Does Procurement eAuction Design Matter? (part 7)

This is the 7th and final posting from my eWorld presentation series.

My last eWorld tip is, again, arguably as much about strategic sourcing as it is about eAuctions. But again, the clarity and open-ness of the eAuction process brings the issue out into stark relief.

As usual, I have a story to illustrate the example.

There was a buyer who ran reverse auctions but who didn’t have the slightest intention of moving to a new supplier. The reverse auction was competitive and identified a significant saving. The buyer then used that information as leverage to get his incumbent to deliver some savings. From the buyer’s point of view this approach seemed too good to be true: running reverse auctions helps you achieve savings targets without ever having to go through the effort and risk of changing supplier.

The suppliers, meanwhile, were aware of what was going in the marketplace and soon got wise to the buyer’s approach. By year 3 of this approach, the buyer was finding it very very hard indeed to encourage suppliers to participate in eAuctions. And why should they? They know it would be a waste of time.

An approach that seemed the most expedient to the buyer in year one turned out to be a counter-productive strategy over the medium term for his employer.

So if, as a buyer, you are interested in medium and long-term sustainability of your supply markets, you’ll be interested in the 5th and final tip:
Trust plays a key role in negotiations in general, and auctions in particular. Protect your reputation and your credibility in the supply market and you will reap the rewards again and again and again.

And here’s the slide for completeness.

Trust Credibility and Reputation in eAuctions

Postscript

Well, that’s it. I’ve tried to compress down TradingPartners’ last 8 years of eAuction experiences into less than 10 slides. And font sizes less than 30. I think I achieved about 70% success rate on the 10/20/30 rules, but most importantly  I hope you’ve enjoyed reading these posts and have taken away something that will help you run better eAuctions (whether or not you choose to do them with us). As a re-cap this is what I covered:

Reverse Auctions Background

  1. The Reverse Auction Family Tree. Reverse Auctions have moved on significantly over the past decade and there are a number of different types of auction suited to different supply markets.
  2. From Consultancy Services to Dairy Cream there is a reverse auction type most suited to your category and supply market conditions.

Reverse Auction Tips

  1. Specifications (Remember the waterproof matches)
  2. Plan and Execute an appopriate Messaging strategy
  3. Strategic Sourcing (and Reverse Auctions) are not one-hit wonders that apply only once for a category. Markets change and can offer new opportunities for buyers
  4. Auction structure impacts success (Remember the UK vs Swiss 3G auctions)
  5. Protect your reputation in the marketplace
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