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What happened to e-auctions?.

e-auctionsprocurement technology

Although it turns out that most of Europe might have escaped the infamous "triple-dip" recession, what is inescapable is that both sides of the pond had a bad five years of economic misery and it's not going to be great (but, hopefully it'll be a bit better) anytime soon.

 

So, given the economic climate it seems timely to reflect on why e-auctions haven't become the prominent, if not dominant, feature of procurement they were anticipated to become fifteen or so years ago when they first burst into procurement professionals' tool-kit.

 

The preparation for a successful e-auction is exactly the same as for running any successful tender process.  You need to:

  • Engage stakeholders
  • Ensure the procurement strategy is appropriate for the product's complexity and importance to the business
  • Pre-qualify the suppliers
  • Explain the process (to everyone and potential suppliers in particular), especially whether pricing is the sole criterion and if not what the other criteria are and how these will be assessed
  • Confirm SLA / T&Cs
  • Be clear about product requirements i.e. product spec, volume and order frequency
  • Precede any of the above with an e-RFx (Request For information, proposal or quote) if, under similar circumstances, their non “e” cousins would be appropriate

Just as a traditional approach to tendering will be unsuccessful if any of the above steps are injudiciously handled, an e-auction, underpinned by similarly unreliable foundations, will fail in exactly the same way.  That similarity explains why e-sourcing has become widely embedded: speedier, more transparent Business As Usual. 

 

E-auctions add the most value as the end point of a set of procurement process improvements and when the products auctioned are not highly strategic.  Where the existing processes are strong and there is not much undue sentimentality concerning tactical purchases there is less scope for e-auctions to add value.  When the conditions, in theory, seem right for an e-auction in practice there are still likely to be significant challenges to implementation.  

 

There are two common sources of resistance to procurement's desire to run an e-auction.  The first is due to the suppliers' understandable desire to avoid the commoditisation of their products and the inevitable, associated margin squeeze.  The second comes from the internal stakeholders who are also the users of the product.  Their concern tends to be that the process will lead to impairment in working relations with the supplier especially where high pricing is a result of internal process inefficiency. 

 

A further, often overlooked, source of resistance to e-auctions comes from within procurement itself. No, I'm not thinking of the Buyer being worried about looking bad in the event an e-auction generating massive cost savings – that problem's very rarely overlooked, if not overcome. 

 

If the personalities within the department are such that the culture is to enjoy the intellectual sparring of face to face negotiation, or even just simply making the supplier squirm (unedifying, maybe – uncommon, definitely not) technology's not going to be easily allowed to take the fun out of the job. 

Liz Maffei
Posted by Liz Maffei