Reversal of Fortune
Ponder this excerpt: "Your managers view suppliers as enemies. Traditional supplier relationships are often adversarial. Beating up suppliers, or playing one off against another, can drive down purchasing costs and enforce deadlines in the short run, but in the long run, supplier distrust limits your ability to develop powerful new products and services. Could collaborative initiatives with your suppliers open up new opportunities for you?"
In fairness, there are tangible benefits to online reverse auctions for both sides of the transaction. Buyers can document and illustrate to upper management that they are using emerging technologies to meet strategic directives, electronic gathering, and organizing specifications and bids.
And some printers report that online reverse auctions have opened up opportunities to bid—but not necessarily develop a relationship—with customers previously unavailable to them.
Regardless, there is a marked lack of education and knowledge about online reverse auctions and their consequences to buyers and sellers. This leads to errors, misunderstandings, and miscommunication that can have devastating liability or cost implications for participants.
Some print buyers have even seen their price for a repeat project increase due to reverse auctions versus straight bidding, because they didn't understand market conditions, and tailored their auction to achieve the desired result.
Although the case has yet to be made that the current print market conditions are ideal to insure the long term viability of e-procurement via online reverse auctions, here are some suggestions to clarify and improve the quality of your participation in this process:
1. Establish and communicate to all participants the objectives and rules for the online reverse auction prior to the event.
2. Utilize a software vehicle that allows for online, real-time communication between buyer and sellers before, during, and after the auction.