What am I thinking about? Here’s a couple of clues:
Big in 1990s.
You got it – e-auctions.
They were big – very big. They were going to transform procurement and drive prices for everything right down. But 20 years later, what happened to the promise?
Over the years the view of e-auctions has always been mixed from the enthusiasts who claimed huge success to the sceptics who saw them as a blunt weapon. But recently, Michael Lamoureax Ph.D. the voice behind Sourcing Innovation, wrote a comprehensive review of e-auctions. In it, he expertly dissects the technology and reveals that the e-auction, despite the double digit savings that can apparently be delivered, is not quite what it seems. (Read it here)
Michael has three headline criticisms of e-auctions. He explains that they, (in his words):
– Don’t capture lowest cost
– Don’t insure quality
– Don’t split awards optimally
He backs this up with some scenarios which, by themselves at the very least, raise an eyebrow. But then, like the psychopath at the circus, he goes straight for the juggler.
e-auctions increase risk. Procurement is, at its crudest, about cost saving. But that doesn’t mean lowest price. It is also about sourcing appropriate quality and service levels and lots of other things.
Some suppliers have a real problem with auctions. If they can’t express the strengths of their proposition via an auction, they decline to be involved. If the best potential supplier isn’t in the auction, the auction is a failure.
The report goes on to describe how auctions can sour relationships with suppliers and how they lead inevitably to supply chain disruption. This is not a good outcome.
As Michael describes it, “e-auctions are nowhere close to the blessing they were made out to be and standard e-auctions should never be the sourcing tool of choice”.
There is a glimmer of hope which I may return to in the future but for the time being, I’d like to congratulate Michael on a great paper.
Great work Michael – perhaps the last word on e-auctions. Really, as a piece of analysis, u can’t touch this.
Pete Loughlin can be found on twitter @peteloughlin