"Dorothy - you are not in Kansas anymore"!
Many suppliers would prefer to stay in figurative Kansas and not embrace the utilization of e-tools in the procurement world. They lament the fact that only price is important now...not quality. It is amazing that after 10 years, the complaints are still the same and still completely inaccurate.
The story of OZ is about the pursuit of courage, intelligence and passion. It is about moving from a comfort zone....knowing that things may not be perfect, but nonetheless they are predictable. Suppliers like predictable, particularly if it leaves the buyer-supplier relationship in their favor.
e-negotiation is the electronic tool that gives buyers the greatest opportunity and from the perception of suppliers it is the greatest threat. Note, that the operative word is perception, because the reality is far different.
What started off as reverse auction (now called e-negotiation), can in fact be tremendously beneficial to suppliers. The fact is that a vendor will not even make it to the "auction" stage without the appropriate quality. Also, because of the fact that the process is done electronically, without manual calculations, etc., required, more suppliers will be able to participate, as the requirement to analyze 5 takes the same amount of time as to analyze 15. Opportunity knocks for those who have the intelligence to recognize it.
"That's the scary part. I don't know if I should smile, crack up, scream or run."
The biggest fear associated with "reverse auctions" is the driving down of "price" and the potential for exposure of the "price" to competitors. Again, there is a lot of perception here vs. the reality. Let's deal with reality.
Firstly, any worthwhile procurement professional focuses on total deliverable cost (also known as total cost of ownership), which considers both the tangibles and intangibles of a proposal. Pricing is only one component, albeit an important one, to the final consideration. Value for money, warranties, reputation, innovation, flexibility, etc., all plays an equally important role in the final decision making. So a supplier needs to understand how in the industry they rank against their competitors in these areas so that they can properly define their pricing strategy.
Secondly, there are many ways that a reverse auction can be set up. In some cases, the kimono will be open for all to see the actually pricing of competitors (although even in this instance the names of the vendors bidding are in most cases not viewable). There is also the potential for just having the rankings available -- that is are you number one or two etc., in the pricing -- without actually knowing the differential. This protects the confidentiality of the pricing; however, it also makes the bidding more difficult for the suppliers -- as they do not know how far they need to go.
When suppliers go into a high level face-to-face negotiation with a client they have their "A" team available and they have outlined their strategies and their bottom-line. Too often in an e-auction, suppliers have not strategized and do not have their key decision makers readily available, which makes failure all the more probable. Ensure you have a sound strategy with your BATNA in place, and always remember that the lowest price doesn't necessarily win -- decisions are made on both quality and quanitative aspects.
Relationships still matter -- even in the "e" world. I have never done business with a firm where I have not met the prinicples' and felt comfortable that they would work in concert with me to achieve my corporation's goals and objectives. Refusing to work with me when I've chosen to implement "e", which definitively saved my team significantly in cycle time and analysis, meant that this supplier did not understand the challenges that my corporation faced and as such I wouldn't want to do business with them.
As Dorothy said to Toto "I have a feeling we are not in Kansas anymore!", suppliers should help buyers and step up to the plate. Otherwise they might very well have the same ending as the Wicked Witch of the East.
Many suppliers would prefer to stay in figurative Kansas and not embrace the utilization of e-tools in the procurement world. They lament the fact that only price is important now...not quality. It is amazing that after 10 years, the complaints are still the same and still completely inaccurate.
The story of OZ is about the pursuit of courage, intelligence and passion. It is about moving from a comfort zone....knowing that things may not be perfect, but nonetheless they are predictable. Suppliers like predictable, particularly if it leaves the buyer-supplier relationship in their favor.
e-negotiation is the electronic tool that gives buyers the greatest opportunity and from the perception of suppliers it is the greatest threat. Note, that the operative word is perception, because the reality is far different.
What started off as reverse auction (now called e-negotiation), can in fact be tremendously beneficial to suppliers. The fact is that a vendor will not even make it to the "auction" stage without the appropriate quality. Also, because of the fact that the process is done electronically, without manual calculations, etc., required, more suppliers will be able to participate, as the requirement to analyze 5 takes the same amount of time as to analyze 15. Opportunity knocks for those who have the intelligence to recognize it.
"That's the scary part. I don't know if I should smile, crack up, scream or run."
The biggest fear associated with "reverse auctions" is the driving down of "price" and the potential for exposure of the "price" to competitors. Again, there is a lot of perception here vs. the reality. Let's deal with reality.
Firstly, any worthwhile procurement professional focuses on total deliverable cost (also known as total cost of ownership), which considers both the tangibles and intangibles of a proposal. Pricing is only one component, albeit an important one, to the final consideration. Value for money, warranties, reputation, innovation, flexibility, etc., all plays an equally important role in the final decision making. So a supplier needs to understand how in the industry they rank against their competitors in these areas so that they can properly define their pricing strategy.
Secondly, there are many ways that a reverse auction can be set up. In some cases, the kimono will be open for all to see the actually pricing of competitors (although even in this instance the names of the vendors bidding are in most cases not viewable). There is also the potential for just having the rankings available -- that is are you number one or two etc., in the pricing -- without actually knowing the differential. This protects the confidentiality of the pricing; however, it also makes the bidding more difficult for the suppliers -- as they do not know how far they need to go.
When suppliers go into a high level face-to-face negotiation with a client they have their "A" team available and they have outlined their strategies and their bottom-line. Too often in an e-auction, suppliers have not strategized and do not have their key decision makers readily available, which makes failure all the more probable. Ensure you have a sound strategy with your BATNA in place, and always remember that the lowest price doesn't necessarily win -- decisions are made on both quality and quanitative aspects.
Relationships still matter -- even in the "e" world. I have never done business with a firm where I have not met the prinicples' and felt comfortable that they would work in concert with me to achieve my corporation's goals and objectives. Refusing to work with me when I've chosen to implement "e", which definitively saved my team significantly in cycle time and analysis, meant that this supplier did not understand the challenges that my corporation faced and as such I wouldn't want to do business with them.
As Dorothy said to Toto "I have a feeling we are not in Kansas anymore!", suppliers should help buyers and step up to the plate. Otherwise they might very well have the same ending as the Wicked Witch of the East.
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