Retailers; is your sourcing transparent enough?

November 23rd, 2009

This is really an important question? If you are not using online or reverse auctions

As such, if you are not sourcing at least 30% of your cost of goods and services with these tools, you are lagging the leaders in your industry and well behind other industries. Resultantly you are not getting the best costs and not driving the best margins for your company.

Reverse auctions since their inception more than a decade ago haven driven healthy competition amongst competing suppliers. As such the results of a reverse auction can provide a great benchmark for both the buyer and the supplier. For the buyer the results can be used as a tool to evaluate how to best source other products and services. Additionally suppliers that are not the low quote or winning bid now have the opportunity to evaluate why that is and what they need to do in order to improve or to be more competitive in the market place. This of course is all happening without the need to collect, collate, compare or negotiate during the process. In other words it is happening transparently to the normal sourcing process.

Additionally reverse auctions provide the opportunity for suppliers that are outside of your business area or knowledge base to bid for your business. That is if your solution provider has access to a large number of retail suppliers.

Possibly the single largest area of benefit to reverse auctions outside of price compression for procurement professionals is that it offers a significant opportunity for process improvement since most solution providers offer a standard process for hosting reverse auctions. Everything is done in one place using standard processes to build the event to the analysis of the bids collected. All information is then available for immediate evaluation and archived for easy access in the future. This reduces the overall procurement cycle time, eliminates or reduces the opportunity for human error, and provides a standard way to award business.

We look forward to and appreciate your comments.

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