ESF Benchmark Analysis - Day 3

March 22nd, 2006 at 07:28am David Bush - Iasta

Adoption vs. Availability
Though reverse auctions have been around for many years, many companies still do not utilize it – especially Small and Medium sized companies. And though Large companies run more auctions than Small and Medium ones, there still exist opportunities for them to run more reverse auctions. One reason for this reluctance is that companies seem to be attached to incumbent suppliers – for both good and not so good reasons. Because of this attachment, many companies miss savings and quality opportunities through their reluctance to source portions of spend or try new suppliers. Incumbent suppliers successfully play to this fear and resistance.

• Use of reverse auctions. Though 63% of companies responded that PRICE was the primary reason to switch suppliers, only 5-25% of companies actually switch suppliers.
• Strategic spend. A large number of respondents (70%) indicated that only 25% of spend was too strategic to source. Yet despite the availability of spend, only 5% of spend is sourced via reverse auctions. Though incumbent suppliers may lower prices during negotiations, far more savings may be left on the table from potential suppliers.

Is it possible that companies “feel bad” about using a reverse auction in a category where a supplier has traditionally performed? It seems so, due to the huge gap between what buyers feel are categories that are “off-the-table” and categories that have sufficient opportunity for competition. Although we would not suggest that the entire amount be sourced through e-auction, it seems illogical that so much spend be left untouched by auction technology since it is a very efficient way to achieve market price transparency.

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.

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