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eProcurement In Canada: Let’s Make a Deal!

Everything Must Go!

by Nicholas Seiersen

It is 2 pm on Friday December 27, 2002. Like every other every Monday, Wednesday and Friday, a Dutch Auction has just started on the Internet. Every ten seconds, the eight items on the screen are sold or continue to decrease in price by 10 percent every 10 seconds. Flowers are auctioned to professionals (strictly B2B) using the Dutch Auction system, meaning that the prices start high and decrease rapidly. Blink, and you may have missed your chance. When all the items on the first screen are sold out, eight new items appear, and the process starts all over again. By about 4 pm, all the flowers sitting in a cooled warehouse in Miami will be sold. For another several hours, buyers can secure flowers that are still growing in Colombia or Ecuador. In fact, many of the flowers that will be given to North America’s sweethearts on Valentine’s Day were already betrothed on the Internet by Christmas. By the end of each auction, some 12,000 boxes of 3,000 different flower/category/grower auction lines will have been offered. An estimated 2,000 of those cases are sitting in Miami to be sold, no matter what the price. They will be merged with about as many cases bought as “futures” during previous auctions. Each bidder will receive a single shipment, with all the flowers they have bought this week and earlier, from every grower that has chosen to use FlowerBuyer to reach the North American market.


We invite you to join us at our new LQ™ Logistics Forum. An online resource for logistics managers.

To participate in our inaugural online logistics forum with other readers and the FlowerBuyer executives with regard to the following questions, please join us at: www.LQ.ca/forums.htm

  1. We’re interested in knowing about similar cases where collaboration and information sharing has improved visibility of demand. We look forward to your comments about how this was achieved.
  2. Given the growth in “made-to-order” offerings, and the dramatic increase in these sales during the past few years, what is the best way to forecast and accommodate demand, in your opinion?
  3. With the noted surges in demand in the case of Flowerbuyer.com, contingency planning and crisis management in logistics practices by and/or with 3PLs are critical. We’re interested to know who you think are the leaders in these practices. What they do well, and what operational and strategic capabilities they require to be effective at this?
  4. FlowerBuyer is eager to automate the Miami DC operations, and they are wrestling with some practical issues. Are there other products that have counter seasonality and that could use a Miami based, automated, refrigerated sortation facility at 34° F and 95% humidity, that does not generate ambient ethylene?
  5. What other businesses have peaks, which occur at least annually, where the peak exceeds normal or regular period activity by at least a factor of four? How is this surge handled by the supply chain?
  6. How heavily (vs. theoretical capacity) are effective automation systems (such as conveyor systems, gantry cranes, carousels) loaded? How is capacity lost, and what can be done about it?

Buyers from across North America convene here three times a week. They buy specific flowers from specific growers, with detailed characteristics, to be shipped from Miami on a specified date. Today, a florist somewhere in North America bought two boxes of carnations for $60, two more of the same at $54, and was tempted to buy yet another at $20. At that price (s)he knew (s)he could find customers! The flowers were all from the same lot, from the same grower, cut the same day, somewhere in South America.

Buyers can go online to see what will be on offer 36 hours before the auction starts. They can see the quantities (in standard boxes of about 10 Kg. on average 177 flowers). They can research each grower, see what they specialize in, and see the ratings of their merchandise by the unique Grower Rating system developed by FlowerBuyer.com. The buyers can purchase the product outright before the event starts (the prices go up when the auction starts). They can place proxy, or unattended, bids if they will not be able to attend – when the auction price reaches their price, the system will place their bids. If there are any still left, it will be theirs. Or they can wait for the auction. Once they have bought flowers, it’s cash on delivery, either by credit card, direct debit, or fax-check in the United States.

Roses are red, my dear…
Growers go online to see what prices are being offered at what dates. If they like the prices, they can cut their flowers, calibrate and hydrate if necessary, then pack them in customized FlowerBuyer boxes (the standard flower “half-box” is used for 95 percent of their volume), and deliver them to one of the four consolidation centers in Quito and Guayaquil (Ecuador), or Medellín and Bogotá, (Colombia), two days before the auction. From this point, the flowers are under FlowerBuyer.com’s quality control. The boxes are bar coded and air freighted to Miami. After passing USDA and customs, the flowers arrive at the Miami consolidation center. There, flowers are pre-cooled to ensure maximum stability and longevity. Using a Webcam, any box can be viewed from the Oakville office. For growers outside these areas, such as the Dutch Tulip growers or the New Zealand calla lily growers, they can ship them direct to the Miami consolidation center. Once bought, they are shipped out by the least destructive mode. For Toronto, that means 36 hours by “reefer” truck rather than another airlift. In Canada, Customs duties are included in the prices, as well as conversion to Canadian dollars. Local delivery or pick up is available from Flower Buyer’s warehouse in Mississauga. For buyers in the United States (well over 90 percent of the business), delivery will be an airport pick-up (25 percent), an LTL reefer truck (40 percent) or a courier such as FedEx (25 percent), where FlowerBuyer takes their chances on the flowers arriving in good shape. When customers make claims, compensation is generous – unless the customer is unlucky too often, or if an onsite audit reveals the claim is not justified. This means that roses growing in the Colombian sun can be in your home as little as seven days later.

FlowerBuyer.com and TheAmericanClock.com are owned and operated by Access Flower Trading Inc., a private Canadian corporation, with its headquarters in Oakville, Ontario, Canada. Its logistical center for North America is located in Miami, FL, United States.

FlowerBuyer.com is the only Dutch-style e-auction trading service available to North America’s commercial flower buyers and is strictly B2B. FlowerBuyer.com’s website trading system is unique. There are no competitors offering similar trading services in the cut-flower commodity industry.

FlowerBuyer.com’s e-auction service enables purchases of an extensive variety of cut flowers from Central and Latin America, Italy, New Zealand, Thailand, Australia and The Netherlands. Regardless of source, quantity or destination, each client’s order is consolidated into one shipment. All sales are through live, online auctions, held three times per week. Its logistical support system ensures rapid and reliable delivery.

Commercial buyers throughout North America and the company’s flower suppliers view the e-auction service as effective and reliable as traditional wholesale distributors. It provides competitive ‘at-market’ prices and is far more convenient than traditional auctions. It allows buyers to select flowers from a particular grower, country or even continent.


For more information, please contact:
Cor Keeren
President & CEO
Access Flower Trading Inc.
E-mail: cor@flowerbuyer.com
www.flowerbuyer.com

The FlowerBuyer team has been in the business of buying and reselling flowers for decades. In 1995, they tried an auction with faxed out lists and faxed in bids. It was exceedingly tedious, and they abandoned that trial after two weeks. In 1996 they started looking at the Internet and in 1997, one of the early auctions brought 54 buyers to bid on 400 boxes. 50 boxes were sold, 350 were destroyed, no-one wanted them at any price. Now 200-300 buyers attend each auction. Registered membership is more than 5,000 and growing by about one percent a week. FlowerBuyer eschews the big retailers as they refuse to become the puppet of one big customer.

EBusiness is Supply Chain business
This is the business of FlowerBuyer.com, an eBusiness in sleepy Oakville, near Toronto. They buy cut flowers from across the Globe, and sell them three times weekly in these reverse auctions. The only issue remaining is at what price a deal will be made… and, as we all know too well, how these orders will be fulfilled. Supply chain management is the core foundation this business is built on. Traditional Dutch Auctions require the buyers to attend physically, and they typically carry away their purchases. This limits the reach of the market, and therefore its size and liquidity. FlowerBuyer is the only Dutch Auction for B2B flowers on the internet, selling mostly blooms from Ecuador and Colombia, but also from California, Costa Rica, Guatemala, Thailand, New Zealand, Australia, Italy, and of course, Holland. In Quito, the source of half of the FlowerBuyer product, they may be the largest player.

The cost of inbound consolidation, airfreight, USDA inspection and Canadian duties, the Miami DC, and the outbound freight, can be one third of the value of the flowers. The most critical part of the supply chain is the Miami DC, although it may only account for 15 percent of the supply chain costs.

Valentine’s Day Massacre
During the Valentine period of 2003, 40,000 boxes were sold. So 70 million roses (more than 350 tonnes) moved through the FlowerBuyer Miami facility in one week. This is the most important week of the year and over 10 percent of the yearly volume is processed in that one week. The logistical challenges for the industry are monumental: Special 747’s will be chartered just to bring flowers into Miami, 10,000 cases-at-a-time. Traditionally, handling this surge in the DC has been a nightmare for the industry. For most players in the flower business, Miami is just a cross-dock operation, For FlowerBuyer, all product converges and is picked to individual customer orders, so the challenge is far more daunting. In 2003, through very careful planning and several changes in the way they do business, Valentine’s Day went surprisingly smoothly. Two years ago, a new DC operator was selected. A longstanding freight forwarding relationship in Quito, an attractive financial offer, and a bungling incumbent (“they couldn’t do worse than the others…”), closed the deal. Since then, the service has improved and prices reflect the new value.

Next year, at Valentine’s Day, all over again, flights will be delayed, cancelled even. Loads will be split, cases will be lost. Flowers will be damaged en route. Officials will get overwhelmed. Tempers will be frayed. But FlowerBuyer will make sure that you will have your dozen roses for your sweetheart.