Category Archives: Reverse Auctions
Many people often wonder (especially eSourcing newbies) what the criteria are for a good reverse auction sourcing event. Since billions and billions of spend are negotiated through reverse auction technology every year, these rules have been developed and refined over time. Honestly, I do not even know the origin of this list or any of the changes it may have gone through over time. I suspect this was some of the original FreeMarkets marketing collateral that could fill an Olympic … More
How many bidders do you need for an electronic auction? There are a variety of “expert” opinions on this question. Is it three, four, five? I have heard all of these recommendations. The correct answer is: at least two. But the actual number depends. I have experienced circumstances where two bidders were plenty. It was a sellers’ market. There was significant over capacity, and the two bidders were hungry. They fought for the business in a bidding war, and the … More
Last week, I was interested to listen to a quick interview of East Coast academics discussing reverse auction theory/technology to solve the credit crisis by procurement of toxic mortgages. Spend Matters has been involved in this topic for a couple weeks, as Jason Busch and Sam Kinney have had discussions with the Treasury Dept about strategies utilizing reverse auction technology to save the world. Sam is a founder of Freemarkets and has a fascinating blog named, Up the Economy, which … More
Nothing spurs on emotional debate in sourcing, more than reverse auctions. According to CAPS, they represent less than 5% of managed spend, but you would not realize that by the blood pressure changes they cause (for buyers and suppliers), who argue their effectiveness. Even being in the industry, one of the hardest questions to answer is: How do I know the value of a reverse auction? This question is also known as: What is the extra cost reduction that a … More
It has been a very long time since I wrote a summary of what is going on, over on the ESF sister site – eSourcingWiki. Since many are now taking long weekends, or full holiday right now, today is a good time to bring attention to what exactly is going on over there. The wiki series are broken into 4 main categories: The Basics, The Technologies, The Methodologies, Global Sourcing Primers. Within each header category, there are numerous papers on … More
UK based Supply Management magazine, had a summary level article regarding suppliers attempting to disrupt the e-auction process. I think the title was a little misleading because, generally speaking, suppliers cannot disrupt a good auction with adequate competition. However, that statement is heavily loaded, and the article does point out some auction best practices that have been around since Tron, or so. According to Huthwaite International, supplier disruption tactics include: refusing to participate, submitting bids outside the auction process or … More
Well I couldn’t resist this…especially since I was once one of these buyers. What is more interesting for me is that having crossed over to the “other side”, the negotiating styles used by the supermarket buyers (Tesco’s etc) certainly sounded very familiar. When showing these tactics to Duncan Bullivant, the Chief executive of Henderson Risk Group, a seasoned hostage and kidnap negotiator, the article writes “even he was surprised”. Duncan then goes on to say ”not only do I recognise … More
Even in these very turbulent economic times, we are still seeing a large volume of reverse auctions being executed. However, now is a good time to remember the definition of cost avoidance, as explained on the eSourcingWiki and pulled from CAPS. Cost avoidance is a cost reduction that results from a spend that is lower then the spend that would have otherwise been required if the cost avoidance exercise had not been undertaken. This accounts for the situations where spend … More
Industry week recently ran a good article by Chris Ferrell of Tompkins Associates on Best Practices in Freight Bidding that had a number of good suggesstions. The article offered up the following 12 best practices: Obtain commitment from executive management. This is always a good idea, no matter what project you are undertaking. Benchmark current freight costs. Also, separate out fuel surcharges from basic freight spend. This is critical. After all, how can you do better if you don’t even … More
There is an economic storm brewing and its called a recession. I believe Zig Ziglar once stated that experts have predicted 36 out of the last 2 recessions. The problem is, that nobody actually knows if we are in a recession until the economy is already pulling out of it. To start, I think it is important to understand some macroeconomic definitions: Recession: a decline in any country’s gross domestic product (GDP), or negative real economic growth, for two or … More
Charles Dominick had a good story about purchasing a new vehicle, which reminded me that I was going to blog about my own process of buying a new car. Last month, we decided to go through the same assessment in my own purchasing department which includes me starring as CPO, Director and Buyer. The process was handled differently but the results came in pretty good! To begin, I have to agree with Charles that some of the biggest houses in … More
SCDigest ran a commentary recently which spelled out five recommendations for improving your results for eSourcing. Prioritize The Trinity Of Reliability, Quality And Price Very true, eSourcing does not change what you would normally do when going through a sourcing exercise, it just enhances it. If you sense the loss of a critical milestones, recalibrate and get it right. Use e-Sourcing Strategically SCD claims here that not all projects are suited for eSourcing. This is a classic trap and not … More
Supply and Demand Chain Exec has a fantastic article on eSourcing process integration, which is written by Andy Sealock of Pace Harmon. If you can get past the incredibly unfriendly user obstruction for printing and viewing the article on 7 different pages, you will be able to really get a ton of great information. In fact, I would say that this is the best and most comprehensive content I have read about eSourcing project management. This comes off my recent … More
The Doctor, who runs Sourcing Innovation blog, is never short on heavy hitting analysis. I particularly like when he takes on topics in eSourcing (big surprise). Last week, he had an in depth breakdown of the core functionality that most think of for eSourcing -eRFx/eAuctions. Additionally, you will notice his theme of the 12 days of X-emplification and there are others days which have great information on topics such as spend analysis and contract management. From his prologue, Michael sets … More
I ran across an interesting article, which continued my recent trend of running into a great deal of new content about reverse auctions. Sort of a strange phenomenon, but true. This one was discovered on CFO Magazine and tells the story about research being done to create software which attempts to infer the lowest possible qualified bid by a supplier. However, the article left me looking around to see if I missed something, because it just ends, sort of like … More
