10 April 2008
Suppliers are attempting to undermine procurement's use of reverse auctions, research has found.
Methods used to "disrupt" the auctions include: refusing to participate, submitting bids outside the auction process or offering their lowest price at the start of the auction, limiting its effectiveness.
A project carried out by research group Huthwaite International found suppliers believe auctions commoditise offers, focus only on price and destroy relationships.
Andrew Moorhouse, research consultant at Huthwaite, carried out the study with 39 suppliers in Europe, the US and Australia. He said when purchasers first started using e-auctions there had been no "best practice" approach for suppliers.
"Now some suppliers are getting smart," he said. "They are learning from their experience, which has been a steep and expensive curve. A number of organisations now have corporate policies not to participate."
This sometimes leads to the collapse of auctions through insufficient competition.
He said sales teams had been disappointed with the lack of transparency in auctions, believing award criteria was often unclear. Although many suppliers aim to be the lowest bidder, the research found the cheapest was successful in only 17 per cent of auctions.
Matt Miller, president of e-sourcing firm K2 Sourcing, told SM suppliers were realising the difference between good and bad e-auctions and the buyers that run them. "There is probably more participation from suppliers in auctions than three years ago, but they are more picky."
Moorhouse advised suppliers to challenge procurement teams if the process lacks transparency, or they think events will be hosted "without integrity". He urged buyers to be explicit about auction goals and avoid restrictive entry terms and conditions.
Claire Forester, category sourcing manager at Reuters, who is an experienced e-auction host, advised buyers to maintain the same processes for auctions as for other tenders. "When running auctions its important to conduct the same level of pre-work and supplier engagement as would have happened previously.
"Suppliers must feel they are being compared like-for-like and therefore a great deal of work must go into preparing detailed RFPs and ensuring suppliers' responses cover all aspects." see news focus Dial 'e' for auction