Why do we hear that reverse auctions are not as successful the 2nd time around?

March 19th, 2010

Many retailers have told us that they do not have continuing success when running prior e-negotiation events the 2nd time around.

As we discuss this further, one area of commonality they frequently discuss is a lack of new suppliers. Another is the price being too high for the same event that has already been built and will result in lower savings the 2nd and 3rd time around.

A simple focal point to begin a discussion of this issue is the lack of availability or the related benefit of a large retail specific supplier database. However unless we discuss how  retail companies should use this type of data when available is just as important if there is a true desire in growing their percent of spend with e-negotiation tools?

There is a proper way to insure the sustainability of your e-negotiation events going forward. Following these guidelines will also encourage senior management to consider placing more spend under the control of e-negotiation tools and specifically reverse auction tools. Armed with a robust retail supplier database and related tools:

1. Conduct a detailed category discovery
     a. Learn all there is to learn about the way a company conducts their   business.
     b. Walk distribution centers and warehouses
     c. Walk an array of stores and understand all formats of the enterprise.
     d. Compile a list of all corporate categories
2. Rank categories by
     a. Total spend
     b. Importance
     c. Sourcing frequency
     d. Quality objectives
     e. Look for aggregation opportunities.
3. Conduct supplier discovery
     a. Rank suppliers
        i. Size
        ii. Experience
        iii. References
        iv. Environmental certifications
        v. Safety Certifications
4. With  the above in hand; develop a three year game plan
     a. Identify suppliers for each event over the three years
     b. Develop savings targets by category
     c. Develop a three year time line for all categories
5. Role Play internally  the first year for a test category
     a. Ask the following questions
         i. How will you award the business
         ii. Review alternate scenarios
         iii. Review savings by scenario
         iv. Determine which suppliers will be invited back
         v. Determine what new suppliers from your database search will be invited to participate next year

Now ask your e-procurement solutions provider to demonstrate their capability in this area

We look forward to and appreciate your comments.

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