Last May, The Reverse Auction Research Center published an article on the subject entitled, “Are Collaboration and Reverse Auctions Mutually Exclusive? - Hardly!” (http://reverseauctionresearch.blogspot.com/2010/05/are-collaboration-and-reverse-auctions.html).
Recently, there has been a debate between two quite prominent “Tim’s” in the world of e-procurement over the nature of buyer-supplier relations and collaboration when contracting is opened-up to the competitive bidding environment of reverse auctioning. It has been taking place between Tim Minahan, CMO (Chief Marketing Officer) of Ariba (http://www.ariba.com/) and Tim Cummins, the founder, President & CEO of the International Association for Contract & Commercial Management (IACCM) (http://www.iaccm.com/). Minahan wrote in a recent posting that in supplier-buyer relationships: “Collaboration is often more lip service than a committed initiative. And tough economic periods, like the one we just went through (are still in?) strain even those most committed to real buyer-seller collaboration.”
Minahan’s comments came in response to a July 2010 posting on the matter by the IACCM’s Cummins, entitled “The State of Customer/Supplier Relationships” (http://tcummins.wordpress.com/2010/07/13/the-state-of-supplier-customer-relationships/). In his most recent August 2010 article, “The Bottom Line On Sourcing & Procurement Software” (http://tcummins.wordpress.com/2010/08/10/the-bottom-line-on-sourcing-procurement-software-2/), Cummins expresses a concise argument that on its surface might seem counter-intuitive, but in actuality is quite strong – that reverse auctioning can actually enhance the buyer-supplier relationship. He wrote that:
The idea somehow that online sourcing and procurement tools are enemies to collaboration is misguided for three key reasons (possibly more):
1) online sourcing tools bring a transparency and openness to negotiations that is often lacking from offline negotiations.
2) leading online sourcing tools enable greater buyer-seller collaboration during the negotiation process, often times allowing suppliers to provide alternative bundles, delivery schedules, or product or process innovation recommendations that can enhance the value of the good/service being purchased and take cost out of the system — without negatively impacting the supplier’s profit margins
3) finally, we must be careful not to confuse the negotiation with the relationship. Such online tools speed sourcing cycles 50%-70%, giving buyers and sellers more time to focus on collaboration and relationship management. (In fact, we’re seeing far greater demand for our supplier collaboration and management solutions from those companies with online sourcing tools than those without.)
Bottom-line: I agree that buyers and sellers need to put more commitment into their collaboration oaths. But online negotiation tools and collaboration can not only peacefully co-exist but actually can enhance one another.
Food for thought for all who have held back on using reverse auctions out of fear of jeopardizing their supplier relationships. Just as in life, putting existing relationships to a bit of a test might just actually end up strengthening the relationship and pay unexpected benefits!
David
From the Reverse Auction Research Center: http://reverseauctionresearch.blogspot.com/
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