31 October 2002 | Robin Parker
Online auctions are a weapon purchasers can exploit to prove their worth, according to Guy Allen, head of group procurement at Abbey National.
Allen told the E-Procurement Summit in Monte Carlo earlier this month that bottom-line savings and demonstrable benefits to supplier relations, secured by auctions, provided one of the best proofs of the purchaser's role in the company.
"Auctions allow procurement to bring something unique to the business, and for a purchaser to become a champion and an agent for change," he said.
"It gives procurement a lot more opportunity than just saving money, if it wants it, and promotes the credibility of purchasers' decision-making skills."
Allen said purchasers should invite senior management to sit in on live auctions. Abbey National's chairman did just that recently and witnessed an auction that saved the company 15 per cent.
"If there's one thing purchasing does badly, it's marketing itself internally," Allen said.
"But it needs to institutionalise the learning so that a buyer about to host an auction doesn't have to go back to buyers involved in previous auctions to find out how they went."
Allen has conducted more than 70 auctions, both at Abbey National and in his previous job at GlaxoSmithKline.
Only two of these auctions failed, he said.
Allen also urged purchasers to watch out for "peeping Tom" suppliers that watch an auction unfold without bidding.
These suppliers try to discover the prices their competitors are prepared to offer without committing to the auction.
Purchasers could either make data invisible until suppliers bid or remove the supplier completely if it has not offered a price within a set time limit.
Allen also disputed the often-cited claim that reverse auctions greatly speed up the entire bidding process.
"Negotiation times may be greatly reduced, but the saving is balanced by an increased preparation time before the auction takes place.
"They expose the procurement professional to a greater risk of things going wrong and they have to understand in advance the precise needs of their business."