Suppliers back e-auctions for better long-term deals

9 April 2003
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10 April 2003 | Robin Parker

Suppliers are backing online auctions as a way of improving long-term relationships with their customers, a CIPS-backed report has found.

Almost two-thirds of suppliers said auctions made purchasers more competent, according to the I-Adapt survey, carried out by the University of West England and CIPS with support from BT and software firm Oracle.

And rather than damaging supplier relationships by focusing on prices, as sceptics have feared, more than half felt confident that they gave buyers no more power over them.

Fewer than one in four said they had won an auction based on price alone, and most said factors such as quality, surety of supply and geographic coverage were key influences.

The study of 515 auctions at 33 companies - about a quarter of those estimated to have taken place in the UK last year - reveals that buyers experience a 22 per cent increase in suppliers' flexibility, a 20 per cent improvement in quality and a 12 per cent increase in reliability after they use auctions to award their deals.

Nine out of 10 buyers said they held auctions with the specific aim of developing better supplier relationships.

Helen Alder, e-practice development officer at CIPS, said that although some suppliers still felt threatened by a tool that buyers can, in theory, use to squeeze margins, a more level playing field seemed to be emerging.

"Suppliers have turned around from thinking the worst of buyers to realising they are being included more in the negotiation process to give them an equal chance of winning contracts."

Andrew Douglas, senior procurement specialist at Oracle UK, said the survey found that two out of five auctions did not go to the incumbent supplier, which suggested a more open, competitive market than is often claimed.

"The buyer is using sounder purchasing practices and principles to produce a more comprehensive specification and better supplier screening.

"Meanwhile, suppliers have gone from auction to auction, seen themselves fail and have been forced to come back to the marketplace more competitive."

Every buyer and supplier surveyed said they planned to continue taking part in e-auctions.

SMapr2003

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