Less than half of buyers use electronic reverse auctions
November 29, 2007
According to a survey published this week in Supply Management 60% of respondents do not use reverse e-auctions. Read the article here: http://www.supplymanagement.com/EDIT/Top_stories_item.asp?id=17116
Reasons against electronic reverse auctions include “it will damage supplier relationships” and “in industry X it’s still a problem finding suppliers that use e-mail.”
Reasons for electronic reverse auctions include reductions in administration and preparation time; easier comparison of data.
From my perspective it is puzzling that so many buyers are not even considering e-auctions. While I wouldn’t say that everything can always be auctioned effectively, there are always going to be categories that buyers will be able to achieve more (quality, savings, sustainability – whatever floats your boat) through the considered application of an e-auction.
A decade into the e-auction industry and there is still a whole lot of educating to be done amongst buyers about when and how to take advantage of reverse auctions.
I’ll say one thing (again): e-auctions are a tool. e-auctions do not damage supplier relationships, if you run then well. If you run an e-auction professionally and carefully you can get the best price in the market while still maintaining supplier relationships.
Entry Filed under: e-auction, reverse auction. .
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1.
David Stone | November 29, 2007 at 5:31 pm
Absolutely. This was my feedback to Supply Management, but I am not clear how they handle it
Auctions are an established and successful way of going to market, though they don’t suit all procurement initiatives. To take the specific critical points:
• Auctions don’t in themselves damage relationships. If a relationship is one where we are more or less obliged to stick with an incumbent, then we shouldn’t auction, but if it is appropriate to go to market then an auction is an efficient mechanism. It is the decision to go to market that threatens relationships, the method by which you go to market is not relevant, you handle the threat by efficient communication and supplier management. If a change of provider is required, an auction actually gives suppliers greater visibility of our sourcing reasons and handled properly can strengthen relationships.
• Similarly, communications can manage the damage done if you don’t award to the lowest price. Calling the lowest price bid the winner is a mistake, it is rare for what we buy to be determined solely by price. Suppliers ought to understand that and the transparency an auction gives on their pricing position gives them an opportunity for a better informed positioning of the rest of their proposition.
2.
alanbuxton | December 2, 2007 at 12:44 pm
Thanks for the comments, David. It’s great to hear a practitioner saying this kind of stuff rather than it coming, as so often, from a service provider.
3. Reverse e-auction myths « Where Next | December 6, 2007 at 9:18 am
[...] e-auctions damage supplier relationships. In a comment on a recent post, David Stone put it best: It is the decision to go to market that threatens relationships, the method by which you go to [...]
4.
Sofia Norberg | December 12, 2007 at 3:12 pm
This is the myth of all myths when it comes to eAuctions. I actually wrote a whole dissertation on the subject itself. When you, as said above, decide to go to market You are in control! eAuctions is truly only the means by which you go to market, it is still your negotiation skills that will matter.
The market place itself is however changing and becoming more straightforward and a harder place to compete. This is why buyers should embrace eSourcing and eAuctions as a mean to meet these new market conditions when suitable. It truly feels that is time for narrow minded assumptions regarding eAuctions to come to an end.