Why is e-negotiation not the most important initiative of all retail companies?

May 3rd, 2010

The answer is because we continually just seem to get in our own way because we always feel as though we have more important things to do and create to many degrees of separation form the original directive...

I have been in many meetings numbers of retail companies where charts that reflect savings from recent e-negotiation events of other retailers with similar formats are reviewed. As real as these results are, it is still difficult for most retailers to pull the trigger in order to give a new process a try. We just seem to get in our own way because we always have more important things to do.

We just have the ability to make things to difficult for ourselves.  Relative to e-negotiation, let’s assume that the CEO directs that he or she would like the cost of goods reduced. The project is then assigned to the Senior Vice President of Supply Chain or Chief Logistics Officer or Chief Procurement Officer or other senior executive. This is further assigned to the Vice President of Purchasing who in turn assigns it to the director of supply purchases. The director convenes a meeting of the buyers or category managers responsible for a variety of supply categories. In degrees of separation this is about 5 or 6 degrees from the person initiating the project. And now the excuses (delays) begin.

1. We can’t damage our relationship with our incumbent suppliers.
2. We get the best price in the industry right now.
3. These guys don’t know what they are talking about.
4. Don’t we have a tool that does this in our ERP system?
5. We’ll sacrifice quality.
6. We don’t have time for this.
7. I’ll get back to you.
8. Let’s create a cross functional team.
9. I’m not going to be first.

If we go back to the CEO and explain what the situation is, one is likely to get a reply that says to the team JUST DO IT! Unfortunately that needs to be followed by; DO IT NOW!

From start to finish, an e-negotiation event such as a reverse auction should take no more than two weeks to run. This includes the entire process including an RFI if required from the day a retailer says go to the actual award of business. There are several requirements necessary to accomplish this that will eliminate the worry and mitigate the risk.

1. A robust supplier database with safety and environmental focus.
2. A robust event template library.
3. An intuitive or intelligent tool for building an event quickly.
4. An automated reporting tool to provide immediate event detail for review.

If you are really interested in improving your bottom line now, you are less than two weeks away from immediate measureable results.

We appreciate and look forward to your comments.

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