Time to Remove e-Auctions from the Strategic Sourcing Toolkit

Time to face the music. There’s absolutely nothing strategic about them.

Strategic Sourcing is supposed to be strategic. Something that is strategic is something that is carefully designed or planned to serve a particular purpose or advantage. What is carefully designed about an auction, and where’s the advantage from a strategic supply management perspective?

Auctions are not a new invention. Recorded auctions are over 2,500 years old, having been recorded as early as 500 B.C. by Herodotus, who recorded the Babylonian auctions for women for marriage. Shortly after, Romans adopted the practice to auction off the spoils of war, including slaves. (So, not only are you using something non-strategic and ancient you are using something that had its beginnings in oppression and slavery. Think about that for a moment as you write your annual Corporate Social Responsibility report.)

The only difference between the auctions of old and the reverse auctions of today is that instead of selling, you are buying and asking bidders to progressively lower their bid until all but one drop out. And instead of oppressing people, you are oppressing corporations as sellers are told they do not get any business at all unless they bid the lowest, and adhere to that bid, no matter what the toll on them.

And when they were invented, there was no careful design. It was merely a way to close multiple transactions in a short time and get the best price for the best “merchandise”. No thought about how that best price would be obtained ever entered the picture — it was up to the bidder to figure out how he (yes, *he*) would honour his bid.

And there is no advantage. The advantage that auctions are sold on is “savings“. But, as per our last post on Savings Machine or Inflation Nightmare, there is no savings in an auction. None. Any savings identified are illusory at best, and hard costs that will have to be paid in the future at worst.

In fact, what you actually get is risk. Lots of risk. Quality. Compliance. Liability. And, depending on the auction, possibly a dozen other types of risk. How so? Download Sourcing Innovation’s latest white paper on The Dangers of e-Auction, sponsored by Trade Extensions, today and find out the many, many hidden dangers of e-Auctions which could quickly become Procurement’s worst nightmare as long as they remain in the strategic sourcing toolkit.