Reverse auctions in smaller spends

February 3rd, 2006 at 08:46am David Bush - Iasta

I recently recieved a newsletter from Aptium Global, a direct material consultancy group out of Chicago that focuses on the Lower Middle Market. The following is copied from it:

“Speaking of reverse auctions, I have found that many Lower Middle Market firms are hostile to the notion. And I don’t entirely understand why. Most Lower Middle Market firms still have tremendous savings opportunity because they have rarely introduced any competition into the sourcing process in the past. I’d say that in 90% of cases, their incumbent suppliers are taking advantage of their ignorance when it comes to benchmark pricing. This is a shame, because it has been my observation that Lower Middle Market firms typically have anywhere from 3-5 categories that are large enough to source using competitive negotiation technology (e.g., reverse auctions, optimization, etc.). Perhaps the greatest irony is that Lower Middle Market firms are only now beginning to take advantage of these approaches, despite the fact that their customers, Fortune 500 firms, have been requiring them to participate for years. And don’t ever tell me that small organizations can’t use reverse auctions. I’ve personally run reverse auctions for a $5 million industrial company with great results, and received little or no push back from their suppliers.”

I agree with Lisa Reisman and think there will be a growing interest from this group in 2006.

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Entry Filed under: General, Reverse Auctions, Supply Management Best Practices, Technology / SaaS