Reduction in cost of goods and services is a no brainer when you ask why companies should run reverse auctions. The real question is can you do it over and over again with the same categories year after year.
Primary success in e-procurement programs such as reverse auctions of which there are many types is in many cases measured by cost reductions. That’s because within a budget period they drop directly to a company’s bottom line plus or minus some switching costs. On more than one occasion I have heard; “did we hit a home run?” Less emphasis seems to be placed on cost avoidance in an up market and creating a sustainable process. This often results in less spend be assigned to these very effective tools then should be.
In order to ensure that results are sustainable; the strategies for all targeted e-procurement categories require consistent deployment across all departments throughout the host company. This is accomplished by utilizing a well planned repeatable process for category selection and discovery, supplier selection, and a solid strategy that is well understood by all buyers and category managers for negotiation and the award of business process.
Supplier selection and management is a critical stage that requires the understanding and participation of all sourcing professionals within an organization. One small mistake by anyone within the procurement or supply chain organization could negatively impact the potential results of an e-procurement event. Historical long term relationships that drive behind the scene comments like; “don’t worry we’ll be fine” to a long term supplier may drive inappropriate bid behavior and lack of ongoing credibility with your program. Not to mention the potential legal implications.
If you are not having the results you would like to or have less than twenty percent your total corporate spend assigned to e-procurement tool’s that are offered in the form of Software as a Service or cloud computing, ask your provider why?
We appreciate and look forward to your comments