questions regarding their positions in the negotiation, you will know their underlying interest. 

Also, you can share your information to show your own interest in the negotiation. This will allow you to unfold potential tradeoffs that are tolerable to both of you.

Lastly, negotiators must look for solutions that can make the other party whole. This means that you must let the other party know that they can benefit greatly from the negotiation. 

Demanding a unilateral concession with a corresponding benefit to the other party will make the negotiation fail. You cannot expect anyone to compromise without them gaining any benefit from the negotiation. 

What can we learn from it? 

From this case study, we can learn how to negotiate without making the outcome self-serving for any of the parties. 

We all know that during an international negotiation , even if negotiators believe that they sincerely want a fair outcome, their perspective of a fair outcome is likely to be self-serving. This kind of perspective will make the negotiator believe that they must have a greater share of the resource—making them biased on their own terms.

We can learn from here that trust is the foundation of every negotiation. Without trust, it will not be possible to produce a fruitful outcome of the negotiation. 

We must also consider the interest of the other party to make concessions that both of you will benefit from the negotiation. 

If you cannot make the other party realize that they can gain from your negotiation, the outcome of the negotiation will always fail. 

Example 5 — Negotiation in Business: Apple and Samsung’s Dispute Resolution Case Study

In April of 2011, Apple accused Samsung of copying the look and feel of its products when it launched its Galaxy line of phones. The situation has made Apple file a lawsuit against Samsung. 

However, Samsung has countersued Apple stating that it has not paid royalties for using its wireless transmission technology. After this, the number of disputed patents has gone up to the sky. 

Since then, the two giant tech companies have repeatedly accused one another of copying the appearance and functions of their respective products. 

Both companies have shown willingness for mediation in an effort to avoid going to court. Due to this, they have cut the number of disputed patents by half. However, even if the CEOs of both companies had sat down at a table for mediation, Apple started striking Samsung again.

Apple has filed a motion to bar the sale of one of Samsung’s products on the grounds that the tablet is created to replicate its second-generation Ipad. 

Both companies have hoped to avoid legal battles. However, the mediation of both companies has ended in an impasse. Neither one wants to back down from their arguments. The lawsuit has been pursued and went to trial twice and Apple has ultimately won more than $409 million.  

We must take note that both parties need to negotiate or mediate a solution before escalating it to the courts. Additionally, both parties must be willing to work together to resolve the problem or deal with the situation. 

In many situations, mediation is viewed as the last step of adjudication rather than the first step in a collaborative effort to work on a solution. 

From the standpoint of preserving the image of the organization, mediation is preferable. Mediation that leads to voluntary agreements will always ensure compliance with whatever the parties have agreed upon

For this case study, we have seen that mediation as a dispute resolution technique is not possible when both parties are grudging participants. In order for mediation to succeed, both must be actively engaged in finding a solution. 

Additionally, Both companies have already invested too much time and resources with all the lawsuits that they have bombarded one another. Due to this, they will feel that it is too late to back down as they have invested too much in it. 

The talks for concession will fail and the aggressiveness from both parties will increase the longer they spend fighting rather than finding a solution.

We can learn that when a business dispute arises, both parties must be willing to negotiate in finding a solution before they take the matters to the courts. Taking it to the courts will end any negotiation for meeting halfway.

Example 6 — Overconfidence In Negotiation

RJR Nabisco, a tobacco company, is having a bad year with its stock performance. Ross Johnson, the CEO of RJR Nabisco, has thought that it is the best time to negotiate a buyout to increase the shareholder’s value of the stock. 

As a reference, a buyout is a transaction where another party has acquired control of the company. Going back, Ross John and his management group have entered into negotiation with the special committee of the board of directors. 

Since he is the CEO of RJR Nabisco, Ross John is confident that his buyout attempt would be a successful pitch for the board of directors. Unbeknownst to him, his overconfidence has led him to fall into making bad decisions and jumping to the wrong conclusions. 

His first mistake is assuming that due to his position and connection in the company, his buyout pitch will be approved easily. 

His second mistake is assuming that his investment bankers will just simply put the financing in place. Lastly, he expected the board of directors that they would give him the entire power to manage the buyout. 

Along with Shearson Hutton, his main financial partner, they offered an initial buyout price of $75 per share. 

Ross Johnson’s overconfidence in closing the buyout has led him to his impending downfall. He was not paying attention to numerous occurrences that were happening at that time. Instead, he had gone on in his self-interest. 

The board of directors has never discussed or met halfway with Ross Johnson regarding the buyout. Additionally, it never occurred to him that there were other companies who wanted to buy Nabisco. 

Following the series of events, his attitude has led the board of directors to award the buyout bid to an investment bank firm, Kohlberg, Kravis, and Roberts (KRR), for $109 million. 

In actuality, the bid of Kohlberg, Kravis, and Roberts (KRR) is lower than Johnson’s Bid. The board just wants to get off Ross Johnson from their shoulders even if it means that they would take a loss. Although it is lower, they appreciated the KRR’s negotiation flexibility.  

The solution here in this negotiation case study is to avoid overconfidence in negotiation. It is okay to have confidence, but overconfidence will make your judgment hazy.

There is a thin line between confidence and egotism. Unfortunately, in the case study, he becomes so full of himself that he does not consider the factors and the events that are transpiring at that time. 

Being confident is knowing that you have prepared for the negotiation. Additionally, you will know your limit and the do’s and don’ts when negotiating even if you know the other party all too well. 

To reduce your overconfidence, you must first collect information. When the stakes are high, you must put down the mirror to stop admiring yourself. Instead, you must know the information about the other players in the game. The collected information will allow you to use it to your advantage when negotiating. 

Second, you must consider the other party. One of the best ways to correct biases such as overconfidence is to think of reasons why your assumptions are wrong. This will allow you to keep your attitude and your assumptions in check. 

Third, you must ask other people in your organization about your assumptions. Good negotiators base their decisions on the data or information available and not on the information that will just make them feel good. 

Lastly, you must not be afraid to ask. Many people avoid negotiation because it is stressful. In the part of the case study, Ross did not ask questions to the board. Rather, he has carelessly gone on with the buyout. His attitude and assumption about the buyout have failed him ultimately.  

Negotiation courses usually suggest that business managers should possess a high level of confidence to succeed. 

This is correct as confidence will allow managers to face any challenges in the fast-paced environment that they are in. However, there is a thin line between being confident and overconfident. 

Overconfidence is a cognitive bias that lurks in the background. It is like a trap waiting for you to get caught as you innocently walk. 

Overconfidence can cause you to become indifferent to the available information. Additionally, it will always cause you to miscalculate things by making assumptions. 

We must always assess ourselves if we are already being overconfident because it will always lead us to make wrong decisions and baseless assumptions. 

Example 7 – The Microsoft-Nokia Deal

According to the New York Times, on September 3 of 2013, Microsoft announced a deal to acquire Nokia’s handset and services business for $7.3 billion. 

The agreement has marked a bold move to the side of Microsoft to upgrade its game in the handset competition. Additionally, it ends the struggle for Nokia to re-enter the phone market where it once ruled. 

The deal explores the dynamics behind the negotiation that has made Nokia join forces with Microsoft. Both sides had a strong urge to join forces. 

Through the years, the struggle of Nokia to re-enter the phone market has lost significant ground to smartphone manufacturers such as Samsung and Apple. It has failed to keep up with the latest innovation in the market which has severely impacted its profitability. 

Nokia’s underperforming handset business has made its focus on telecommunications equipment, mapping business, and patent portfolio. 

Steve Ballmer, the previous CEO of Microsoft, first approached Nokia’s CEO, Stephen Elop, for a possible acquisition during the Mobile World Congress industry conference in Barcelona. 

Their first meeting started the discreet negotiation between Nokia and Microsoft.

Microsoft’s acquisition of Nokia means that it has to know its cultural background before negotiating. 

According to a report from the Program on Negotiation at Harvard Law school, there are four simple rules to handle cultural differences in international negotiations. 

First, you must research your supplier’s culture. In the case of Microsoft, it must know the culture of Nokia to know what are the dos and don’ts in their negotiation. 

Second, you must show respect for cultural differences. Microsoft has to understand the value system of Nokia. 

Third, you must be aware of how others may perceive your culture. Microsoft needs to carefully analyze how its gestures in the negotiation may affect the deal. Being aware of their culture will allow you to be able to adjust your negotiation in order to close the deal. 

Lastly, you must always find ways to bridge the cultural gap. The cultural differences create division between Microsoft and Nokia. If Microsoft knows how to come to terms with Nokia, then the negotiation process will be much easier than being insensitive to each other’s perspectives. 

Acquiring another company is not an easy process. It entails overcoming its greatest challenge —  cultural barriers in negotiation. 

Merging different cultures can be confusing and a lengthy process. Merging two of the largest companies in the world is difficult as both will have embedded roots in their respective country. 

It makes sense to keep the identity of the organization and borrow from the best of both. It never hurts to create strategies that are based on the expected cultural norms of the acquired company as long as it is a part of the bargaining process which creates valuable, workable, and sustainable agreements. 

Example 8 — After the West Coast Ports Conflict, Damage Remained

In a crisis negotiation, parties may believe that they face an impossible choice between giving in to the other side’s demands or standing firm with their decision resulting in the worst-case scenario to happen.

This is the case with the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The lack of agreement between the two parties quickly became a problem. 

The ILWU-PMA contract expired on July 01, 2014. Since the month of May, the parties have met to negotiate a new agreement regularly. During this period, the ILWU claims that it has consistently come to discuss the agreement in good faith despite the other party’s pressure tactics. 

The spokesperson from the PMA has said that both parties agreed that normal operations at West Coast ports would continue even if no agreements have been reached but the ILWU has backed out of the agreement.

However, after a few months, PMA has accused the ILWU of orchestrating slowdowns at the Pacific Northwest ports of Seattle. It alleges that the slowdown at the port has resulted in the reduction of terminal productivity by 40 to 60%. 

Following these events, the ILWU has issued a statement that according to experts, the cause of the congestion is the result of three factors that are deeply rooted in employer management. 

In the case of LIWU and PMA, both have already plunged themselves into crisis negotiations. Fortunately, both parties have already reached a deal in 2015 but still, we cannot change the fact that there are ways that can help the parties avoid the need for crisis negotiation. 

First, to avoid crisis negotiation, you must build trust in its early phase. You should not wait for an urgent deadline to come before you do something. Take advantage of launching negotiations early to establish trust. Furthermore, check on the other party periodically to ensure that you can mutually address any issue before it is too late to be fixed. 

Second, you must be aware of overconfidence. Crisis negotiation often arises because of the overconfidence of one party in the negotiation. To prevent this, you must think of possible scenarios and prepare for each of them accordingly. 

Third, you must avoid extreme demands. A demand increases the tendency to escalate commitment to tough positions. You must resist drawing a line in the sand. 

Lastly, you must seek an outside opinion. Third parties can give a dose of rationality in crisis negotiations. This allows you to have an objective critique of your plans that will result in meeting all the parties’ interests in the negotiation. 

We can learn from here the adage,” prevention is better than cure.” If the parties have discussed their interests early, the congestion will never happen. Partnered with the contentious history of both parties, the crisis negotiation is bound to happen. 

In addition, it is important to build trust in its early phase. This will build a foundation that will allow both parties to resolve any issues that will arise together. 

If there ever have been any heated arguments in the past, it is important to take note that the party who has delayed on their promise apologizes sincerely. 

Also, we must take note that in a negotiation, both parties must see that their interest will be met. There can never be any negotiation if the other one feels that it got the short end of the stick. 

Example 9 — International Negotiations: North and South Korea Talks Collapse

In June of 2013, North Korea and South Korea were supposed to meet in Seoul to negotiate how they can forge a rapprochement due to their decades of division. 

If this happened, it would be the highest government dialogue between the divided nation in years. 

After this, news came out that South Korea had appointed its vice unification minister as the chief delegate to the negotiation that will occur.

North Korea was offended by this move made by South Korea. It demanded that South Korea send its more senior officials. South Korea defends itself and has responded on the issue that the proposed delegate of North Korea is lower in status than what it has delegated. 

The night before the scheduled talks begin, North Korea accused the South that their response is an insult to them. South Korea is still open to dialogue but it will not back down with its delegation. 

When South Korea criticizes North Korea’s argument, it has risked the latter in embarrassment. According to a study by experts, direct threats to self-esteem can trigger anger, embarrassment, and competitive behavior toward the other party. 

We know that some people are slightly more sensitive than others. When slightly-sensitive people negotiate with others, they are twice as likely to declare an impasse even if the agreement will benefit both sides. 

Research has concluded that when slightly-sensitive people are personally invested with the issue that is being negotiated, they are more susceptible to feeling threatened and acting competitively.

In the case of South Korea, it has neglected the value of helping North Korea to save face or to protect its image. It is the mistake of South Korea that made the negotiation meet its dead end. 

Many experts have criticized the government of South Korea for ruining the chance to engage with the North. 

In this case study, we can learn that protecting the image of the other party in the negotiation is important to reach a fruitful discussion. 

Of course, no one wants to be put in a situation where you will be a laughingstock in the eyes of the public, more so when it comes to international negotiation.

Example 10 — Why Ethical People Become Unethical Negotiators

Bernie Madoff, the person who ran the largest Ponzi scheme in history that is worth about 64.8 Billion dollars, did not pull off the scam by himself. 

To give a brief review of his infamous scheme, we will go back on how he attracted investors by claiming to generate large returns through an investing strategy that is called split-strike conversion which is a legitimate trading strategy. 

However, he deposited the client funds into a single account which he used to pay existing clients who wanted to cash out. The 2008 financial crisis has made him unable to maintain his fraud . On December 10 of 2008, he confessed his fraudulent act to his son who has worked in his firm. 

Long story short—a lot of investors put their trust in him due to his facade as a respectable financier in the industry.  

According to professor Max H. Bazerman, good people that have strong ethical values can trick people without realizing that they are doing it. 

He draws on the psychological study of ethical decision-making and applies it to negotiation. He tells us that negotiators usually act unethically due to the desire of gaining high profits and greed. 

Negotiators may exaggerate things that are far from the real thing which falls into the category that Bazerman calls bounded ethicality. You may ask why it happens. Well, it happens once the negotiation progresses. In the heat of the negotiation, it is where ethical fading begins. 

Negotiators fail to see what they are doing as they are only focused on one thing—high profit. Many people interpret situations that will favor them.

According to Bazerman, deception occurs at the negotiation table, especially during the preparation, participation, and recalling of the negotiation phase . Participation in negotiation is the most susceptible phase where ethics fall. This is due to the fact that negotiators will only want to negotiate what makes sense for them. 

In recollecting or remembering the negotiation that transpired, the negotiator fails to see the other party’s perspective. 

We can promote ethics at the negotiation table by encouraging negotiators to slow down and consider important decisions. They should mask the gender and the picture of the applicant to lessen the bias in the process

Negotiators should also know that language matters. Using words like Ultimatum and winning can unintentionally set the negotiation for deception. 

What Can We Learn From It?

We can learn that negotiators that become aware of their susceptibility to deception, will be lessened at the negotiation table. 

Negotiators must be able to reflect and deliberate all the important decisions before dealing with someone at the negotiation table. 

Once you see that something is wrong but you failed to notice due to your focus on the high returns, that is when ethics fade. 

In conclusion, the provided case studies offer valuable insights into the complexities of negotiation across various scenarios. Negotiation is a skill that extends beyond business transactions, encompassing international relations, legal disputes, and even internal organizational dynamics.

These examples underscore the importance of preparation, cultural awareness, trust-building, and ethical considerations in successful negotiations.

How important is trust in negotiation?

Trust is fundamental in negotiation. It fosters open communication, collaboration, and a willingness to find common ground. Without trust, negotiations become challenging, and parties may struggle to reach mutually beneficial agreements.

How can cultural awareness impact negotiations?

Cultural awareness is crucial in negotiations. It influences communication styles, decision-making processes, and the perception of gestures and actions. Ignoring cultural differences can lead to misunderstandings and hinder the negotiation process.

Why is ethics essential in negotiations?

Ethics are vital in negotiations to maintain integrity and build sustainable relationships. Even well-intentioned individuals can engage in unethical practices, especially when driven by financial gains. Prioritizing ethical considerations ensures fair and honest negotiations.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

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8 Procurement analytics use cases to meet the moment

The procurement function has evolved significantly over time. Modernity -- in the form of global supply chain expansion and advancements in technology -- has hastened the maturation of the procurement officer’s role from tactical to strategic.

With the expansion of global supply networks, procurement’s initial focus on tactical, day-to-day purchasing operations has broadened to include enterprise-scale strategy on topics ranging from risk mitigation to sustainable sourcing.

As stated by KPMG , “CEOs are looking to the procurement function to take on a broader and deeper set of strategic responsibilities than ever before.”

Procurement leaders are sought after to make decisions affecting many critical business processes.  Poor supplier performance or lengthy source-to-settle cycle times, for example, can have downstream impacts on revenue generation, profit margins, warehouse storage costs, and workforce hiring.

Deloitte’s Global 2021 Chief Procurement Officer Survey similarly acknowledges the increased expectations within the procurement role and suggests that “…building capabilities focused on agility is the CPOs’ best bet to meet and exceed them.”

Data analysis provides procurement professionals with the agility needed to meet these increased expectations. Using procurement analytics, executives can surface critical patterns from the vast data sets generated from purchasing transactions, delivery inspections, invoice processing, and more. This empowers procurement teams to isolate profitability drivers and eliminate bias when making purchasing decisions.

The use cases below detail specific examples of how organizations can implement procurement analytics solutions to drive efficiency, cost savings, and risk management decisions.

Accelerate procurement efficiency with analytics

“Driving organizational efficiency” was ranked by CPOs as the #1 business priority in Deloitte’s 2021 Global CPO Survey , surpassing “Cost Reduction” by a slim margin for the first time since the survey’s inception.

While cost reduction will assuredly remain a top benchmark by which procurement officers are assessed, there is a growing consensus building around additional areas of value influenced by the procurement department. According to Deloitte: “It’s no longer just about more products and services at a lower cost, but about a broader range of improvements (e.g., speed to market and innovation enablement) and in many cases ROI.”

Improve procure-to-pay cycle time

Inspecting aspects of the procure-to-pay cycle provides a better understanding of the procurement team’s performance. Benchmarks linked to revenue generation, such as speed of time to market, are influenced by the pace at which critical parts are secured. Source-to-settle cycle times impact the ability to meet demand at its peak or snag market share before competitors. For these reasons, procurement cycle time efficiency affects internal operations and alters the momentum of innovation.

Data comprising the procure-to-pay cycle comes from multiple different departments and is often siloed. Analytics allows procurement teams to connect workstreams and data across the entire enterprise to form an accurate representation of cycle times. The ability to break down a cycle time by its parts enables organizations to surface -- and triage -- operational bottlenecks that threaten to thwart productivity. Granular visibility into these processes would not be possible without analytics.

A detailed analysis goes beyond transactional reporting, allowing me to determine which teams or individual employees are prolonging the approval process. Quick access to this level of detail enables our organization to rectify the situation before we experience the rush of seasonal demand.

Analyze supplier performance to minimize disruption

Analytics makes it easier for procurement professionals to support peers’ revenue and profitability goals across the organization by providing process visibility.

Detailed analyses into delivery status and Advanced Ship Notice (ASN) by item type, project code, and other metrics allow companies to maximize productivity while proactively managing customer relationships. Teams can see which goods were ordered and their arrival date at a specific location. When analyzed against current warehouse inventory, organizations gain a complete understanding of their operations, and alert customers or downstream partners of possible delays in advance.

For instance, the manufacturing team’s productivity is hampered by the inability to see whether a critical part needed for production is located within a nearby warehouse, or whether it has been ordered at all. Inventory uncertainty creates idle time/downtime.

Within transactional reporting systems, supply and demand drivers are often kept in separate data repositories. Many employees can only view the inventory on-hand for their facility, rather than an aggregate view of inventory across the business. However, suppose the manufacturing team can see that an essential production part has been ordered, and will arrive at a nearby facility by Wednesday at 2 PM. In that case, they can begin a partial build on Monday. The team will then be well-positioned to continue work when the part is delivered later in the week. Analytics enables companies to bypass workflow interruptions while efficiently using time and resources.

Reduce bottlenecks within invoice and purchase order processing

The age-old adage “time is money” is one that operations and finance professionals alike are familiar with.

In general, the complexity of the process increases operational costs. Combining procurement and financial data for analysis is a crucial first step an organization can take towards streamlining excess logistical complexities across the procure-to-pay cycle.

Let’s imagine that I have direct access to a graph that depicts purchase order (PO) dollar amounts by supplier alongside the number of invoices received from each supplier.

 When the number of invoices issued by one supplier far surpasses the monetary amount on a contract, it's a good assumption that the supplier is invoicing my organization for each line item on the PO, rather than producing one blanket invoice. This creates additional work for the Accounting department and increases the risk of accidental late or missed payments for small amounts.

Armed with this knowledge, a category manager can create an improvement plan for this  supplier that includes invoice consolidation. Reducing the number of invoices processed streamlines accounting practices, and in turn, saves money in the form of labor hours.

Proactively manage procurement contract expirations

Procurement teams can more deftly navigate contract expirations with the aid of analytics. Tracking all agreements and contract expirations across global operations is a painstaking task that many companies face. Complexity is magnified when attempting to monitor multiple agreements with the same vendor across different categories and geographies. Different contract creation dates and varied category manager responsibilities for each contract add to the complication. It is not uncommon for procurement analysts to spend precious days painfully tracking these expirations by manually copying thousands of lines of contract information into spreadsheets… it’s no wonder accidental contract expiration occurs.

When contract expirations inadvertently slip through the cracks, it can prove a sore inconvenience to recreate the entire contract. This cumbersome process increases logistical processing time, and the renegotiation process always poses the threat of increased pricing terms. 

Analytics is a powerful antidote to these complexities. Receiving timely alerts 30, 60, or 90 days before contract expiration eases the mental burden of spreadsheet tracking for procurement officers. With an in-depth procurement analytics solution , users can visualize contract expiration by multiple dimensions, such as product type, country, supplier location, direct vs. indirect spend, and more. High-level analysis also allows procurement executives to track the overall contract execution roadmap from a workload and staffing level; how busy will my procurement officers be with the number of contract renegotiations coming up?

Deliver cost savings with procurement analytics

Despite increased demand for organizational efficiency, Chief Procurement Officers (CPOs) are most commonly held accountable to cost reduction metrics. The expectation remains that an increasing number of CEOs and CFOs will either begin to -- or continue to -- require CPOs to “deliver cost savings that are visible to the bottom line (with more robust tracking to prove it).”

For the procurement organization, the path to increased margins can be attained by various means, whether by negotiating more favorable pricing rates with suppliers or reducing contract leakage. The key to understanding where to reduce expenditures lies principally within an entity’s spend analysis solution ; it becomes nearly impossible to identify cost reduction opportunities without a comprehensive view of spend across the business.

Enhance strategic sourcing negotiations with spend analysis

Buyers and category managers are measured on savings negotiated and realized year-over-year (YoY). Yet without the right tools to measure and track progress, it can be an onerous task to track the company’s price negotiations over time for each supplier and every product managed.

For category managers entering renegotiations with past suppliers, the ability to easily see historical pricing trends for a particular product across all business units-- in addition to pricing received from competitors -- can serve as a benchmark for cost reduction.

Visualizing discounts received for a specific set of goods over time also allows the procurement organization to optimize negotiations. The procurement analytics dashboard below illustrates spend analysis information alongside “savings potential” by product and supplier.

With the right analytics tools, procurement teams can arm themselves with salient data points to improve their position during contract negotiations and can reduce off-contract spend on a granular level. 

Realize greater savings with Invoice Price Variance (IPV) Analysis

It is equally important to track negotiated pricing against invoice amounts to determine the organization’s realized savings. 

Negotiated discounts are meaningless if data from finance and procurement departments have not been synchronized to ensure that the rate negotiated matches the price paid. Getting these metrics is often time-intensive and complex due to the data integration and manipulation needed to combine outputs from different sources.

It is imperative to invest in procurement analytics software that makes this critical matching process easy. By speedily surfacing Invoice Price Variance (IPV) trends, companies can uncover instances of inadvertent overpayment. Perhaps one supplier, in particular, is guilty of making this error consistently -- once discovered, this becomes an easy fix with a phone call to their accounting department.

Reduce rogue spend with contract utilization and contract leakage analysis

Analysis of contract utilization and contract leakage by category, business unit, and item allows buyers to assess how well they’ve procured products and services that closely match business needs. Category managers can negotiate more favorable rates for items on an agreement, but this proves ineffective if employees ultimately purchase that item off-contract, or don’t use these products at all.

Let’s imagine that my top 10 items procured account for 90% of my utilization, and the rest of my items – 140 of them – are seldom being purchased. However, my off-contract spend for a similar category is very high. This is a clear signal to investigate this discrepancy further -- should I fold the off-contract items into my agreement for the next negotiation cycle? By looking at agreement utilization by item and supplier, buyers can more accurately predict the amount and type of goods needed, thereby reducing wasteful spending.

As pictured in the visualization above, agreement utilization analysis can help identify opportunities to realign agreements and contracts with purchase needs. Insights into agreement utilization trends can be used to increase spend under management. In the example above, the graph of “agreement amount” versus “agreement utilization” reveals that internal demand for silicon control sleeves from supplier Advanced Network Devices is far greater than demand for the same item from other suppliers. Procurement can use this information to shift future agreement amounts with each supplier to better align with company purchase preferences, thereby reducing rogue spend. 

Mitigate Procurement Risk

Full visibility into a company’s entire value chain can be elusive, yet transparency into supplier risk and performance is paramount when it comes to identifying unhealthy sourcing dependencies or mitigating unforeseen disruption. With the help of analytics, procurement professionals gain the tools to navigate the ever-looming threat of volatility.

“...most businesses do not have a good idea of what is going on lower down in their supply chains, where sub-tiers may play small but critical roles. That is also where most disruptions originate, but two-thirds of companies say they can’t confirm the business-continuity arrangements with their non-tier-one suppliers.” – McKinsey [link]

Reduce sourcing risks with increased insight into supplier performance

Lack of organization-wide knowledge of supplier performance trends permits low-performing suppliers and vendors to negatively impact downstream deliverables.

Analyzing spend data with supplier performance metrics enables organizations to understand the many tiers of their supply base and helps companies assess the potential for disruption stemming from each vendor.

“The ability to detect, measure, and manage risk remains a challenge...Our research found that very few CPOs (18%) were formally tracking the risks that existed in their direct (tier 1) supplier base, and only 15% had visibility beyond that.” -- Deloitte Global 2021 Chief Procurement Officer Survey

Knowledge of supplier performance by on-time delivery, accepted, rejected, shipped, short-closed, and return rates enables the optimization of purchasing and facilitates strategic supplier management.

For example, the visualization below demonstrates the benefit of viewing multiple supplier performance metrics together to get a comprehensive picture that is otherwise difficult to get through multiple separate reports. 

 Using analytics, a procurement team can determine the optimal supplier for critical project completion. By comparing suppliers according to delivery performance, quality, and spend amount, procurement officers can more fully understand where inherent risk lies. When faced with a tight timeline, the volume of rejected shipments by one vendor may outweigh the benefit of their lower-priced offering.  To avoid the risk of stock-outs, supplier diversification may be necessary.

Why procurement analytics from Oracle?

Whether pre-built via Fusion ERP Analytics or DIY using Oracle Analytics Cloud , Oracle provides comprehensive procurement analytics offerings. Within the procurement space, the automation of routine tasks has become table stakes, while a comprehensive understanding of spend and supplier risk provides companies with multiple paths to greater profitability.

At Oracle, we believe that technology solutions must rise to meet the new demands of the procurement role. Our cloud procurement and advanced analytics solutions have been built to facilitate strategic decision-making for procurement teams as they navigate complex supply chain challenges. To learn more about the benefits of procurement analytics, check out our latest product tour . 

Visit Oracle.com/analytics, and follow us on Twitter@OracleAnalytics and LinkedIn .

Roxanne Bradley

Product marketing manager.

The procurement function has evolved significantly over time. Modernity -- in the form of global supply chain expansion and advancements in technology -- has hastened the maturation of the procurement officer’s role from tactical to strategic.

With the expansion of global supply networks, procurement’s initial focus on tactical, day-to-day purchasing operations has broadened to include enterprise-scale strategy on topics ranging from risk mitigation to sustainable sourcing.

As stated by KPMG , “CEOs are looking to the procurement function to take on a broader and deeper set of strategic responsibilities than ever before.”

Procurement leaders are sought after to make decisions affecting many critical business processes.  Poor supplier performance or lengthy source-to-settle cycle times, for example, can have downstream impacts on revenue generation, profit margins, warehouse storage costs, and workforce hiring.

Deloitte’s Global 2021 Chief Procurement Officer Survey similarly acknowledges the increased expectations within the procurement role and suggests that “…building capabilities focused on agility is the CPOs’ best bet to meet and exceed them.”

“Driving organizational efficiency” was ranked by CPOs as the #1 business priority in Deloitte’s 2021 Global CPO Survey , surpassing “Cost Reduction” by a slim margin for the first time since the survey’s inception.

While cost reduction will assuredly remain a top benchmark by which procurement officers are assessed, there is a growing consensus building around additional areas of value influenced by the procurement department. According to Deloitte: “It’s no longer just about more products and services at a lower cost, but about a broader range of improvements (e.g., speed to market and innovation enablement) and in many cases ROI.”

Inspecting aspects of the procure-to-pay cycle provides a better understanding of the procurement team’s performance. Benchmarks linked to revenue generation, such as speed of time to market, are influenced by the pace at which critical parts are secured. Source-to-settle cycle times impact the ability to meet demand at its peak or snag market share before competitors. For these reasons, procurement cycle time efficiency affects internal operations and alters the momentum of innovation.

Analytics makes it easier for procurement professionals to support peers’ revenue and profitability goals across the organization by providing process visibility.

For instance, the manufacturing team’s productivity is hampered by the inability to see whether a critical part needed for production is located within a nearby warehouse, or whether it has been ordered at all. Inventory uncertainty creates idle time/downtime.

The age-old adage “time is money” is one that operations and finance professionals alike are familiar with.

Let’s imagine that I have direct access to a graph that depicts purchase order (PO) dollar amounts by supplier alongside the number of invoices received from each supplier.

 When the number of invoices issued by one supplier far surpasses the monetary amount on a contract, it's a good assumption that the supplier is invoicing my organization for each line item on the PO, rather than producing one blanket invoice. This creates additional work for the Accounting department and increases the risk of accidental late or missed payments for small amounts.

Armed with this knowledge, a category manager can create an improvement plan for this  supplier that includes invoice consolidation. Reducing the number of invoices processed streamlines accounting practices, and in turn, saves money in the form of labor hours.

Procurement teams can more deftly navigate contract expirations with the aid of analytics. Tracking all agreements and contract expirations across global operations is a painstaking task that many companies face. Complexity is magnified when attempting to monitor multiple agreements with the same vendor across different categories and geographies. Different contract creation dates and varied category manager responsibilities for each contract add to the complication. It is not uncommon for procurement analysts to spend precious days painfully tracking these expirations by manually copying thousands of lines of contract information into spreadsheets… it’s no wonder accidental contract expiration occurs.

When contract expirations inadvertently slip through the cracks, it can prove a sore inconvenience to recreate the entire contract. This cumbersome process increases logistical processing time, and the renegotiation process always poses the threat of increased pricing terms. 

Despite increased demand for organizational efficiency, Chief Procurement Officers (CPOs) are most commonly held accountable to cost reduction metrics. The expectation remains that an increasing number of CEOs and CFOs will either begin to -- or continue to -- require CPOs to “deliver cost savings that are visible to the bottom line (with more robust tracking to prove it).”

For the procurement organization, the path to increased margins can be attained by various means, whether by negotiating more favorable pricing rates with suppliers or reducing contract leakage. The key to understanding where to reduce expenditures lies principally within an entity’s spend analysis solution ; it becomes nearly impossible to identify cost reduction opportunities without a comprehensive view of spend across the business.

Buyers and category managers are measured on savings negotiated and realized year-over-year (YoY). Yet without the right tools to measure and track progress, it can be an onerous task to track the company’s price negotiations over time for each supplier and every product managed.

Visualizing discounts received for a specific set of goods over time also allows the procurement organization to optimize negotiations. The procurement analytics dashboard below illustrates spend analysis information alongside “savings potential” by product and supplier.

With the right analytics tools, procurement teams can arm themselves with salient data points to improve their position during contract negotiations and can reduce off-contract spend on a granular level. 

It is equally important to track negotiated pricing against invoice amounts to determine the organization’s realized savings. 

Analysis of contract utilization and contract leakage by category, business unit, and item allows buyers to assess how well they’ve procured products and services that closely match business needs. Category managers can negotiate more favorable rates for items on an agreement, but this proves ineffective if employees ultimately purchase that item off-contract, or don’t use these products at all.

Let’s imagine that my top 10 items procured account for 90% of my utilization, and the rest of my items – 140 of them – are seldom being purchased. However, my off-contract spend for a similar category is very high. This is a clear signal to investigate this discrepancy further -- should I fold the off-contract items into my agreement for the next negotiation cycle? By looking at agreement utilization by item and supplier, buyers can more accurately predict the amount and type of goods needed, thereby reducing wasteful spending.

As pictured in the visualization above, agreement utilization analysis can help identify opportunities to realign agreements and contracts with purchase needs. Insights into agreement utilization trends can be used to increase spend under management. In the example above, the graph of “agreement amount” versus “agreement utilization” reveals that internal demand for silicon control sleeves from supplier Advanced Network Devices is far greater than demand for the same item from other suppliers. Procurement can use this information to shift future agreement amounts with each supplier to better align with company purchase preferences, thereby reducing rogue spend. 

Full visibility into a company’s entire value chain can be elusive, yet transparency into supplier risk and performance is paramount when it comes to identifying unhealthy sourcing dependencies or mitigating unforeseen disruption. With the help of analytics, procurement professionals gain the tools to navigate the ever-looming threat of volatility.

“...most businesses do not have a good idea of what is going on lower down in their supply chains, where sub-tiers may play small but critical roles. That is also where most disruptions originate, but two-thirds of companies say they can’t confirm the business-continuity arrangements with their non-tier-one suppliers.” – McKinsey [link]

“The ability to detect, measure, and manage risk remains a challenge...Our research found that very few CPOs (18%) were formally tracking the risks that existed in their direct (tier 1) supplier base, and only 15% had visibility beyond that.” -- Deloitte Global 2021 Chief Procurement Officer Survey

For example, the visualization below demonstrates the benefit of viewing multiple supplier performance metrics together to get a comprehensive picture that is otherwise difficult to get through multiple separate reports. 

 Using analytics, a procurement team can determine the optimal supplier for critical project completion. By comparing suppliers according to delivery performance, quality, and spend amount, procurement officers can more fully understand where inherent risk lies. When faced with a tight timeline, the volume of rejected shipments by one vendor may outweigh the benefit of their lower-priced offering.  To avoid the risk of stock-outs, supplier diversification may be necessary.

At Oracle, we believe that technology solutions must rise to meet the new demands of the procurement role. Our cloud procurement and advanced analytics solutions have been built to facilitate strategic decision-making for procurement teams as they navigate complex supply chain challenges. To learn more about the benefits of procurement analytics, check out our latest product tour . 

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10X Source to Pay with GenAI

• Strategic Sourcing
• Supplier Management
• Procurement Technology
• Accounts Payable
• Spend Analysis
• Indirect Procurement
• Procure to Pay
• Source-to-Pay

Winners are not designed by chance but by the choices they make. Successful professionals are the ones who have faced litmus tests and have never been found wanting. They are the dreamers, the rebels, the ones who challenge the status quo and create success stories.

We at Zycus, salute the Winners from Procurement and have documented their triumph in 6 unique case studies encompassing the areas of Spend Analysis, eSourcing, Contract Management, Supplier Management, Savings Management, and Procure-to-Pay Management.

Learn More: Zycus iContract Solution

Download this eBook to read these 6 unique case studies about organizations that have worked towards procurement process excellence with Zycus.

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Related Read:

• Procurement vs. Purchasing: The Definitive Guide
• How procurement automation can help in procurement transformation?
• Direct Procurement vs. Indirect Procurement : Key Differences Explained
• Procurement Risk Management: A Cognitive Data Driven Approach
• Augment your Procurement Function with Lean Procurement Strategy
• Streamline Your Procurement Processes with Integrated Source to Pay Platforms and Autonomous Quick Sourcing Technologies

Navigating the Next Frontier in Retail Procurement: Innovations for a Sustainable Future

ProcureNxt: Revolutionizing S2P with Generative AI for Procurement and Supply Chain Leaders

Experience cognitive procurement software, today, witness the automation & digitization of the source to pay process..

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Bank uses intelligent procurement to cut risk

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Call for change

Following a period of growth generated through mergers and acquisitions, this leading global financial institution wanted to consolidate a fragmented procurement function.

A dynamic market environment that included increasing cost pressure and growing uncertainty, led the company to have a laser focus on improving its compliance. Regulatory changes meant that it needed to verify its procurement processes.

Additionally, an explosion in digital banking capabilities was creating new risks. The sophistication of financial crime and greater number of criminal activities afforded by digitalization, meant the institution needed to upgrade its anti-fraud protections. The financial institution needed to move away from manual processes to intelligent, digital procurement operations.

When tech meets human ingenuity

The company moved to a new digital procurement function by using SynOps to bring together data insights, digital technologies and human talent to deliver breakthrough value.

A blend of offshore, nearshore and onshore resources handle over 250,000 purchase orders and nearly 600,000 invoices every year, which streamlined processes from requisitions through to payments.

Customer Service Desk chatbot helps employees and suppliers to get answers faster to common queries, based on a deep analysis of the type and frequency of past agent interactions.

64% of invoice fields are captured with 98% accuracy by using optical character recognition to automatically process and validate invoices.

A valuable difference

This new operating model has transformed annual spend under management in the following ways:

reduction in cost per invoice.

decrease of invoice receipt cycle time.

of invoices are touchless e-invoices (up from none).

invoices paid on time.

capture of early payment discount.

spend captured via purchase orders.

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How Walmart Automated Supplier Negotiations

• Remko Van Hoek,
• Michael DeWitt,
• Mary Lacity,
• Travis Johnson

Using a chatbot allows the procurement team to focus more on strategic relationships, exceptions, and continuous improvement.

It’s an age-old problem in procurement: Corporate buyers lack the time to negotiate fully with all suppliers. Historically this has left untapped value on the table for both buyers and suppliers. To address this challenge, Walmart deployed AI-powered negotiations software with a text-based interface (i.e., a chatbot) to connect with suppliers. So far, the chatbot is negotiating and closing agreements with 68% of suppliers approached, with each side gaining something it values. This article offers four lessons to deliver results from automated procurement negotiations: move quickly to a production pilot, start with indirect spend categories with pre-approved suppliers, decide on acceptable negotiation trade-offs, and scale by extending geographies, categories, and use cases.

Walmart, like most organizations with large procurement operations, can’t possibly conduct focused negotiations with all of its 100,000-plus suppliers. As a result, around 20% of its suppliers have signed agreements with cookie-cutter terms that are often not negotiated. It’s not the optimal way to engage with these “tail-end suppliers.” But the cost of hiring more human buyers to negotiate with them would exceed any additional value.

• Remko Van Hoek is a professor of supply chain management at the University of Arkansas’s Sam M. Walton College of Business. He previously served as a chief procurement officer at a number of companies.
• Michael DeWitt is vice president of strategic sourcing at Walmart International.
• Mary Lacity is the David D. Glass Chair and Distinguished Professor of Information Systems at the University of Arkansas’s Sam M. Walton College of Business.    
• Travis Johnson is senior director of procurement enablement solutions at Walmart International.

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Case Study: Transform a Procurement Organization

Investco’s purchasing demands were growing faster than their procurement capabilities could handle—the process was at a breaking point.

Despite a time of economic instability with headlines depicting a grim global economy plagued with debt crises, financial volatility, and lower commodity prices, Investco has continued to sustain its competitive advantage in hedge fund management. Similar investment companies recorded portfolio losses, while Investco experienced unprecedented growth, expanding its client roster, maintaining and improving historical returns, and substantially increasing the number of its personnel during this period.

Although Investco retained a competitive advantage, the company was growing organically faster than internal processes could adapt to scale and new demands. This growth challenge was exacerbated by the current procurement practices which varied by business unit with limited enterprise-wide standards or policy. Lengthy cycle times and redundant activities were common across the procurement to pay cycle as a result of this rapid growth and nonstandardized approach. Adding to the challenge, the existing procurement tool, a custom-developed solution, was inflexible and inefficient. While the tool was fixed and rigid, individual business unit processes and approaches were not. Some business units used purchase orders, where others did not. Each business unit had a variety of process and review steps for purchasing goods and services. The legal review process for contracts was not differentiated or scalable based on type of purchase, and the review steps were not consistently applied. Spend authorization thresholds were low relative to the large number of purchases at a smaller dollar value and had not been adjusted to reflect growth. For example, a $50 software license renewal went through the same review stages (technology, legal, and sourcing) as a one-off $100,000 specific piece of IT equipment. Investco’s existing tool did not have workflow capabilities that would meet the new needs of the business, and concerns existed regarding scalability. The inflexible workflow issues combined with poorly designed process also led to late engagement of the required reviewers. For example, a purchase would frequently go through sourcing or contract review before technology review.

The impact of these inefficient processes was being felt as a constraint to leveraging third party goods and services to support firm growth. When the firm identified a need for a new procurement software tool to address these constraints, KPMG was chosen to assist Investco with the selection of the tool and the initial design of the new procurement solution.

© 2024 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit https://kpmg.com/governance .

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities. Any trademarks or service marks herein are the property of their respective owners.

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Artificial Intelligence in Procurement: Case Studies from GEP

• AI-powered solutions can help businesses to automate tasks, improve efficiency, and gain new insights into their procurement strategies.
• AI is well positioned to help businesses to catch the pulse of their customers, understand their needs, resulting in better customer experience.
• With incremental leaps in technology, AI will continue to deepen its impact on procurement software solutions.

October 16, 2023 | Procurement Software

Artificial intelligence (AI) is rapidly transforming the procurement landscape. AI-powered procurement solutions can help businesses to improve their efficiency by automating tasks as well as help them gain deep insights into their operations.

As a leading provider of AI-powered procurement solutions, GEP's solutions are used by businesses of all sizes to improve their procurement performance. Here are a few artificial intelligence procurement case studies that discuss how AI-powered procurement solutions have helped businesses to achieve success.

Artificial Intelligence in Procurement Case Study #1

A global oil and gas company wanted to streamline, unify, and automate its procurement operations. Its existing system was fragmented, with a limited set of automation capabilities and multiple sources of data across systems and business units. Although the client had more than 20,000 B2B customers and its annual revenue was more than $14 billion, it had limited supplier interaction through systems and high sourcing cycle time. As a result, the client wanted to make the procurement system more consistent, efficient and automated.

GEP SMART™, the AI-driven procurement platform, made the client’s procurement a seamless, integrated function for the client, enabling a high level of automation. GEP’s solution also strengthened the client’s entire source-to-contract and procure-to-pay process, encouraged catalog-based buying, and eased the supplier onboarding process.

This case study is a must-read for procurement professionals looking to rid their operation of silos and transform it into a united, efficient function that drives value.

Read the case study here: Global Oil & Gas Company Transforms Procurement Operations With GEP SMART™

Artificial Intelligence in Procurement Case Study #2

A Global 500 heavy equipment manufacturer with more than 400 sites and multiple subsidiaries wanted to transform its entire sourcing processes. The client’s transformation objectives included streamlining procurement operations, improving spend visibility and forecast of material costs. The chose GEP as a partner to deploy the best-in-class source-to-pay (S2P) software in order to provide a boost to its spend, sourcing and category management functions. With the help of AI-powered GEP SOFTWARE™, the manufacturer was able to unify and replace its disparate legacy systems that were slowing down its global operations. GEP was able to streamline the workflow and capture all direct material sourcing process data in one unified system, making all demand visible in one place for the first time.

The software functions implemented by GEP included sourcing, spend, analytics and category strategy. The procurement software solution’s intuitive interface helped the client drive user adoption of sourcing/RFX and CLM tools — from under 20% to more than 80%. This helped the client gain much-needed visibility into spend, as well as real-time insights into suppliers, cost breakdowns and risk, enabling it to forecast material needs more accurately and improve sourcing efficiency, saving millions of dollars in costs.

Read the case study here: Global Heavy Equipment Manufacturer Saves $45M in Direct Material Sourcing With GEP SOFTWARE

Artificial Intelligence in Procurement Case Study #3

A leading global pharmaceutical company wanted to transform its research and early development (R&ED) infrastructure with a bespoke, data-driven and AI-enabled platform that would facilitate modern clinical trials.

The pharma giant needed new-age infrastructure that would enable it to keep up with rapidly changing requirements in clinical trials. The company partnered with GEP to achieve this goal. GEP adopted a multi-pronged approach to help the firm identify its needs and select a suitable cutting-edge platform that transformed the R&ED infrastructure.

This case study demonstrates how the strategic partnership enabled the company to speed up drug development, improve patient experience and enhance the operational efficiency of its clinical trials.

Read the case study here: How GEP Helped A Pharma Giant Transform R&ED Procurement Infrastructure and Reduce Drug Development Time

Advantages of Integrating Artificial Intelligence in Procurement

As AI continues to make incremental leaps, the impact on procurement will continue to deepen. Therefore, businesses that embrace AI will be well-positioned to succeed in the future. Some key benefits include:

Increased Competitiveness

By automating tasks, improving efficiency, and reducing costs, AI can help businesses to become more competitive in their markets.

Improved Customer Experience

Artificial intelligence with all its technological advancements is well positioned to help businesses to catch the pulse of their customers, understand their needs, resulting in better customer experience. From personalizing product recommendations to providing instant customer support to providing real-time resolutions, AI can provide quick and efficient support.

More Innovation

AI can help businesses to develop new products and services more quickly and efficiently. For example, enterprises can use AI to quickly analyze customer data and identify new product opportunities, and accordingly devise strategies and production methods.

AI is rapidly transforming the procurement landscape. AI-powered solutions can help businesses to automate tasks, improve efficiency, and gain new insights into their procurement strategies. Be it heavy engineering, oil and gas or the life sciences industry, artificial intelligence in procurement will have a deeper impact on sustainability practices of businesses – including reducing waste, improving energy efficiency, and identifying sustainable suppliers.

Tags: Artificial Intelligence in Procurement , AI in procurement

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Case studies showcase replicable sustainable, circular, and innovation procurement approaches and strategies. Our resource centre contains over 200 case studies which detail the methods used, the obstacles overcome and successes achieved in implementing sustainable public procurement.  Below is a selection of representative case studies that contain inspiration and guidance on how to implement sustainable, circular, and innovation procurement in relevant sectors.

Mainstreaming SPP

Metropolitan city of rome capital, developing a monitoring system for gpp.

The Metropolitan City of Rome Capital has been monitoring GPP since 2009, and in 2016, it introduced a new monitoring system linked to the public procurement electronic information system. This innovative, digital system makes it possible to require departments to attach relevant environmental criteria to procurement procedures.

City of Barcelona

Sustainable city council programme.

Barcelona City Council has been implementing SPP for almost two decades, and in 2006 it launched the +SCC programme which introduced firm purchasing commitments which are applicable to all council departments. Participatory processes have been central to the development of the +SCC Programme, and were used to develop strategic goals and define compulsory criteria for 12 high priority procurement categories.

Transport & Mobility

Catalunya region, cleaning the air through clean vehicle procurement.

The Catalan Government has multi-pronged approach to encouraging SPP of vehicles, including: provision of Green Vehicle Procurement Guide, development of specific government agreements to encourage procurement of low emission vehicles, supporting the Catalan Ecolabel, and promoting sustainable mobility.

Food & Catering

The city of copenhagen, supplying seasonal and diverse organic fruit and vegetables.

The City of Copenhagen is dedicated to ensuring its food and catering service is healthy, sustainable and appetising. The City has a target to supply 90% organic food across its 900 municipal canteens. In 2014 the municipality ensured that bids for fruit and vegetable contracts would include a variety of different sorts, varieties and types. This was the Procura+ Award winning tender in 2016 for Sustainable Procurement of the Year.

Plavinu Municipality

Testing circular school catering.

Plavinu Municipality wanted to sustain good quality catering in their school for a reasonable price. They also wanted to include circular aspects in the procurement in order to be more sustainable. The catering tender provided the opportunity to test circular economy aims, and is the first example of a circular public procurement supported by the Circular PP project.

Office Supplies & Stationary

Government of flanders, encouraging sustainable choices through an office supply framework (p+ awards winner 2018).

Flanders has set a target that at least 50% of products purchased in its latest office supply framework are sustainable. To achieve this, it used a mix of technical specifications and award criteria to encourage the inclusion of sustainable stationary products in the product inventory. In addition, it used contract performance clauses to ensure that the contractor works with users of the framework to ensure that the amount of sustainable products they are choosing is increasing over the lifetime of the contract.

MINISTRY OF DEFENCE, NETHERLANDS

Procurement of textiles from recycled fibres.

In its procurement of towels and overalls, the Ministry of Defence of the Kingdom of the Netherlands (MODNL) followed a circular policy and explored requirements around recycled fibres. The winning bids creating estimated savings of 233,000,000 litres of water, 69,000 kg CO2 and 23 MJ of energy. This was the Procura+ Award winning tender in 2017 for Innovation Procurement of the Year.

Cleaning Products & Services

Government of catalunya, socially responsible cleaning framework using green products.

The framework agreement for cleaning services, valid between December 2014 and November 2017, had the purpose  to  carry  out  environmentally-friendly  cleaning  services  in  buildings, premises and facilities with an administrative use.

Waste Management

Netherlands, efficient waste water treatment in the netherlands.

A competitive dialogue process was launched by Waterschapsbedrijf Limburg (WBL) for the design, construction, maintenance and operation of a waste water treatment plant (WWTP) in Venlo, with a high production of biogas, and reduced sludge.

City of Helsinki

Renewing the it equipment of the city of helsinki with low-carbon solutions.

This tender represents a model for fast IT renewal processes achieving remarkable energy savings. Estimations are based on approximated volumes for 7,000 basic computers, and 2000 laptops and 2,000 monitors. Calculations show that total lifetime cost savings for electricity are estimated to be 288,000€ and 27,4% CO2 emissions saved.

Construction, Buildings & Infrastructure

Rijkswaterstaat, sustainable reconstruction of the motorway a6.

Rijkswaterstaat (RWS) procured works and services to widen the A6 motorway, aiming for the motorway to be energy neutral after construction. RWS developed instruments to calculate the CO2 emissions, then selected a tender using a combination of price and quality according to the economically most advantageous submission. This was the Procura+ Award winning tender in 2016 for Tender Procedure of the Year.

Hyvinkää Municipality

Procuring the first nordic swan ecolabelled pre-school in finland.

In 2015, Hyvinkää Municipality set an ambition to procure the first ecolabelled pre-school in Finland. By building a pre-school to the standards necessary to achieve the Nordic Swan Ecolabel, Hyvinkää was able to promote a range of sustainability considerations, including promoting energy use and using sustainable building materials and methods. The winning bidder not only built the school, but also managed the ecolabel verification process, which the school successfully achieved in August 2017. This was the Procura+ Award winning tender in 2017 for Sustainable Procurement of the Year.

Public Health Wales

Reuse and remanufacture of office furnishings.

When Public Health Wales (PHW) moved offices in 2016, it wanted the successful bidder to use as much of its existing office equipment, furniture and flooring as possible, as well as supplying remanufactured goods from other sources. The winning consortium of social enterprises supplied over 2,500 items, with only 6% from new stock. The circular approach diverted 41 tonnes of waste from landfill with a CO2 saving of 134 tonnes.  This was the Procura+ Award winning tender in 2017 for Tender Procedure of the Year.

Bio-based products

Region of skåne, disposable bio-based aprons for skåne’s healthcare sector.

Innovation-oriented public procurement to purchase renewable (bio-based) aprons for the health sector in the Swedish region Skåne. The Regional Council decided to change their purchasing approach for protective disposable aprons to one which results in a purchase of a more environmentally-friendly product alternative. Skåne’s healthcare system in fact disposes of five million aprons every year (approximately 100 million for the entire Swedish healthcare sector), which together makes them one of the products with the highest carbon footprint.

Timber & Forestry

City of madrid, responsible timber procurement: from campaigning to implementing.

A case study on Madrid implementation of responsible timber procurement. Madrid is listed in the ‘green’ list of the WWF campaign “Cities Friends of the Forest”, amongst the top scoring in Spain for implementing procurement policies that give preference to suppliers of wood certified with the maximum guarantee of social and environmental criteria.

Transport for London

Innovative lighting procurement for london's underground network.

Best practice case study as part of the European Commission GPP In practice series focusing on TfL's extensive market engagement for the procurement of innovative lighting. TfL introduced a new WLC and performance based process for lighting. The process has been met with such success that it will now be applied to a range of other assets commonly found across London’s transport network.

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Artificial intelligence in procurement: real-world case studies, introduction to ai in procurement.

Artificial Intelligence (AI) has revolutionized numerous industries, and procurement is no exception. With the ability to analyze vast amounts of data, identify patterns, and make data-driven decisions in real-time, AI is transforming the way organizations manage their procurement processes . From supplier management to spend analysis and inventory optimization, AI is streamlining operations, enhancing efficiency, and driving cost savings.

In this blog post, we will explore real-world case studies that highlight how companies have successfully implemented AI in procurement. We’ll delve into specific examples where AI has had a significant impact on supplier management , spend analysis, and inventory optimization. Furthermore, we’ll discuss the challenges and limitations of using AI in procurement and explore potential future possibilities for this rapidly evolving technology.

So grab your virtual shopping cart as we embark on an exciting journey through the world of artificial intelligence in procurement – where cutting-edge technology meets supply chain excellence!

Advantages of AI in Procurement

Artificial Intelligence (AI) has revolutionized various industries, and procurement is no exception. The integration of AI technology in procurement processes offers numerous advantages that can enhance efficiency, accuracy, and decision-making.

One of the primary benefits of AI in procurement is its ability to automate repetitive tasks. With machine learning algorithms, AI systems can analyze large volumes of data quickly and accurately. This saves valuable time for procurement professionals who can now focus on more strategic activities such as supplier relationship management or contract negotiation.

Furthermore, AI-powered analytics tools enable organizations to gain deep insights into their spend patterns. By analyzing historical data from multiple sources, including invoices and contracts , AI algorithms can identify cost-saving opportunities and potential risks. This helps companies make informed decisions when it comes to negotiating prices with suppliers or optimizing sourcing strategies.

Another advantage lies in predictive analytics capabilities offered by AI systems. These technologies use past performance data to forecast future demand trends accurately. By leveraging this information, organizations can optimize their inventory levels, reducing both excess stock costs and stockouts.

Additionally, the implementation of chatbots powered by natural language processing allows for streamlined communication between buyers and suppliers. Chatbots provide instant responses to inquiries about product availability or order status without requiring human intervention.

Moreover, incorporating AI into supplier management processes improves the evaluation process by providing a comprehensive assessment based on objective criteria rather than subjective judgment alone. This ensures fair treatment for all vendors while helping organizations select the most suitable partners based on predefined parameters such as quality standards or delivery timeframes.

In conclusion,

The advantages presented above are just a glimpse into how AI is transforming procurement practices across industries globally. From automating mundane tasks to offering advanced analytics capabilities for better decision-making; there’s no denying that the integration of artificial intelligence holds immense potential for improving operational efficiency and driving cost savings in procurement departments worldwide.

Real-World Case Studies

Now that we have explored the advantages of artificial intelligence (AI) in procurement, let’s take a closer look at some real-world case studies where companies have successfully implemented AI to streamline their procurement processes.

Company A, a global manufacturing firm, decided to harness the power of AI for supplier management. By utilizing advanced machine learning algorithms, they were able to analyze and evaluate potential suppliers based on various factors such as quality, cost, and delivery reliability. This not only saved them valuable time but also ensured better decision-making when it came to selecting reliable suppliers.

In another example, Company B used AI for spend analysis. With vast amounts of data flowing through their procurement systems daily, it was becoming increasingly challenging for them to identify savings opportunities. By implementing an AI-powered spend analysis tool, they were able to automatically categorize and analyze spending patterns across different categories. As a result, they could pinpoint areas where cost reduction strategies could be applied effectively.

Company C faced inventory management challenges due to unpredictable demand fluctuations. They turned to AI technology and implemented predictive analytics models that took into account historical sales data along with external factors such as weather conditions or holidays. This allowed them to optimize their inventory levels by accurately forecasting demand patterns and minimizing stockouts while avoiding excess inventory.

These real-world case studies demonstrate how AI can revolutionize traditional procurement practices by enhancing decision-making capabilities and improving overall efficiency. However, it is important to acknowledge that implementing AI in procurement comes with its own set of challenges and limitations which we will explore in the next section.

Stay tuned as we delve deeper into the potential roadblocks organizations may face when adopting AI solutions in procurement!

A. Company A: Implementation of AI for Supplier Management

Company A, a leading player in the procurement industry, has successfully implemented artificial intelligence (AI) for supplier management. By leveraging AI technology, they have revolutionized their procurement processes and achieved significant improvements.

One of the key advantages of using AI in supplier management is the ability to streamline and automate tasks that were previously time-consuming and manual. With AI-powered systems, Company A can now easily collect, analyze, and categorize large volumes of data from various sources. This enables them to make informed decisions based on real-time insights.

Moreover, AI algorithms help identify patterns and trends in supplier performance data. By analyzing historical data on factors such as delivery times, quality standards, and pricing accuracy, Company A can accurately predict potential risks or opportunities with suppliers. This allows them to proactively manage their relationships with suppliers and ensure optimal performance.

Additionally, by implementing AI for supplier management, Company A has greatly improved their efficiency in handling negotiations and contracts. The system’s natural language processing capabilities enable faster contract review by extracting relevant information from documents automatically. This saves valuable time for both Company A’s procurement team as well as their suppliers.

Furthermore, AI helps enhance transparency throughout the supply chain by monitoring compliance issues closely. Real-time alerts are generated when deviations occur from predefined parameters or regulations set by both parties involved – allowing timely corrective actions to be taken.

In conclusion (as per instruction), through the implementation of AI for supplier management purposes at Company A we see clear benefits arising across multiple aspects including streamlining tasks via automation; making informed decisions utilizing accurate predictions; improving efficiency during negotiations & contract reviews; enhancing supply chain transparency via effective monitoring while ensuring compliance adherence throughout

B. Company B: Utilizing AI for Spend Analysis

Company B, a leading player in the procurement industry, has successfully harnessed the power of Artificial Intelligence (AI) for spend analysis. By leveraging AI technologies, they have revolutionized their approach to understanding and managing their spending patterns.

Traditionally, conducting a thorough spend analysis was a time-consuming and manual process that required combing through vast amounts of data. However, with the implementation of AI algorithms and machine learning models, Company B has been able to streamline this task significantly.

The use of AI in spend analysis allows Company B to identify trends and patterns in their spending behavior quickly. These insights help them make more informed decisions about supplier selection, contract negotiation, and cost optimization strategies. With AI’s ability to process large volumes of data at lightning speed, the accuracy and efficiency of these analyses have greatly improved.

Furthermore, AI-powered tools enable real-time monitoring of spending activities across different departments or business units within Company B. This level of visibility provides valuable information for identifying potential areas for cost savings or opportunities for consolidating suppliers.

In addition to improving efficiency and decision-making processes related to spend management, AI also helps Company B detect anomalies or irregularities in their financial transactions. By automatically flagging any suspicious patterns or discrepancies in spending behavior, they can proactively address issues such as fraud or non-compliance before they escalate.

By utilizing AI for spend analysis purposes, Company B has gained a competitive edge in the procurement landscape. The ability to analyze massive amounts of data quickly and accurately empowers them to optimize costs effectively while ensuring compliance with regulatory standards.

Stay tuned as we explore more real-world case studies on how companies are integrating Artificial Intelligence into various aspects of procurement!

C. Company C: Using AI to Optimize Inventory Management

Company C is a perfect example of how artificial intelligence can revolutionize inventory management. By harnessing the power of AI, they were able to optimize their inventory levels and streamline their operations.

With the help of AI algorithms, Company C was able to accurately forecast demand patterns and identify potential supply chain disruptions. This allowed them to make data-driven decisions and ensure that they always had the right amount of inventory on hand.

Additionally, AI provided real-time insights into customer preferences and market trends. By analyzing vast amounts of data from various sources, Company C could anticipate shifts in consumer behavior and adjust their inventory accordingly. This not only prevented overstocking or understocking but also helped them stay ahead in a competitive market.

Furthermore, AI-enabled predictive analytics helped Company C identify potential risks in their supply chain. By continuously monitoring factors such as supplier performance, lead times, and transportation delays, they were able to proactively address any issues before they escalated into major problems.

By leveraging AI for inventory management, Company C achieved increased efficiency and cost savings while ensuring high customer satisfaction due to timely deliveries. It’s clear that AI has immense potential in optimizing inventory management processes across industries. As technology continues to advance, we can expect even more significant advancements in this field!

Challenges and Limitations of AI in Procurement

Implementing artificial intelligence (AI) in procurement processes has undoubtedly brought numerous benefits to companies. However, it is important to acknowledge that there are still some challenges and limitations associated with this technology.

One significant challenge is the quality of data input. AI relies heavily on accurate and relevant data to generate meaningful insights. If the data fed into the system is incomplete or inaccurate, it can lead to flawed analysis and decision-making.

Another challenge lies in integrating AI systems with existing procurement infrastructure. Many organizations already have established software platforms for managing their procurement activities. It can be complex and time-consuming to integrate AI technologies seamlessly into these existing systems without disrupting ongoing operations.

Furthermore, there may be concerns about the ethical implications of using AI in procurement. For instance, biases embedded within algorithms could potentially lead to unfair supplier selection or pricing decisions.

Additionally, a limitation of AI technologies is their inability to fully replace human judgment and intuition. While they excel at processing vast amounts of data quickly, they may struggle when faced with complex negotiations or strategic decision-making that requires a deep understanding of business contexts.

Cost can also be a limitation for some organizations looking to adopt AI solutions for procurement. Implementing advanced AI technologies often requires substantial investment in training employees, acquiring new hardware/software systems, and maintaining them over time.

These challenges and limitations should not discourage organizations from leveraging the power of AI in their procurement processes but rather serve as points for consideration when implementing such technology successfully.

Future Possibilities and Potential Impact on the Industry

The advancements in artificial intelligence (AI) have already shown great promise in transforming procurement processes. However, the potential of AI in procurement is far from being fully realized. As technology continues to evolve at a rapid pace, there are several exciting possibilities for the future of AI in this industry.

One area where AI can make a significant impact is predictive analytics. With access to vast amounts of data, AI algorithms can analyze historical purchasing patterns and market trends to forecast future demand accurately. This capability can help organizations optimize their inventory levels, reduce costs , and improve overall supply chain efficiency.

Another exciting possibility is the integration of natural language processing (NLP) into procurement systems. NLP enables machines to understand and interpret human language, allowing buyers to interact with systems using conversational interfaces or voice commands. This advancement could streamline procurement workflows by eliminating manual data entry tasks and enhancing user experience.

Furthermore, machine learning algorithms can continuously learn from past experiences and adapt their decision-making processes accordingly. In procurement, this means that AI-powered systems can become increasingly efficient over time as they gather more data about supplier performance, market conditions, pricing trends, etc.

In addition to these advancements within individual organizations’ operations, there is also potential for collaborative platforms powered by AI that connect multiple buyers and suppliers across industries. These platforms could facilitate better communication among stakeholders while enabling real-time price monitoring and negotiation support.

While the possibilities are certainly intriguing, it’s important to acknowledge that integrating AI into procurement processes comes with challenges as well. Data quality issues must be addressed so that accurate insights can be generated from large datasets. Furthermore, organizational resistance or lack of understanding may hinder successful implementation efforts.

In conclusion,…

(Word count: 297 words)

Conclusion Artificial Intelligence has revolutionized the field of procurement, offering significant advantages and real-world benefits for businesses. Through the case studies mentioned above, we have witnessed how AI can enhance supplier management, optimize spend analysis, and streamline inventory management.

Companies like Company A have successfully implemented AI to automate supplier onboarding processes and gain better visibility into their supply chain. This has resulted in improved efficiency, reduced costs, and enhanced collaboration with suppliers.

Similarly, Company B leveraged AI to analyze vast amounts of spending data quickly and accurately. By doing so, they were able to identify cost-saving opportunities, negotiate better contracts with vendors, and make more informed purchasing decisions.

Furthermore, Company C utilized AI algorithms to optimize their inventory management system. As a result of predictive analytics capabilities provided by AI technologies, they could forecast demand accurately, avoid stockouts or excess inventory situations while maximizing profitability.

However beneficial it may be; implementing AI in procurement does come with its challenges. Obtaining high-quality data sets for training the algorithms is crucial but can often be time-consuming and complex. Additionally adjusting existing systems and processes to incorporate new technologies requires careful planning and change management strategies.

Looking towards the future brings endless possibilities for AI in procurement. Advancements such as natural language processing (NLP) will enable more sophisticated communication between humans and machines in procurement tasks like contract review or negotiation process . Machine learning models might become even more accurate at predicting market trends based on historical data analysis resulting in smarter decision-making processes within organizations.

AI’s integration into procurement operations offers immense potential for businesses across various industries to transform their sourcing practices fundamentally. By leveraging advanced technologies like machine learning algorithms or natural language processing, organizations can achieve greater efficiency, cost savings, and strategic insights from their procurement functions . While there are challenges in terms of implementation, the benefits far outweigh them when considering long-term gains. It is clear that artificial intelligence is here to stay and will continue to shape the future of procurement , enhancing effectiveness and driving innovation in

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Tata sons harnesses group synergy with platform-based sourcing services.

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Tcs tap™: a cloud-based ai-powered source-to-pay platform.

Leverages unique participative and active collaboration model to drive sustainable sourcing

Localized procurement, diverse needs, and lack of collaboration led to fragmented sourcing.

Business 4.0 TM world offers opportunities for the organizations to harness abundant resources. Harnessing ecosystems is one of the key aspects of this abundance. Tata Sons being a promoter of Tata Group, a large business conglomerate, needed to tap opportunities across group companies to drive sustainable energy, reduce wastage, and promote responsible and profitable supplier relationships. Localized procurement, lack of visibility into demand, and collaboration challenges prevented Tata Group from harnessing group synergy. Sustainable sourcing was seen as a business imperative requiring scale and synergy.

TCS sourcing platform helps Tata Sons fast-track sustainable and inclusive sourcing

Tata Sons wanted to standardize and harmonize sourcing process across the group companies, simplifying it for the buyers and bringing greater transparency to harness demand. They selected TCS sourcing platform and services, in order to leverage category expertize, proven sourcing process and best practices, unique collaboration model, and technology leverage. TCS platform-based sourcing helped Tata Sons aggregate and rationalize diverse needs across the group companies and rapidly strategize group-level sourcing while overcoming challenges of scale, complexity, supply risk, quality, and cost. The solution encompasses an active engagement model, aggregating complex demand, early supplier feedback, and establishing critical success factors, cross-functional collaboration, inclusive sourcing, and RFX management. The solution enables rapid formulation and execution of sourcing strategy, while bringing long-term cost certainty for the group companies. Tata Sons has transformed the group sourcing and started to reap benefits in terms of savings through competitive pricing, most favorable contract terms, and active use of contracts.

TCS’ platform-based sourcing enabled Tata Sons to harness group synergy

Indriyajit Sethi, Vice President and Head Group Strategic Sourcing

Rapid execution through active engagement helped tata sons harness demand across the group         .

Adopting a unique collaboration model, rationalizing complex demand, and deploying a first-time-right sourcing approach helped Tata Group harness scale and synergy across businesses. Tata Sons achieved early impact with rapid execution, while ensuring long term benefits.

savings across categories

reduced energy consumption

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Negotiating With A Chatbot: A Walmart Procurement Case Study

Talking Logistics

MAY 1, 2023

Read more The post Negotiating With A Chatbot: A Walmart Procurement Case Study appeared first on Talking Logistics with Adrian Gonzalez. More than two-thirds of the respondents (68%) said they weren’t using AI and.

Case Study: NXP Semiconductors

Procurement Academy

OCTOBER 18, 2023

The challenge Following the appointment of NXP’s Chief Procurement Officer, Jeff Wincel , a new global strategy was implemented that included a pillar dedicated to ‘people and success’. As part of this important pillar, a professional development program was created to transform the procurement department.

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Case Study: BNP Paribas

NOVEMBER 8, 2023

The solution BNP Paribas’ Procurement function chose Skill Dynamics as their preferred partner for multiple reasons including: User experience of our Learning Management System (LMS). We wanted to ensure our procurement teams were able to manage the market exigencies, by both improving our organization and our employees’ expertise.

Case Study: Ewellix

MARCH 2, 2023

After implementing several new procurement processes, Group Director Purchasing, Nicolas Robardet, identified a number of competencies which required development within the team. The results Ewellix launched the training to their procurement and supply chain team in early November 2022 and have already seen results.

How One Manufacturer Used GEP SOFTWARE To Save $45M in Direct Material Sourcing

Advertiser: GEP

Multiple legacy systems prevent procurement from standardizing processes and tracking what they’re spending with each supplier.

Case Study: Huber+Suhner

MARCH 30, 2023

The challenge With such a vital product at stake, they needed to ensure their ambitious and dedicated procurement teams were equipped with the right training to ensure they can deliver everything needed to get their cutting-edge technologies into their customers hands. We’re looking forward to expanding this to our supply chain team too.”

Companies Using ERP: Case Studies

SEPTEMBER 22, 2021

This type of software is used by businesses to plan and oversee routine operations, such as supply chain management, manufacturing, services, project management, customer relationship management, risk management, compliance, accounting and procurement . Case Study #1: Noble Biomaterials. Case Study #2: Veoneer.

Getting Started with AI in Supply Chain Management (Lessons from the Past)

MAY 10, 2023

As I highlighted last week in “Negotiating With A Chatbot: A Walmart Procurement Case Study ,” despite all the hype surrounding Artificial Intelligence (AI), relatively few companies are using AI in their supply chain or logistics operations today. Simply put, we’re still in the very early adopter stage.

Judging Supply Chain Improvement: Campbell Soup Case Study

AUGUST 11, 2014

We would not have succeeded without a team effort across R&D, the business leaders, and SC disciplines of engineering, procurement , and manufacturing. This is challenging work because it is highly dependent on cross-functional collaboration.

TMS for SMB: A Case Study with Carhartt

OCTOBER 19, 2016

Procurement & Contract Management. Carhartt evaluated several TMS solutions across a broad set of functional requirements, including: Order Management. Location Management. Capacity Management. Rate Management. Carrier Communication. Planning & Optimization. Shipment Management. Visibility & Event Management.

ANCA Streamlines Procurement with the QAD Supplier Portal

MARCH 31, 2020

In some cases , only one or two companies in the world can produce the components ANCA needs. Inevitably, the procurement process is complex and challenging to manage. Our full case study provides details of how the QAD Supplier Portal helped ANCA streamline their purchasing processes. Procurement System Improvement Goals.

Procurement Digital Transformation Sets the Stage for Delivering Game-Changing Benefits for Ahlsell

NOVEMBER 3, 2021

Acting as a complementary partner to their suppliers, Procurement is a central target and strategic function for Ahlsell. One of the early objectives of Procurement was to optimize tail supplier management. Provide a consumer-like experience for procurement stakeholders.

Supply Chain Innovation + Automation: How Körber is Positioning Procurement for the Future

JUNE 15, 2022

At our annual Ivalua NOW event in Paris, France–Ivalua asked, “Is your procurement team prepared to respond to unexpected supplier chain issues with speed and agility?”. Automation and innovation are at the forefront of the supply chain industry with procurement acting as a key enabler in the process. Körber at a Glance….

The Science and the Art of Procurement

MARCH 28, 2019

As we move towards a new decade is the emphasis in the procurement world changing – are we going to see a new age, where the Art of Procurement comes to the fore? Technology has radically changed procurement activities and procurement roles across virtually all our spheres of activity.

How Food Manufacturing Software Drives Profit [w Case Studies]

AUGUST 11, 2020

A smart food manufacturing software solution is able to leverage the power of automation to further enhance the efficiency of procurement , production, distribution and sales. With the right software at their disposal, procurement managers are better able to integrate their data with their suppliers. CASE STUDY 1: Gourmet Organic Herbs.

4 ways IT & Procurement team collaboration increases resilience

JULY 21, 2020

The Hackett Group report recommendations on IT & Procurement collaboration and how it can benefit your organization in the time of Covid-19 and beyond. This study includes input from a range of industries via interviews conducted with pairs of IT and Procurement leaders.

Role-Based Training for Procurement & Supply Chain Teams

OCTOBER 19, 2023

A generic approach to training is not the solution to the increasing range of challenges facing procurement teams. This means that skills enhancement across wider roles is required for procurement professionals, with a focus on role-specific learning. For instance – improved communication skills or legal contract knowledge.

6 Essential Procurement Training Courses for Professionals: How To Begin and Advance Your Career in Procurement

JULY 3, 2023

In today’s fast-paced and competitive business landscape, organizations across industries are realizing the immense value of effective procurement practices. Procurement professionals play a vital role in driving operational efficiency, cost savings, and strategic decision-making. But how do you get started? Do not worry!

Client Case Study Video Interview

APRIL 19, 2019

Client Case Study Video Interview with Lucid Motors, Menlo Park, CA. We did a comprehensive market analysis of the majority of the procurement tools that were available to us and we decided upon the Eyvo eBA system due to a combination of high functionality and reasonable cost.

New Case Study on Alcatel-Lucent Sustainable Procurement Best Practices

JULY 9, 2015

Case Study . We are pleased to publish a new case study detailing Alcatel-Lucent’s sustainable procurement program. Download the Case Study from the library. Long-time EcoVadis client, Alcatel-Lucent, has done all this and more.

JAGGAER Webinar with Accenture Strategy and Attijariwafa Bank Case Study: Accelerating Trust in Banking – Internal, Suppliers and Customers

OCTOBER 22, 2020

He was joined by Youness Taghrichte, Head of Procurement at Attijariwafa Bank, together with Richard Hogg, VP Northern Europe, JAGGAER, and Javier Lopez, Senior Value Engineer, JAGGAER. Spend management and procurement will play a key role in enabling banks to achieve their efficiency targets while managing supply chain risks,” he added.

7 Traits of Great Supply Chain Leader: A Case Study of Tim Cook

Supply Chain Opz

OCTOBER 3, 2013

Steve Jobs met Tim Cook In 1998, Steve Jobs invited Tim Cook for the interview while Cook was working as a procurement and supply chain leader at another company. Jobs also run the day-to-day operations, which resulted in the relationship problems with key vendors and third party logistics providers.

Women in Procurement: Recent Recruits

JULY 29, 2022

We’re proud to champion women in the procurement sector at Proxima and are passionate about supporting the careers of the women in the business through every stage of their careers. Prior to joining us, she worked client side leading strategic marketing and communications projects from a procurement standpoint.

Women in Procurement: Recent Recuits

El Niño Impacting Key Materials: Palm Oil Case Study

APRIL 6, 2016

In this brief case study , we examine El Niño’s recently observed impact on the global output of palm oil and its prices, provide an overview of palm oil’s diverse industrial applications, and discuss how planning for “bigger picture” supply chain risk elements can help inform your company’s resilient procurement practices.

7 Mini Case Studies: Successful Supply Chain Cost Reduction and Management

Logistics Bureau

MAY 24, 2019

The following five mini case studies explore a few high-profile companies that have managed to sustain their supply chain cost-reduction efforts and keep expenses under control. Procurement analysis. Of course, the above case studies are merely summaries of the changes these high-profile brands made to their supply chains.

IT Procurement: How to Purchase IT Products and Services Effectively

MAY 22, 2023

This process, known as IT procurement , requires comprehensive steps with clear objectives and vendor selection criteria to ensure that technology investments align with business goals and yield a return on investment (ROI). This article encompasses the best practices for planning and executing successful IT procurement strategies.

Next Generation Supply Chain Risk Management: A Case Study

DECEMBER 16, 2015

A case in point is offered by AGCO. We are entering an era where it is becoming possible to detect supply chain risks much more quickly. AGCO is a global leader in the design, manufacture and distribution of a wide range of agricultural equipment.

The Procurement Summit – 17 November 2015

Supply Chain Movement

APRIL 23, 2015

The Procurement Summit. The Procurement Summit provides senior purchasing, sourcing and supply chain executives across the North of England with an unmissable opportunity to keep up-to-date with the latest industry innovations, best practice and new technology solutions. Date: 17 November 2015. Venue: The Midland Hotel, Manchester.

New BSR Case Study: Pharma giant Bayer tackles sustainable supply chain with TfS chemicals initiative

JULY 27, 2015

EcoVadis is pleased to publish this new case study , facilitated by BSR, which examines the huge challenges, and the methodical approach of Bayer in driving success in their sustainable procurement initiative. This case study was prepared by BSR, in partnership with EcoVadis. .

IBM Case Study Webinar: How AI can revolutionize your supply chain NOW

NC State SCRC

NOVEMBER 15, 2017

The focus was on the impact of AI on supply chain decision-making, and I spoke about a recent case study on IBM’s application of Watson to their own supply chain. I learned a lot from these individuals, and urge anyone who is interested to take the time to listen to it, and read the case study on the topic.

Digital Procurement Improves Supply Chain!

Supply Chain Game Changer

SEPTEMBER 9, 2020

Digital Procurement article and permission to publish here provided by Katherine Barrios of xeneta.com. The Hackett Group has recently released their analysis of their procurement benchmarking database. It demonstrates the advantages of working with a digital procurement strategy. Important Digital Procurement Trends.

The procurement Summit 2016

AUGUST 31, 2016

The procurement Summit 2016. Building on the huge success of eWorld Procurement & Supply – which has been running bi-annually in London since 2001 – the new Procurement Summit will bring together 150 purchasing and finance professionals from across the commercial, public and third sectors. Procurement Automation.

Global Supply Chain & Procurement Summit 2015

JULY 21, 2015

Global Supply Chain & Procurement Summit. parity.com/global-supply-chain- procurement -summit/. Achieving this goal relies mainly on the Procurement and Supply Chain Management team. Achieving this goal relies mainly on the Procurement and Supply Chain Management team. Date: 15-16 October, 2015. Organisation: C-Parity.

Lull Case Study: Order Fulfillment that Doesn’t Keep You Up at Night

OCTOBER 11, 2018

Get the PDF of Lull’s case study >> Challenges to Order Fulfillment. Negotiating and procuring separate 3PLs would have taken months, but with FLEXE, we were able to stand up facilities in a matter of weeks.”. The post Lull Case Study : Order Fulfillment that Doesn’t Keep You Up at Night appeared first on FLEXE.

When the Rubber Hits the Road

SEPTEMBER 28, 2022

As a result, companies are writing new case studies through their actions or inaction. In this volatile world, efficient procurement led by a CFO is not the answer. The supply chain team’s past thirty-two months of disruption were a long, winding road full of surprises. Business continuity is the overarching issue.

Just How Dire is the COVID Healthcare Global Supply Chain Response? (A Case Study)

AUGUST 28, 2020

Every entity is sort of on their own to procure a test they think is needed, and of course the model is even more complicated because the health systems must bow to the insurance companies, who will only pay for that test for which they have their own oversight, and which they will allow, as well as the fee and reimbursement for that test.

What does it take to build a best-in-class supply chain?

MARCH 7, 2018

by Alexa Cheater Avaya: A supply chain management case study . Procurement spend analysis. Read Aberdeen Group’s in-depth case study . Trust in the transformation. That’s what high-tech giant Avaya had to do when the company decided to radically change up how it manages its supply chain. Supply planning.

Adexa is Recipient of 2023 Top Supply Chain Projects Award

JUNE 21, 2023

About Supply & Demand Chain Executive Supply & Demand Chain Executive is the only supply chain publication covering the entire global supply chain, focusing on trucking, warehousing, packaging, procurement , risk management, professional development and more. Go to www.SDCExec.com to learn more.

Achieving the Value of Digital Twins

DELMIA Quintiq

JUNE 5, 2023

While the promise is clear, and we see a growing number of case studies proving the benefits of the approach, many companies struggle to create and maintain digital twins. Please take the time to watch the webinar replay to learn more from research, case studies , and a very valuable question-and-answer session.

AI and All That – Ivalua Now Looks to the Future

APRIL 12, 2019

Anyway, there were also a couple of very good customer cases studies , but we’ll save those for a future discussion and focus on AI here. Procurement leaders are being given more and more priorities, he said, but there are obstacles in their way that stop them delivering strategic decision making and real value.

Rockwell Automation: A Case Study in Supply Chain Excellence

DECEMBER 4, 2018

As a B2B company, procurement management is essential. The company is now focusing on cognitive sourcing, demand-driven procurement , and enhancing visibility. Rockwell Automation is a case study of a company working a long-term plan focused on improving flows for the customer.

Case Study – CodeFour

MARCH 5, 2020

Case Study - CodeFour Media Group. The post Case Study – CodeFour appeared first on Purchasing and Procurement Software Solutions. From time to time we like to showcase a few clients during the year. Code Four media group is a fairly unique business – its actually 4 business’s all under one roof.

Pandemic Lessons For Supply Chain Leaders

FEBRUARY 18, 2021

I am currently working on a couple of case studies for this blog on how business leaders used digital twin modeling during the pandemic. Initially, the output was published to procurement to design strategic buying strategies. Procurement became an island–isolated from the demand signal except for MRP.

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This is not me

Vehicle Operator Recruitment, Retention, and Performance in ADA Complementary Paratransit Operations (2010)

Chapter: chapter 10 - case studies of procurement and contracting best practices.

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

108 It has been estimated that between 70% and 90% of ADA paratransit programs use one or more contracted operators. Some systems also use contractors to perform reservations and scheduling and sometimes the dispatch function as well; depending on the contractual arrangements and relation- ships, these can be part of a turn-key operation contract or could be a contract for call center management or brokerage management services, with separate contracts for operations. Because the use of contractors for ADA paratransit is so pre- dominant, the ways in which contractors are procured bears examination relative to their impact on the recruitment and retention of operators. Some transit agencies include in their procurement docu- ments (RFP, sample contract) terms and/or requirements that result in effective operator recruitment and a low turnover rate. For example, some transit agencies have developed procure- ment documents that specify a minimum vehicle operator wage rate or “livable wage rate” or even a “competitive wage rate.” Moreover, some transit agencies have asked in their RFP for proposers to provide detailed information about wage rates and the fringe benefits that are available to operators. These agencies have discovered that it is not sufficient to question whether or not a proposer offers health care coverage to its employees, which only tells half the story; a follow-up and more illuminating question asks for the percentage of health care premiums that the employee must contribute. For exam- ple, if the percentage contribution is unrealistically high for an employee, health insurance effectively becomes unattainable. Other transit agencies in their procurement documents have emphasized the importance of operator recruitment and the retention of a stable work force in a more circuitous manner by (1) including evaluation criteria and/or bonuses paid to the contractor for achieving a certain level of operator retention and/or (2) requiring or providing bonuses for 100% pull-out coverage. By including such terms, these transit agencies are working to discourage the submission of proposals that include low operator wages, which are too often a casualty of the compet- itive bidding process. The goal is to generate competitive cost proposals that also accurately reflect competitive vehicle oper- ator wage rates and fringe benefits and result in a more stable vehicle operator workforce. The objective of this portion of the research was to collect best practice examples of procurement documents that directly or indirectly resulted in a fair vehicle operator compensation pack- age and to determine how positively those strategies effected operator recruitment and retention. Approach and Methodology The first step in the research was to identify transit systems who indicated in the national survey that they crafted their pro- curement documents to contain one or more of the following provisions: • Statements that a stable, experienced operator workforce was expected, along with evaluation criteria that put more weight on proposals that include effective vehicle operator recruitment and retention efforts or which otherwise evi- dence how this is to be achieved. • Requirements to provide detailed information about spe- cific operator recruitment and retention activities and the associated level of effort and cost specific to each effort. • Requirements for a minimum operator wage rate or “living wage” or favorable or competitive operator wages rates, along with additional requirements to provide details of the operator wage rates, including training wage rates, starting wage rates, and maximum wage rates per vehicle type if appropriate for each year of the contract. • Requirements to provide detailed cost information or assumptions about the levels of fringe benefits provided and the required employee percentage of contributions for health care insurance for each category of employee (single, married, family, etc.). C H A P T E R 1 0 Case Studies of Procurement and Contracting Best Practices

• Requirements to provide total and average operator wages and fringe, and the assumptions upon which that total cost is based, e.g., number of full-time and part-time operators, average shift lengths, total service hours by operator type and how that was calculated, and total operator pay hours by operator type and how that was calculated. • Requirements to achieve certain standards for operator retainage (or turnover) and/or to maintain a sufficient oper- ator work force or surrogate measure, such as achieving a certain standard for pull-out coverage; as part of this requirement, the specification of bonus payments for achiev- ing these standards or penalties for not achieving these standards. Among the respondents to the national survey, 26 public transit/paratransit agencies indicated that they included such language in their RFPs and contracts, and 14 of these 26 agen- cies indicated that they had had moderate or good success as a result. These 14 systems and the success indicated are shown in Table 10-1. The following summarizes those results: • Eleven agencies reported moderate or good success with conveying that a stable and experienced work force was expected. Of these, ten stated that this was mentioned in the RFP, and seven stated that they included this as an eval- uation criterion in rating the proposals. • Seven agencies indicated moderate or good success with the inclusion of a living or minimum wage standard. • Nine agencies indicated moderate or good success with incentives and penalties related to maintaining an adequate workforce and/or covering runs. Follow-up contact was made with these 14 agencies to obtain more detailed information. Follow-up contact focused on the following: • Determining whether any measurable improvements to service could be traced to the procurement/contractual provisions; • Obtaining procurement/contract documents to get the exact language used (or point systems used in the case of evaluation criteria); and • Discussing their perspectives and experiences with these strategies. An attempt was made to also interview one contractor from each system to get a contractor perspective on the pro- curement process or contract provisions. Thirteen of the 14 agencies responded, and detailed infor- mation was gathered from 12 of these systems. The research team was able to obtain a contractor perspective for 11 of the 12 systems contacted. Information from 11 of the systems contacted is included in the mini case studies below. Lessons Learned The data obtained in this study provided a strong and com- pelling case for the positive effect that certain ADA paratransit contractor procurement and contract provisions have on oper- ator recruitment and retention of the paratransit contractors. The following are lessons learned: • Transit agencies that included clear expectations of a stable, experienced operator workforce in their RFPs often did report lower rates of operator turnover. The language in the RFPs did appear to encourage potential bidders to improve compensation and focus more on efforts to maintain a sta- ble operator workforce. In most cases, performance penal- ties did not have to be imposed because compliance with goals and contract provisions was achieved. • Operator compensation stands out as the key determining factor of operator recruitment and retention. Even in areas without a municipal living wage ordinance, it was found that contractors who paid more per hour than lower-paying companies tended to see a reduction in turnover. Other efforts, implemented along with wage increases were also reported to achieve lower turnover. • Contractors who were able to evidence in their proposals a successful track record of operator retention in their pro- posals claim to encounter minimal challenges in securing contracts and in implementing new contracts. At the same time, those agencies that did not include such expectation or requirement in their RFPs claim to value this experience when selecting a bidder. • The comparative importance of cost versus service quality varied somewhat amongst transit agencies as an evaluation criterion, though it is important to note that the agencies valuing service quality over cost consistently reported high satisfaction with their operating contractor(s). For many procurements, the evaluation process is conducted in two independent phases: first a technical evaluation and then a price evaluation; and in at least one case, the two phases were undertaken by two different evaluation committees. • Decreases in operator turnover rates and increases in ser- vice productivity were reported by agencies that selected contractors which evidenced competitive compensation packages and a commitment to maintaining a well-trained, experienced operator workforce. One agency was able to more than double its number of service hours provided as a result of the contractors’ ability to maintain operators who were capable of meeting an increased level of service demand. Whether expressed in evaluation criteria or contractual requirements, it is evident from the research that transit agen- cies that recognize the benefits of using contractors that can 109

City Transit Agency Living or Minimum Wage Standard in RFP Incentives and/or Penalties for Maintaining Adequate Workforce or Covering Runs Mentioned in RFP Evaluation Criteria Columbus, OH COTA Moderate Moderate Moderate Good Dallas, TX DART Moderate Moderate Good Denver, CO RTD access-a-Ride Good Good Good Good Everett, WA Community Transit Kalamazoo, MI Kalamazoo Metro Transit Good Good Los Angeles, CA Access Services Madison, WI Madison Metro Transit Moderate Good Good Nashville, TN Nashville MTA Moderate Moderate Moderate Orange County, CA OCTA Good Good Good Lake Worth, FL Palm Tran Good Moderate Phoenix, AZ Phoenix Public Transit Moderate Moderate Moderate Moderate Moderate Moderate San Diego, CA San Diego MTS Moderate Moderate San Mateo County, CA Redi-Wheels Good Seattle/King County, WA Access Transportation "Stable, Experienced Workforce" Table 10-1. TCRP project F-13 survey respondents indicating moderate or good success with operator recruitment/retainage as a result of procurement/contractual provisions.

attract and maintain a stable, experienced operator workforce attract contractors who either share this recognition or who modify their practices to achieve this goal. The following case studies summarize the approaches taken by 11 selected systems that were studied. Outcomes and expe- riences, as well as a contractor perspective on the changes, are provided. Case Studies Dallas Area Rapid Transit (DART), Dallas, TX DART is the regional transit authority serving the Dallas metropolitan area, including the city of Dallas and 12 sur- rounding cities. DART has approximately 130 bus routes, 45 miles of light rail transit (DART Rail), 75 freeway miles of high occupancy vehicle (HOV) lanes, and an ADA paratran- sit service. DART and the Fort Worth Transportation Author- ity (the T) jointly operate 35 miles of commuter rail transit (the Trinity Railway Express or TRE), linking downtown Dallas and Fort Worth with stops in the mid-cities and DFW Inter- national Airport. Use of Contractors for ADA Paratransit DART’s ADA paratransit service, called Paratransit, is organized as follows: DART staffs a call center that includes the reservations, scheduling and dispatch function for the entire system. DART also provides staff for contract admin- istration, eligibility certification, and customer service func- tions. Veolia Transportation, under contract to DART, oper- ates the service with a fleet of 186 vehicles supplied by DART. The contract payment structure includes a monthly fixed amount to cover fixed costs, a variable hourly rate for opera- tions, plus reimbursement for tolls. Procurement/Contractual Provisions In the survey, DART reported that it had moderate success with specifying a minimum wage rate in its procurement and contract documents and significant success with liquidated damages for uncovered runs. With respect to the minimum wage requirement, DART staff stated the following: We make it clear that we expect experienced, trained opera- tors; by setting the bar high, we have a better chance securing such a workforce through the contract. As a rule, happy people make contented workers. A contented workforce makes good decisions and they are reliable. Requiring the contractor to pro- vide a minimum or living wage helps to ensure a more contented workforce. Left to themselves, contractors will try to keep wages as low as possible. This low rate will eventually cause personnel to leave. The turnover rate increases and valuable experience and skills are diluted or lost. In DART’s solicitation, the two provisions related to the workforce were the following: Operators Minimum Wage Rates and Incentive Programs All persons employed as operators for performance of this con- tract or any subcontract hereunder shall be paid not less than $10.00 per hour while in training. The minimum wage standard imposed is a minimum and the Contractor is required to employ a systematic evaluation program and benefit package designed to encourage retention of well qualified and good performing oper- ators for the duration of the contract. Toward this end, the Con- tractor shall establish progressive wage increases beyond the train- ing level and offer such increases to employees who successfully graduate from the training program. Operators and mechanics shall also be provided a minimum of three (3) sick days as part of the benefit program. Failure to comply with this provision shall constitute noncompliance with the terms of this contract. Schedule of Liquidated Damages for Uncovered Runs Liquidated damages in the amount of $350 per occurrence shall be assessed for unavailability of operators or vehicles at Contractor scheduled operator report/clock-in time. The Contractor Perspective The Regional Manager for Veolia Transportation and for- mer General Manager for this contract felt that the minimum wage rate/sick day provision has contributed more signifi- cantly to operator retainage than the uncovered run provision. He reported that competitive wage rates and benefits attract a “higher-quality” job applicant which results in less voluntary attrition, whereas the liquidated damages for uncovered runs are more to ensure that operators depart on time. Reported Results The Regional manager reported that voluntary operator attrition totals no more than five or less operators per year since the RFP/contractual provision for minimum wage and sick day benefits was instituted. Denver Regional Transportation District (RTD), Denver, CO The Regional Transportation District (RTD) is the regional transportation agency for the Denver metropolitan area. The RTD has 140 local, express, and regional bus routes and six light rail lines that provide 35 miles of light rail service. The RTD also has three demand-response services: (1) call-n- Ride, a general public dial-a-ride in several neighborhoods that cannot sustain fixed-route bus service; (2) access-a-Ride, its ADA paratransit services; and (3) access-a-Cab, a supple- mental (non-ADA) taxi subsidy program that is available to access-a-Ride customers. 111

Use of Contractors for ADA Paratransit RTD’s ADA paratransit service is organized as follows: RTD contracts with First Transit to operate its paratransit call center. As part of this contract, First Transit provides reser- vations, scheduling, and dispatching services for access-a- Ride, and reservations for access-a-Cab. RTD has separate contracts with four different carriers to operate access-a-Ride services in Denver: Global Transportation, MV Transporta- tion, Special Transit, and Coach USA. Special Transit is also contracted for service in Boulder, CO. The call center con- tractor develops the daily schedules and transmits daily run manifests to each of the contractors. Procurement/Contractual Provisions In the survey, RTD reported that it had had significant suc- cess with (1) specific evaluation criteria for a stable experi- enced workforce; (2) requiring proposers to provide wage scales, and (3) specifying liquidated damages for uncovered runs. With respect to these strategies, the RTD access-a-Ride service manager attached the following note: Points are assigned via the evaluation process for a range of issues such as understanding and approach to the RFP, firm and staff experience and costs. While we do not mandate specific wages, we do identify current wage scales. Liquidated damages and incentives are designed to motivate contractors to perform within acceptable service standards. The relevant provisions in RTD’s paratransit RFP are: • Proposal Evaluation Criteria for Wage Rates. Proposers who state that they will maintain (or increase) the current wage scales are given points accordingly. Proposers who state that their wage scales are below the current ones are marked down. The purpose of this is to maintain a consis- tency in the wage scale from one contract to the next. RTD views this evaluation criterion as a significant contributor to this goal, which in turn has contributed to low operator attrition rates. • Contract incentives and/or penalties related to maintain- ing an adequate vehicle operator workforce or covering all runs assigned. As a contract provision, RTD assesses a $500 fine for each uncovered run, whether it is a result of not enough operators and/or not enough vehicles. On days when there are an unexpected and large number of operator call-outs, a carrier may not be able to cover all of the runs. In this circumstance, RTD allows a carrier to re-distribute trips from light runs to other runs where these trips might fit. However, in some cases, this may not be possible, and the carrier has no other choice but to give back the run. In this case, a $500 fine is assessed per “give-back.” This provision is thus an inducement for a carrier to size an extra board correctly and for the carrier to have a back-up plan for call- ing in operators willing to work overtime. The Contractor Perspective The Executive Director of Special Transit had a slightly dif- ferent take on the provisions in the RTD’s procurement/ contractual document, indicating that the provisions had per- haps less significant impact on vehicle operator recruitment in actual practice but also acknowledging that the liquidated damages for uncovered runs did provide an impetus for Spe- cial Transit’s maintaining a sufficient roster of operators. She stated that the challenge for Special Transit is to balance the potential for liquidated damages against the cost of having excess operators, since the Call Center contractor (First Tran- sit) can cut runs at any time. She added that RTD’s practice of providing transit passes to contractor operators (at no cost to the operators) had a positive impact on Special Transit’s ability to recruit and retain operators. Reported Results Special Transit reported an annualized operator turnover rate of about 35% for its access-a-Ride service in Denver. Interestingly, the Executive Director also reports a 0% turn- over rate for its access-a-Ride operators in Boulder. She attributed this dramatic difference to the fact that the Denver operators are unionized, and the Boulder operators are not (Special Transit inherited a union shop when it took over the entire regional service in 2000 on an emergency basis for RTD). She further explained that the seniority-based shift- bid process (which is required by the union agreement) results in the newer operators getting the worst shifts (nights, week- ends, etc.), and that the operator turnover in Denver is most acute among the newer operators. In contrast, Special Tran- sit has more flexibility in matching individual operators’ needs with shift requirements in the Boulder operation. Attrition Rate. RTD reported that its contractors have experienced operator attrition rates ranging from 20% to 35%. Run Coverage. RTD indicated that since the run coverage provision was instituted, the average number of “give-backs” have been reduced from 5 per week to perhaps 1 per month. Community Transit, Everett, WA Community Transit is a special-purpose municipal corpo- ration providing public transportation services in Snohomish County, WA. Community Transit’s services include fixed-route transit, vanpool, ride-matching, and paratransit (DART). In 2004, over 8 million passenger trips were made on the system, and Community Transit carried 57% of all Snohomish County- 112

Seattle commuters to work and back. The entire bus fleet is wheelchair accessible, either by low-floor ramped vehicles or buses equipped with wheelchair lifts. Dial-a-Ride Transportation (DART) is Community Transit’s ADA paratransit service. With an existing fleet of 53 vehicles, the service operates 7 days a week, covers 1,400 square miles, and provides an average of 800 one-way trips per weekday. Use of Contractors for ADA Paratransit DART service is operated by Senior Services of Snohomish County (SSSC), a private non-profit organization, through a contract with Community Transit since 1981. Although the contractor manages all day-to-day operations, the hardware and software, including an automated client file, reservation, mapping, scheduling, and dispatch system, is provided by Community Transit. Vehicles are also provided by Commu- nity Transit, but maintenance is provided by the contractor. SSSC manages the day-to-day operations of the service. The organization’s responsibilities include customer eligibility screening, customer service, scheduling, reservations, routing, dispatching, supervision, fare collection, and operations. Procurement/Contractual Provisions Community Transit places a high value on service quality when selecting contractors, recognizing operator pay as an indicator of that quality. The agency’s Contracted Services Coordinator stated the following: We make it clear in our RFPs that we expect experienced, trained operators; by setting the bar high, we have a better chance of securing such a workforce through the contract. While the expectation of paying operators well and valuing employment longevity is not explicitly indicated in the RFPs, it acts as a strong determinant in selecting winning proposals. For example, Community Transit’s most recent contractor was chosen largely because its proposal touted high wages for operators and extremely low turnover. Community Transit’s RFPs also include a detailed set of serv- ice standards, incentives, and liquidated damages, although Community Transit reported that the incentives do not have a significant impact on service. One of the liquidated dam- ages provisions relates to run coverage. The following is an example: Contract incentives and/or penalties related to maintaining an adequate vehicle operator workforce or covering all runs assigned The Contractor shall provide adequate staffing to ensure that staff or manpower shortages are compensated for with qualified personnel in a manner which does not detract from staffing lev- els in other areas of this project. The RFP includes the following language regarding penal- ties for poor performance by the Contractor: One hundred dollars ($100.00) for each occasion that the Contractor does not have the number of vehicles available for revenue service as specified by Community Transit in operating service. The Contractor Perspective The General Manager of Senior Services of Snohomish County stated that the high expectations for experienced operators and high wages are “definitely a draw” when recruit- ing operators. He explained that before hiring operators, they go through intensive training, and 60% “make it out.” The agency looks for vehicle operators that have the following: “good driving records, good people skills, and want to assist people. Those are the ones that stick around a long time.” The agency reported the turnover rate for operators is about 20–30%, depending on the month. The General Manager reported that Senior Services meets the goals set forth by Community Transit. The 91% on-time performance standards are always met, and the general man- ager stated that they “never miss a trip.” He explained: “We meet all goals. We don’t turn anybody down. We really don’t have financial disincentives happen.” Although he is aware that the financial disincentives exist in the contract, the main motivation for Senior Services is to be a good service provider. Reported Results Turnover has not been a problem for Community Transit since they began contracting with Senior Services of Sno- homish County, the contractor who proposed to provide high operator wage rates and to maximize operator retention to the extent possible. It was noted that Senior Services only loses one or two operators a month out of about 70 operators. Community Transit believes that the combination of RFP language requiring a stable, experienced operator workforce and the contractor’s natural desire to treat operators well and provide them with sufficient training has contributed to a paratransit system that provides high quality, on-time ser- vice, and satisfied and experienced operators. Access Services, Inc. (ASI), Los Angeles, CA Access Services (ASI) is a local public agency organized as a public benefit corporation that operates ADA complemen- tary paratransit service. ADA paratransit service is provided for the Los Angeles County Metropolitan Transit Authority (LACMTA) and 40 other fixed-route transit operators in Los Angeles County pursuant to the Los Angeles County Coordi- nated Paratransit Plan. In addition to operating the ADA 113

complementary paratransit service, known as Access Para- transit, ASI acts as the Los Angeles County Consolidated Transportation Service Agency (CTSA). It is governed by a nine-member board appointed by the Los Angeles County municipal fixed-route operators, the Los Angeles County local fixed-route operators, the City of Los Angeles, the County of Los Angeles, the Transportation Corridor Representatives of the Los Angeles branch of the League of Cities, the Los Angeles County Commission on Disabilities, and the Coalition of Independent Living Centers. Use of Contractors for ADA Paratransit Service is provided by six principal contractors in six regions as shown in Table 10-2. Requests for service are auto- matically routed to the appropriate carrier based on the cus- tomer’s telephone number. Each of the contractors provides turn-key services in their region. Each provider except for MVT in the Southern region is responsible for taking reservations, verifying customer eli- gibility, scheduling rides onto vehicles, and providing service using ASI-certified vehicles and operators. GPI accepts all reservations for the West/Central and Southern regions and passes on a portion of the reservations for the Southern region to MVT. Each provider is responsible for all trips originating in its region regardless of whether the destination is in the region or another one within the Los Angeles Basin. Trips between the Basin, Santa Clarita, and the Antelope Valley require a transfer. Service is provided using a mix of ASI-owned vehicles, provider-owned vehicles dedicated to Access service, and taxi- cabs certified for Access Paratransit service. ASI manages the system, providing contractor oversight and monitoring, and also directly provides customer service functions, fleet management functions (for its own vehicles), community outreach functions, and all administrative and planning functions. Procurement/Contractual Provisions Access Services reported in the survey that it had moderate success with the inclusion of “living wage” and benefit infor- mation in the RFP. Evaluation criteria are used to evaluate proposals, and points are earned on a sliding scale. Criteria are based on the following: • Comparability of pay (to other carriers); • Quality of the heath care plan (e.g., the percentage split of premiums between the company and the operator); • Inclusion of medical, dental and vision benefits versus medical only • Family package; • Number of vacation, sick and PTO days; • Educational reimbursement; and • 401K/retirement plan. In its paratransit solicitations, Access Services supplies wage information by position for the current contractor; this includes the starting hourly rate, the top hourly rate, and any qualifying notes, such as whether there are annual or merit increases. The two most relevant provisions in the solicitations are as follows: Expectations for Operator Wages / Retention The selected Proposed shall establish and maintain an employee pay and benefit structure, which will serve to attract and retain high-quality employees for all positions required to successfully perform the work. Proposer must submit rates and graduated rate increases along with timelines for the increases. Proposal Evaluation Criteria Access Services will substantially downgrade proposals that do not incorporate appropriate wage and benefit packages that will facilitate successful recruitment and retention of qualified employees. Access Services will also downgrade proposals that do not provide for reasonable medical benefits for all full time employees. Proposer should carefully consider adequate and comparable rates of compensation, public sector and private sec- tor, which exist for similar positions within Los Angeles County. Proposals are evaluated with both qualitative and quanti- tative measures. The quantitative measures are as follows: Quality of Technical Approach 30% Paratransit Operating Experience 20% Cost/Price Proposal 20% Employee Pay and Benefits 15% Qualifications and Availability of Proposed Staff 15% 114 Region Contact Providers San Fernando Valley (Northern) MV Transportation (MVT) Eastern San Gabriel Transit (SGT) West/Central Global Paratransit Inc. (GPI) Southern Global Paratransit Inc., and MV Transportation Santa Clarita Santa Clarita Transit Authority Antelope Valley Antelope Valley Transit Authority (AVTA) Table 10-2. ASI service regions and contractors.

The Contractor Perspective MV Transportation’s General Manager reported that wage scales have had a positive impact on vehicle operator retention, but he said that because of the competitiveness of the procure- ment process, the company is unable to increase hourly wages. However, operator retention is encouraged through increasing wage scales at 6 month and yearly increments. In addition, the company offers incentive programs for retention, such as a financial retention bonus, paid at multiple stages up to an operator’s first 6 months of work. He also reported that the company’s employee referral program has been extremely successful. If an operator refers a new applicant, and if the new hire works for at least 90 days, both receive bonuses. The general manager said that this program also “encourages the experienced operators to be mentors for the new hire referrals.” Despite retention programs, there is about a 45% turnover rate. As far as the evaluation criteria, the general manager sug- gested that “it is a good concept, although the current con- tract was renegotiated due to the current budget crisis.” Reported Results ASI’s Executive Director noted that ASI purposely did not quote a minimum wage rate in their RFP because in Califor- nia, that would constitute ASI being an “implied” employer. However, in the past, ASI has encouraged contractors to set a vehicle operator wage above the minimum ($8.50), but in many cases, the wages came in at the figure. She said that ASI is exploring how to actually set the wage without becoming the implied employer of the operators. The Executive Director also was quick to point out though that operator wage rates alone do not tell the entire story, reporting that the contractor with highest operator wage rates in the system was one of the poorest performers, and the con- tractor with the lowest wage rates was one of their best per- formers. In the survey, ASI noted that many contractors are still focused on submitting the “lowest bid” since operator wages make up the majority of the overall cost. She also men- tioned that some of her contractors include a benefits pack- age that provides English-as-a-second-language benefits, an operator recognition program, and “stepping stone” career programs and internships that pave the way for operators to advance to senior/management positions. Madison Metro Transit, Madison, WI Madison Metro Transit is the municipal transit provider for the city of Madison, WI, covering an area of 60 square miles. With more than 450 full-time employees, Madison Metro Transit serves an average of over 54,000 daily passenger trips during the school year. The service has 56 fixed-routes and operates a fleet of 204 buses. Its ADA paratransit service, Metro Plus, provides nearly 300,000 annual trips to 1,774 clients. Metro also operates Group Access Service (GAS) for Madison, Middleton, and Monona adults who live in their own homes and apartments, are over 60 years old, and have a physical or sensory disability. GAS is a scheduled, routed, group service to meal sites, farmers’ markets, pharmacies, libraries, and grocery stores. Use of Contractors for ADA Paratransit Beginning in 2009, nearly a quarter of Metro Transit’s paratransit operations are in-house, with the remainder of the work contracted to Transit Solutions, Badger Cab Com- pany, and Badger Bus. All customers call Metro Transit, and transit agency staff either serves the customer themselves or delegates the work to one of the three contractors. Transit Solutions operates about 20% of the ADA service on week- days only, with no weekends or holidays; Badger Bus handles about 30% of the requests on weekdays, nights, and week- ends; and Badger Cab provides ambulatory services and takes over leftover ADA paratransit runs, about 23%. Procurement/Contractual Provisions There is a municipal and county-wide living wage ordi- nance that is articulated in Madison Metro’s RFPs. It states: LIVING WAGE (Applicable to contracts exceeding $5,000). CONTRACTOR agrees to pay all employees employed by CONTRACTOR in the performance of this contract, whether on a full-time or part-time basis, a base wage of not less than CITY minimum hourly wage as required by Section 4.20, Madison General Ordinances. One of the contractors, Transit Solutions, adds to this liv- able wage by providing benefits and an incentive plan that pays operators for safety and attendance. Madison Metro has also established standards in its con- tracts with penalties on a per-trip basis. Since 2006, this sys- tem of collecting performance data from contractors and then generating a percentage of compliance has been used to calculate this per-trip penalty fee: It is the responsibility of CONTRACTOR to make every effort to comply with all service standards established by CITY. CITY has established a service standard of passenger pick up no later than twenty (20) minutes after the scheduled time. For each instance in which a passenger is picked up outside of this service standard, the following reimbursement will be applied: On-Time Performance Reimbursement 94% On-Time 100% of the reimbursement rate 90–93% On-Time 98% of the reimbursement rate Less than 90% On-Time 90% the reimbursement rate 115

While the CITY pays the lesser of the cost of the ride or $3.00 for each “no show” a passenger has when service is provided by the CONTRACTOR on a per trip basis, this cost must be absorbed by the contractor if they are over twenty minutes late. The Contractor Perspective The owner of Transit Solutions commented that the “liv- ing wage” outlined in the contract is “great because it gives people a higher starting wage.” Transit Solutions also has benefits for employees like health insurance, retirement pack- ages, and paid holidays, which all help to maintain a steady workforce. In addition to the incentive plan in the contract, the owner noted that Transit Solutions has an incentive plan for vehicle operators that: “pays people for safety and atten- dance . . . all of those things play into recruitment and reten- tion.” The company uses the financial incentives in the con- tract with Metro Transit in a similar fashion with its other employees. The owner stated, “Overall, I think the system they [Metro Transit] have is reasonable and it works.” Reported Results Contractors are almost always within the 94% to 100% on- time rate. Madison Metro Transit’s Paratransit Program Man- ager reported that rarely, if ever, is the 10% reduction penalty enacted. Contractors work hard to meet the 94% compliance rate and have found that the only time they fall short is dur- ing bad weather (in which case the penalty is waived by the City). In March 2009, Transit Solutions achieved a 98% on- time performance rate. It was noted that paying a living wage has definitely helped to retain vehicle operators. The Paratransit Program Manager said she believes this higher pay has also contributed to higher quality driving and service. She stated, “Operators stay when there is better pay, and they drive better, too.” Vehicle operator turnover at Transit Solutions is extremely low. In 11 years of business, over half of Transit Solutions’ orig- inal operators remain. The owner attributes this to a combi- nation of good wages, benefits, and hands-on management; he and his partner are present and available each day, and they make an effort to treat people well and with respect. They even maintain a special account for employee pay advances which are paid back via paycheck deduction at no interest. The owner stated: “We do things to help our work- ers and make it easier and more enjoyable to work here. And it really works.” Orange County Transportation Authority (OCTA), Orange County, CA The Orange County Transportation Authority (OCTA) serves Orange County through bus, commuter rail, Express Lanes, and paratransit service. OCTA operates approximately 80 bus routes, covering every city in Orange County and sev- eral cities in Los Angeles County. OCTA also operates express service to Los Angeles and to San Bernardino and Riverside counties. OCTA’s ADA paratransit service is called ACCESS. Most recently, in 2007, OCTA initiated a Vanpool Program to provide assistance to commuters who work in Orange County and live in neighboring counties. Use of Contractors for ADA Paratransit Until July 2009, OCTA’s fixed-route, express bus, and ADA paratransit service were operated by Veolia Transporta- tion. After July 2009, Veolia Transportation began running only the ADA paratransit service, ACCESS, utilizing a fleet of 350 vehicles. Veolia provides a turn-key operation, providing all day-to-day operations and vehicle maintenance on OCTA provided vehicles. OCTA has a managerial role and has close oversight on all service provided by Veolia. Procurement/Contractual Provisions In the survey, OCTA reported that it had significant suc- cess with specifying a minimum or “living wage” rate in its procurement and contract documents, as well as including language regarding an experienced workforce and incentives or penalties in the contract related to maintaining an ade- quate vehicle operator workforce. OCTA also reported that they include strict and specific evaluation criteria in the RFP. OCTA includes the following language to indicate its expec- tations for vehicle operator wages/retention: AUTHORITY recognizes the expense and negative effect of employee turnover. Therefore, the CONTRACTOR must demon- strate they have an acceptable recruitment and hiring program that is intended to minimize employee turnover and retain a high quality work force. Several service performance standards, incentive payments, and penalties are also included, as shown in the Table 10-3. The Contractor Perspective The Project Director for Veolia reported a low turnover rate of 7%. He reported that there is a dedicated commitment to training which has paid off, as evidenced by the high retention rate. He said that with better training the company sees better results. He noted that another reason for the high retention is the benefits package provided to employees, including good health care, a living wage, and help with flexibility on travel to work, which is an issue in and around the Los Angeles area. The Project Director reported that the incentives outlined in the scope of work are hard to achieve. He said: “In 36 months, 116

we’ve received only one performance incentive. They are chal- lenging incentives to meet.” He explained that the complaint standard is the toughest and perhaps the strongest in the coun- try, so the company has never met it. Veolia is striving to meet it and is establishing a new program with increased training for better results. Reported Results OCTA’s Field Administrator commented that the contrac- tor performs well according to obligations outlined in the scope of work. He reports that good communication between the contractor and the agency is the best way to have a shared understanding of expectations, since language in a contract can be tricky and interpreted in more than one way. He said that since April 2007, Veolia has maintained an on-time per- formance level average of 93%. Palm Tran CONNECTION, Lake Worth, FL Palm Tran, Palm Beach County’s public transportation service, provides fixed-route public bus transportation and coordinated paratransit service. Fixed-route bus service is provided on over 30 routes, serving nearly all destinations in the county. Buses generally operate weekdays with 30-minute headways during peak rush hours and 60-minute headways during mid-day and on the weekends. Palm Tran CONNECTION is the county’s shared ride, door- to-door transportation specialized service. CONNECTION schedules all trips, prepares vehicle manifests, handles cus- tomer concerns, determines eligibility, and monitors the per- formance of transportation providers. Veolia runs a turn-key operation, performing all ADA paratransit functions. Use of Contractors for ADA Paratransit Palm Tran contracts with MV Transportation, Palm Beach Metro Transportation, and Two Wheels Transportation. The contractors operate 190 vans, providing door-to-door service for senior citizens, persons with disabilities, and persons with low-income. The service provides an average of 4,025 sched- uled passenger trips each weekday. Veolia runs a turn-key operation and performs all ADA paratransit functions. Procurement/Contractual Provisions Palm Tran includes language in RFPs indicating that a stable, experienced vehicle operator workforce is expected. Under- standing that a great deal of operator retention is determined by compensation, Palm Tran gives preference to respondents with the highest operator pay rates. Palm Tran also includes a specific liquidated damage fee in contracts to offset the cost of uncovered runs. While this fee has provided an effective incentive for contractors to cover runs, there have not been many problems, and the fee penalty has been scarcely implemented. The Contractor Perspective The General Manager of MV Transportation believes that factors such as benefits, work atmosphere, and communica- tion are key ingredients in maintaining a stable and experi- enced workforce. MV Transportation takes extra care in mak- ing the company an enjoyable place to work by providing full-benefits, substantial vacation time, and an open door pol- icy with all managers. The general manager reported that the company no longer has to spend significant time and money 117 Category Standard Incentive Penalty ACCESS On Time Performance 95% or above $5,000 for each percentage point above 96% on time $5,000 for each percentage point below 94% on time Service Delivery Failure All qualified requests must be served. None $1,000 per occurrence Call Center Hold Time Average of 90 seconds or less None $1,000 deduction if monthly average exceeds 90 seconds Call Center Valid Complaints No more than 1 valid complaint per 1,000 passengers each month None $100 for each valid complaint over 1 per 1,000 passengers Accident Report Report all within 24 hours, verbal and written. None $5,000 per accident not reported. Table 10-3. OCTA service standards, incentives and penalties.

recruiting employees because the pay is higher than other companies. MV Transportation increased hourly pay for the Palm Tran contract, and the general manager reported that this has helped to retain operators. The general manager also reported that she aims to main- tain a stable operator workforce and works towards adhering to contract requirements. She uses the liquidated damages clauses set forth in contracts as incentives to provide good service. Reported Results Palm Tran CONNECTION’s Fiscal Analyst reported that, generally, contractors perform well and meet their contractual requirements. There are rarely, if ever, any uncovered runs. Turnover has become less of a problem not only because of the RFP provisions, but as unemployment rates have increased, operators tend to hold onto to their jobs for longer periods of time. City of Phoenix Public Transit Department, Phoenix, AZ The City of Phoenix Public Transit Department is responsi- ble for the overall supervision of the City of Phoenix Transit System. The City manages local buses, Phoenix Dial-a-Ride paratransit, Reserve-a-Ride senior service, RAPID and Express commuter services, and several neighborhood circulators. The City’s paratransit service is called Dial-a-Ride. The service operates seven days a week in almost all areas within Phoenix city limits. Dial-A-Ride serves individuals who are ADA paratransit eligible as well as seniors. ADA paratransit customers are encouraged to call at least one day in advance for service; where possible, same day demand service is also available after reservation requests have been scheduled. The City also manages Reserve-a-Ride, a specialized, door- to-door transportation service for senior citizens over 60 years old and certified persons with disabilities. Reserve-a-Ride pro- vides transportation to senior centers, medical appointments, social service agencies, and shopping. The primary responsi- bility of the service is to provide transportation to and from senior centers, and other trip requests are accommodated wher- ever possible. These two services, Dial-a-Ride and Reserve-a- Ride, are operated by the same contractor with the same fleet of vehicles. Use of Contractors for ADA Paratransit MV Transportation has been the City’s paratransit contrac- tor since 2001. MV Transportation manages all day-to-day operations, including maintenance on over 100 vehicles and scheduling service for both advance and same-day service requests. Out of the 300 or so MV Transportation employees, about 215 of them are vehicle operators. Procurement/Contractual Provisions In the survey, Phoenix reported that it had moderate success when specifying that a stable, experienced vehicle operator workforce was expected, and also moderate success when including a “livable wage” requirement in its procurement and contract documents. While there is no living wage ordinance in Phoenix, the City understands that a livable wage scale is sig- nificant for job retention and stability. The City’s RFP requests a detailed plan with specific strate- gies for maintaining a stable workforce. The City encourages proposers to be creative in their approach to operator reten- tion, stating that preference will be given to proposers who can successfully demonstrate to City their ability to retain quality operators. In addition to requiring the proposer to outline hir- ing, training, and retraining programs for operators, Section VII of the RFP asks proposers to respond to the following: Discuss the PROPOSER’S philosophy on providing a “livable wage” given the current state of the economy and how the pro- posed employee wage and benefit package and other innovative programs ensure that they meet that standard. Describe in detail the methods to be taken in order to attract and retain the appropriate staffing levels. Include any incentive and/or merit programs to award outstanding employees. Describe in detail the type and level of employment benefits provided or available to employees addressing vacation, sick and other leaves, health and welfare benefits, wage and salary classi- fications and progressions, and employer contributions for all programs for all job categories. When evaluating RFP responses, a points system is utilized. The Director of Transportation Contract Services explained, “Our approach is that we want to make sure the company we hire is going to fulfill our needs as far as service—we take an approach of service over price.” The evaluation criteria out- lined in the RFP are the following: Qualifications 50 points Professional References 50 points Management 150 points Maintenance and Operations Experience 100 points Understanding of Scope 400 points Price 250 points The RFP also provides a system of incentives and sanctions to reward exemplary performance and ensure adherence to performance standards, but the survey indicated that these incentives and/or penalties did not have even a moderate impact on contractor performance. 118

The Contractor Perspective The General Manager for MV Transportation reported that the success it has had working with the City of Phoenix is due to a “successful, true partnership” between the two organiza- tions. He gave credit for the positive working relationship to the City’s understanding of the operation, saying: “[The Director of Transportation Contract Services] knows how our system works—he understands the nuts and the bolts.” The current average wage for an operator is $14.45, which is adequate according to the terms outlined in the RFP. In addition to a reasonable wage, though, the general manager said it is important to look for individuals who are customer- service oriented. He also indicated that a good work environ- ment and other non-monetary rewards have measurable pos- itive effects on turnover. He noted that these methods were helpful in MV Transportation’s response to the City’s RFP requirement of a description of “methods to be taken in order to attract and retain” employees. Annually, MV Transporta- tion in Phoenix sees about a 21% turnover rate. It was noted that 83 of MV’s 180–200 paratransit vehicle operators have over 8 years of experience. Both the City staff and MV General Manager reported that the financial incentives or penalties were not a motivator to provide good service. MV Transportation does adhere to goals outlined by the City, and they have “monitors all over the place,” indicating current levels of on-time performance, aver- age hold time for a customer on the phone, etc. This keeps all personnel informed of the current situation and helps to strive for the best customer service possible. Regardless of whether the motivation for good service is the contract with the city or just good business practice, MV Transportation receives more financial rewards than penalties. The MV General Manager also commented that RFPs and contracts should be specific: “The more specific the agency can be when putting the proposal together and creating the vision that they want, then the end result will be more successful.” Reported Results The contractor for paratransit service has a relatively low turnover rate for a private contracted operation (reported to be 21%). A third of operators have been employed with the contractor for over 8 years. City of Phoenix transportation staff also reported that “this has improved service and produc- tivity by volumes.” The Director of Transportation Contract Services commented, “It definitely improves productivity and service quality when you treat your employees well.” On the books, the City and contractor have yet to experience a day with high numbers of closed runs. Budgeted hours from the most recent contract indicate that the contractor is always able to meet allotted hours, whereas before contractors in pre- vious periods fell short of the requirements due to lack of oper- ators, which caused the City to over-budget. For the past five or so years, the City has been able to maintain its budget pre- cisely. Important to note, immediately prior to the most recent contract with MV Transportation, the City approved a sales tax measure that allocated more money to transit. In just a 2-year period, the City was able to double its number of service hours provided, and the contractor was able to provide an adequate workforce to meet this new induced demand. According to City staff, the greatest challenge when nego- tiating contracts is trying to convince bidders to change their mindset or approach when developing their proposals. He said that most bidders are accustomed to winning a contract based almost entirely on price rather than service. He noted that in the Phoenix process, when reviewing proposals, the price for each bidder was not revealed to the evaluation com- mittee. As a result, the committee was only able to evaluate based on the merits of the proposals. A City staffer expressed: “I feel that we had a successful procurement in that the suc- cessful proposer is still with us and doing a very good job, which was our objective to have them competing on the qual- ity of service, rather than the price. By the way, the successful proposer was not the lowest bidder.” San Diego Metropolitan Transit System, San Diego, CA San Diego Metropolitan Transit System (MTS) is the public transit agency that provides bus and rail services directly or by contract with public or private operators. MTS manages the scheduling, frequency of service, and hours of operation for its existing services covering approximately 570 miles in and around San Diego. Existing passenger services include 82 bus routes, three trolley lines, and ADA paratransit service that together serve over 3 million residents. ADA paratransit service is called MTS Access. Use of Contractors for ADA Paratransit First Transit is the contractor for MTS Access. The contrac- tor is 100% turn-key and handles all operations functions. Vehicles are owned by MTS. Procurement/Contractual Provisions In the survey, MTS reported that it had moderate success including (1) language that a stable, experienced operator workforce was expected; (2) requirements for proposers to provide wage scales, and (3) specific incentives and/or penal- ties for uncovered runs. RFPs include wage standards, which are set to increase or decrease according to the market, thus creating a level playing 119

field for new bidders which allows operators to keep up with the cost of living and retain employees. New contractors must maintain existing operators at current seniority levels. MTS mandates in its contracts that a certain percentage of each invoice is allocated to operators’ benefits. For example, for fiscal year 2011, the minimum wage is $10.14/hour for train- ing, $10.71/hour after training, and $11.27/hour base wage after a probationary period. The contractor is required to con- tribute 5%, or $2.10, from the base wage towards employee benefits. There is also a requirement that all operators who work more than 20 hours per week should have full medical coverage. MTS provides a 10% preference to contractors who are able to prove in proposals that they are able to retain their operator workforce and who agree to retain their current staff upon contract. The evaluation criteria are as follows: Corporate Capacity/Qualifications 10 points of the Firm Corporate Experience 30 points Key Personnel 50 points Facility Plan 20 points Safety and Training Plan 10 points Start-up Plan 20 points Customer Services 20 points Cost and Price 70 points 10% Bidding Preference 23 points MTS also sets performance standards, financial incentives, and liquid damages. These are shown in the Table 10-4. The Contractor Perspective The District Manager at First Transit reported that the livable wages clause included in the RFP helped to drive the company to meet the high standards for wages. The responsible wage requirement “helps maintain a level of wages that are competi- tive” and, in turn, helps to prevent a high turnover rate. The District Manager also commented on the incentives and disincentives included in the RFP. “We have met the highest level of incentive thresholds for productivity for the past four years,” he explains. He said that the incentives and disincen- tives were set “at a level where the dollar level wasn’t significant enough.” He noted that instead of financial motivation, cus- tomer service and good business practice are instead drivers for service. The District Manager noted that the responsible wage requirement only applies to vehicle operators that are not cov- ered by a collective bargaining agreement. First Transit oper- ates under labor contracts now and it is expected that when the company responds to the June 2009 RFP, the responsible wage requirement will not be applicable. Reported Results Despite the focus in the procurement on workforce stability, it was reported that turnover has continued to be a problem over the past few years running at “upwards of 100%” according to the First Transit District manager. With the economic down- turn, the turnover rate has decreased and has been running at about 40% for the past year. San Mateo County Transit District (SamTrans), San Mateo, CA The San Mateo County Transit District is the administrative body for the principal public transit and transportation pro- grams in San Mateo County: SamTrans bus service, Redi- Wheels paratransit service, Caltrain commuter rail, and the 120 Performance Measure Incentive LiquidatedDamages Contractor shall achieve a monthly no- show rate of under 5% $2,000 per each month no-show rate is below 5% Any month in which no-shows are greater than 7.5% may carry a damage of $1,000, and $2,000 in which no- shows are greater than 10% Contractor shall ensure that all trips arrive within the established MTS On-Time Performance Window $5,000 per month may be paid Contractor for each month that 90% or more of trips arrive in the MTS established On-Time Window none Contractor shall ensure that hold times don’t exceed an average of two (2) minutes None $5,000 for each month where average hold times exceed two minutes Table 10-4. MTS performance standards, incentives, and liquidated damages.

San Mateo County Transportation Authority. Caltrain and the Transportation Authority have contracted with the District to serve as their managing agency, under the direction of their appointed boards. The SamTrans fixed-route bus system con- sists of 54 routes (44 operated by the District and 10 contracted to MV Transportation), which carry nearly 50,000 passengers on an average weekday. The District’s paratransit service, Redi- Wheels, transports approximately 1,000 customers every day on 83 buses, vans, and sedans, with some additional taxi ser- vice. RediCoast operates nine vehicles on the coastside and provides about 100 rides each day. Use of Contractors for ADA Paratransit Redi-Wheels, RediCoast, and a portion of fixed-route service are contracted to MV Transportation. For Redi-Wheels service, SamTrans performs ADA eligibility and marketing and owns, maintains, and fuels 59 vehicles. MV Transportation manages the remaining day-to-day operations. MV Transportation provides 15 vehicles, all sedans. MV has about 110 vehicle operators. Procurement/Contractual Provisions In the survey, SamTrans reported that it had significant suc- cess with specifying a minimum wage rate and incentives and disincentives relating to an adequate workforce in its procure- ment and contracting documents. SamTrans emphasizes the importance of an experienced workforce in both the pre-bid meeting and in the RFP, stating specifically that operators must be fairly compensated with competitive wages and ben- efits. While SamTrans legally cannot require a specific pay scale, the transit district consistently places strong emphasis on a stable workforce, and staff monitors the contractor to ensure a competitive wage is provided. The most recent RFP contained a specific section on Para- transit Operator Longevity, which is closely monitored by SamTrans throughout the duration of the contract: It is of paramount importance to the District and in the best interest of its customers that Paratransit Operators are not only properly trained, but gain hands-on experience in their craft. It has been the District’s experience that a high turnover rate among Paratransit Operators reduces overall service quality through lack of efficiency and familiarity with the areas in which they operate. In order to indicate a high level of commitment, a Contractor must encourage and promote longevity of its Paratransit Opera- tors. Proposers are required to complete and submit Appendix D, “Staffing Plan Summary” and Appendix E, “Wage and Benefits Summary,” and disclose a plan to accomplish this end with its Proposal. Proposers should disclose information such as award programs and other incentives offered to their Paratransit. There is also a monetary penalty if the contractor is not able to meet the daily demand or maintain at least a 90% on- time performance level. If the contractor fails to provide an adequate number of vehicle operators to meet the required level of service as defined in the contract, a $1,500 fine is insti- tuted. The contract also clearly states that no trips shall be missed or dropped due to unavailability of operators, and the contractor is fined $500 for each missed trip. The Contractor Perspective The General Manager for MV Transportation reported that “We have a low turnover rate at Redi-Wheels, mainly because we have a very good pay rate and fringe benefits.” Employees receive 100% full health benefits, paid by MV Transportation, which equates to about $10 per hour for health benefits on top of their hourly wage. As a result, the general manager esti- mated that the annual turnover rate is about 10% which he felt was “incredible in our industry.” He also comments on the current economic climate, which has dramatically changed operator recruitment: “Before, it was difficult to find opera- tors in the Bay area because there is so much competition for jobs in other sectors. Now, I’m finding 10–20 people a month looking for employment.” As for financial incentives outlined in the contract, the gen- eral manager reported that bonuses and disincentives in the contract have worked “substantially.” He said that four of the standards, productivity, on-time performance, accidents/ safety, and wait time on the phone, have huge bonuses and repercussions for MV Transportation if the company does not meet the standards. He reported that these financial repercus- sions influence his business decisions, saying “It is cheaper for me to add a person to the reservations taking function than to exceed the standards for wait time on the phone.” Currently, MV Transportation meets Redi-Wheels’ 90% on-time per- formance standard. The general manager said that the com- pany has been at this 90% level for a long time, and he is trying to figure out how to improve it, but so far has been unsuccess- ful. As for productivity, he reported that the service operated at about 1.5 to 1.6 trips per revenue-hour. Reported Results The SamTrans Accessibility Coordinator reported the paratransit contractor experiences extremely low turnover rates, especially in comparison to others in the region. She noted that by paying just $1 to $2 more per hour, operator turnover was reduced significantly, making a clear case that paying a higher wage dramatically reduces turnover. She also noted that she believes the more experienced operators tend to be safer and more efficient, which is both a financial and a community benefit. It was noted that while the monetary penalties have acted as an incentive for on-time performance, they have yet to be leveraged with the current contractor, who has consistently been able to meet the 90% on-time performance rate. 121

SamTrans also recognizes good performance by individu- als and reinforces good behavior by making both the transit district and contractor employees eligible for the “I Made a Difference” award. The award, generally an honor rather than a monetary award, is usually presented by a supervisor to an operator while mid-route. The award has created a good atmosphere and appreciation in the workplace, which was felt by managers to contribute to maintaining a stable vehicle operator workforce. King County Metro Transit (Metro), Seattle/King County, WA King County Metro Transit (Metro) is a public transit agency serving more than 1.7 million residents in King County, Washington. Metro operates a fleet of about 1,300 vehicles, including standard and articulated coaches, electric trolleys, dual-powered buses and hybrid diesel-electric buses that serve an annual ridership of 100 million in a 2,134 square mile area. In addition, Metro operates the largest publicly owned vanpool program in the country, with more than 600 vans providing transportation to 5,000 people every day. Metro also manages Access paratransit service, its ADA paratransit service. The program provides next-day, shared rides within three-quarters of a mile on either side of non- commuter fixed-route bus service during the hours and days of operation those routes are in service. In 2007, Access ser- vice provided over 1.1 million rides with a fleet of 300 vans. Use of Contractors for ADA Paratransit Metro contracts its Access paratransit service call center to First Transit, who manages scheduling, reservations, and dis- patching. Two other private companies are then under con- tract to Metro to provide vehicle operation and maintenance. The service provider contractors are Veolia Transportation, which operates about 70% of the runs, and Solid Ground, a local non-profit organization that operates about 30% of the service. Procurement/Contractual Provisions In the survey, Metro reported that it had moderate suc- cess with including language in the solicitation indicating that a stable, experienced vehicle operator workforce was expected. Metro Transit also noted a specific points system used in the evaluation of prospective contractor proposals. The following language is included in the 5-year service provider contracts: The Contractor shall ensure that sufficient staff are hired and retained to meet this Contract’s service requirements. The County reserves the right to reduce the Contractor’s monthly invoice appropriately for any management or supervisory position such as Project, Operations, Information Service or Maintenance Manager, left vacant for more than sixty (60) Days. The Contractor’s provision of qualified, capable and experi- enced personnel is essential to the performance of its contractual obligations herein. As such, failure to provide suitable personnel consistent with the County’s contractual expectations as set forth herein shall be deemed a material breach of contract and subjects the Contract to immediate termination at the County’s option. The Contractor shall ensure that its employees are qualified, capable and suitable to perform the requirements of this Con- tract and the County reserves the right to provide input to the Contractor in determining the suitability of any employee to con- tinue performing the work pursuant to this Contract. The Con- tractor shall provide all pertinent employee records regarding incidents/accidents, passenger complaints, etc., to King County as soon as possible upon request. The County recognizes that the strength of its transportation program is built upon the strength of its operators. Proposers are asked to consider how they will hire and retain an excellent workforce. Metro assigns points when evaluating RFPs to best analyze the proposed services. Typically, vehicle operator recruitment and retention comprise 18–20% of the total score. Table 10-5, 122 Criteria Points Percent of Total Training program 25 2.5% Plan to recruit, train staff and perform the work 50 5.0% Evaluation of proposed team and key persons 45 4.5% Proven ability to collaborate with contractor’s staff 20 2.0% Plan to transition staff who are currently employed with another operator so that service is not disrupted 75 7.5% Record keeping and retention plan 25 2.5% Customer service plan 75 7.5% Pricing 200 20.0% Other (specifics in contract) 515 51.5% Table 10-5. King County Metro proposal evaluation criteria and points.

adapted from a recent RFP, shows the evaluation criteria and points. Metro also includes a liquidated damage for runs that are dropped due to a lack of vehicles or operators. The relevant section reads as follows: The Contractor acknowledges that the provision of services pursuant to this Contract entails providing specialized, public transportation services, and that it is essential that safe, reliable, and efficient service is provided at all times. Liquidated damages may be assessed, at the option of the County, in the circum- stances detailed in the table set forth below. Reported Results Metro indicated that it is difficult to determine the impacts of these procurement strategies at this point because the con- tracts have just been awarded. A previous contract contained only minimum wage standards, which seemed to raise issues as several of the contract providers have had union repre- sented operators. In addition to increasing wage require- ments in the latest RFP, Metro removed the incentives related to run coverage that were included in past contracts. They indicated that the incentives in prior contracts related to run coverage didn’t seem to affect contractor behavior, so they replaced them this time around with liquidated damages. It was noted that vehicle operator turnover is a significant problem for King County. A commonly cited issue in retain- ing paratransit operators is that they often leave the industry for higher paying industrial jobs since they are required to also maintain commercial drivers’ licenses. Metro is considering eliminating the CDL requirement, but still requiring the train- ing to address the same content as in the CDL training. It was noted that operator retention has been better at Solid Ground. Metro indicated that this appeared to be partly due to the more extensive fringe benefits provided by this contractor. Metro managers noted that they have recently established a new bid model with flexible start times which can vary within 1–2 hours per day. Operators will receive notification the day prior to service as to when they will begin work the following day. More and more operators have been sent home before a shift’s end when late cancellations have allowed routes to be closed early and rides to be moved. 123 Item Requirement Liquidated Damage - Cost 1 Route dropped or reassigned due to unavailable vehicle or operator Perform all routes VSHs as assigned $1.5 times cost for replacement service per VSH

TRB’s Transit Cooperative Research Program (TCRP) Report 142: Vehicle Operator Recruitment, Retention, and Performance in ADA Complementary Paratransit Operations provides guidance for understanding the relationships that influence and enhance operator recruitment, retention, and performance in Americans with Disabilities Act (ADA) complementary paratransit services.

Appendixes to TCRP Report 142 were published electronically as TCRP Web-Only Document 50 : Survey Instrument, Productivity Charts, and Interview Protocol for Case Studies for TCRP Report 142.

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Read this article, which highlights a novel strategy for procurement. Focus on sections 1, 2, and 5 and the opening paragraphs for sections 3 and 4. The model in the paper presents a new strategy to reduce procurement costs and enhance overall procurement flexibility.

An Indian Company is manufacturing/assembling product A and B as per the bill of material shown in Figure 2. The company is 40 km away from the railway station and well connected with other cities by road. Considering fluctuation of market demand of product A and B, company is seeking effective procurement strategy for their ATO production system. The company has assembling unit in Punjab and retailers in different parts of India. Base product is manufactured as per the forecast and stored at the central warehouse shown in Figure 1. After receiving the customer order, the base product is brought to retailer shops in 15 to 20 days. Auxiliary parts/components/sub-assemblies are manufactured or assembled at the retailer site. It is assumed that material handling cost is 10% of procurement cost from each supplier. The aggregate demand for raw material to produce base product in the planning horizon is 4,900 tones. Senior members of different departments such as Finance, Marketing, Design and Manufacturing are asked to form a team of decision makers to select the right supplier for the company. Initially, a supply base is formed based on their industrial certifications such as ISO, TUV etc, material test data and ability to supply within the lead time. Based on the above information supplier's data sheet, is prepared, and shown in Table 2. Distance and mode of transfer mentioned in Table 2 is used further to calculate cost of emission for inbound transport. Linguistic terms, shown in Table 3, are used to prepare supplier's reliability measurement data sheet, shown in Table 4. Arithmetic mean of each IFN, shown in Table 4, is used to calculate reliability of each supplier, shown in Figure 5.

Table 3 Linguistic terms.

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