ESF Benchmark Analysis - Day 2

Add comment March 21st, 2006 David Bush - Iasta

Reverse Auction Usage
Today’s entry talks about something that gets the most attention relative to all e-Sourcing tools – reverse auctions. A large number of responding organizations (70%) have run reverse auctions. Not surprisingly, Large organizations have tried reverse auctions more often than smaller companies, probably because they have more spend at their disposal and are much more willing to utilize technology to maximize efficiency.

Obviously, the use of auctions decreases with the relative size of the company. There has been enough buzz over the past five years that most companies have at least tried running a reverse auction. This statistic also indicates that reverse auctions are considered “mainstream” by the majority of companies. (My next blog entry will talk more about adoption rates for this tool, but for now let’s just talk more about reverse auctions.)

But, as many of you know, it’s not enough just to try a reverse auction in order to check the box and say it was done. A reverse auction is just the tip of the iceberg and requires a sourcing organization to start thinking differently about how it sources and how it relates to other business units. Running a reverse auction is the easy part – run an auction, identify savings, and implement savings…easy. You get the low-hanging fruit and go back to the way you’ve always done it. (“It’s a great idea for ‘X’, but it won’t work for ‘Y.’”)

The hard part is developing and continuing an e-Sourcing strategy that involves not only reverse auctions, but other sourcing tools like decision analysis, spend analysis, and supplier management. The hard part is developing an e-Sourcing strategy that involves collaboration with other business units rather than order taking, material expediting and logistical problem solving. And this is where many companies stumble.

After working with many companies over several years, it’s clear what makes companies successful when it comes to strategic e-Sourcing – regardless of industry. You’ve heard it before, but I always like to repeat these factors.

Key success factors for e-Sourcing:
1. Visible, vocal leadership with a plan
2. Long-term commitment to strategic e-Sourcing
3. Use of commercially available e-Sourcing tools/application
4. Use of standardized operating procedures that evolve with business needs
5. Commitment to team through training and new skill acquisition

If you are interested in reading the full report, please email survey@iasta.com and request a free copy of the e-Sourcing Benchmark Diagnostic. Please include your corporate email address only.

Entry Filed under: Analysts/Research, Functionality, General, Reverse Auctions, Supply Management Best Practices, Technology, e-Sourcing Marketplace