A recent post on one of the lesser known sourcing blogs indicated that, due to the lack of economic upturn in most of the developed world, maybe now is the time to finally try reverse auctions. The rationale, quotes from a CEO and his team that watched their first reverse auction that indicated that it was simple, powerful, easy to follow, effective, and, most importantly, if you read between the lines, gave them an illusion of control over the process and the results.
This, and some of the messaging coming from a few of the smaller e-Sourcing providers, is scaring me. I fear that adopters may believe that adopting this technology may give them some control. Well, as this recent article over on Chief Executive on why you should embrace tomorrow’s strategies clearly points out, you have NO control! You can manage the process, but you have no control over the outcomes. Why? For starters
- Cartels, cabals, speculators, organized crime, and entire countries are constantly manipulating commodity prices.
Case in point: China possesses over 90% of many of the rare earth metals used in many technologies (smart phones, batteries, etc.) and when they recently reduced exports, a steep price increase resulted that triggered a costly disruption of delivery of the precious commodities to global business.
- Disasters are on the rise.
Industrial, agricultural, and political disasters are increasing in frequency and wiping out production in entire regions. For example, the nuclear meltdown in Japan affected most businesses that rely on a Japanese supplier.
- Global currency fluctuations, unforeseen credit crises, and economic stagnation are increasingly severe and unpredictably enduring.
The extreme fluidity in the valuation of imported and exported goods, services, and components is as equally difficult to predict and manage.
No e-RFX or Auction is going to help you regain control over these economic nightmares that you have to deal with on a daily basis. And any provider that’s trying to sell you 1999 e-Sourcing technology to deal with the current economic stagnation doesn’t have a clue. There’s only one way you can even hope to adapt to the constantly changing reality, and that is through the adoption of a supply management platform with advanced data analytics capability. You have to constantly monitor, react, adapt, predict, plan for what-if, monitor, react, and adapt again. This requires extensive data acquisition, mapping, transformation, and analysis that only a real analytics solution, with advanced (spend) analysis, optimization, simulation, and reporting is going to provide. Don’t get fooled. All auction platforms give you in this day in age is a false sense of security. Sometimes an auction is the right way to go, but, most of the time, an auction (on its own), is not the answer.