Reverse auctions 'no danger to supplier relationships'

22 August 2001
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23 August 2001 | Robin Parker

Successful early adopters of electronic reverse auctions have demonstrated that it does not endanger long-term supplier relationships, according to an analysis of the car industry.

Researchers at Warwick Business School analysed perceptions of such auctions among 50 company managers, including buyers at six automotive assemblers and associated suppliers.

The key inhibitor was the belief that auctions threaten long-term supplier relationships.

Research found that e-auctions have allowed more experienced users to negotiate competitive contracts with a small number of suppliers, removing the aggressive annual tendering process and cutting costs.

The report cited DaimlerChrysler's recent reverse auction for 1,200 components as the biggest yet conducted.

"The auction was considered by those we spoke to as 'breathtaking'," said Jan Tribiahn, one of the report's authors.

Chirag Shah, founding director of business-to-business marketplace Trading Parts, said auctions do not compromise the buyer-supplier relationship. "If suppliers do not win a contract, they realise they need to be more competitive," he said. "All those we have asked say they would enter one again."

Procurement professionals are likely to face increasing pressure from senior management determined to cut commodity costs, added Tribiahn.

"They would like to see buyers be more proactive in using auctions, especially when they see rival big players use them so effectively," he said.

SMaug2001

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