“Part II” Why don’t middle market retailers use reverse auctions and other e-procurement tools?

August 18th, 2014

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

Please read yesterdays post first.This is part two from yesterdays blog post that end with the following statement. Expect pushback from two sources.

The first source is your own buyers or category managers. For some, it is the false belief that these tolls will eliminate their jobs. For others, it is the thought that in rising markets, buyers tend to be conservative in the hopes that their suppliers will continue to honor old contracts and delay price increases. Neither assumption is true. E-procurement tools make a buyer’s job easier as they can do more in less time such as working with dozens of suppliers versus only the same few. Honoring old contracts almost never happens. Ever-greening of contracts is a huge problem in retail where the lack of sophisticated contract management systems that provide automatic alerts results in hundreds of contracts auto renewing at predetermined price increases resulting in huge cost increases to retailers. That was not planned for. This is all the more reason to be thinking about your spend months before contracts expire even if it only results in cost avoidance.

The second area where you can expect pushback is from your incumbent suppliers or wholesale distributors. If you have never participated in the setup of a reverse auction and most middle market retailers have not, that initial call to your suppliers to ask them to participate in a reverse auction event is always an interesting journey. Be prepared for all of the reasons in the world why you should not waste your time on this type of process. The more forceful the pushback the more likely you are to see savings that you should have seen earlier. As such, although suppliers may b well aware of or even using this technology to reduce their costs, middle tier retailers were not able to share in these savings to the extent they should.

If middle market senior executives lead the charge and cost and the availability of new sources of supply is no longer an issue, there is no reason middle market retailers should not benefit greatly from running reverse auctions.

Please contact a SafeSourcing Customer Services Account Manager in order to begin your successful approach to eProcurement today.

I look forward to your comments.

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