My time in procurement has been interlinked quite strongly
with the rise web 2.0 as a powerful business tool and an advance in
technological solutions, some of which are shaping the way procurement
functions around the globe operate on a day to day basis.
I will be blogging over the next few weeks and months on my
observations and thoughts on a wide array of procurement technologies, both how
they are currently utilized and how they will continue to develop over the
coming years.
To start off this blogging exercise I will be covering
e-auctions and specifically the link between e-auctions and successful supplier
relationship management (SRM), an association seen on both the buyer and
supplier side seen as highly paradoxical. It’s easy to see why. A common view,
from the supplier side, is that eAuctions are a highly aggressive sourcing
technique devoid of any (or limited at best) human interaction. SRM on the
other hand is still viewed with a modicum of suspicion by procurement
professionals who view long term relationships as areas of untapped
opportunities for savings rather than an effective tool for achieving long term
value.
On closer inspection however the two tools can make for
happy bedfellows. A core part of the
success of SRM involves an element of trust, openness and transparency. The openness
and transparency should ensure there are no surprises for either party involved
and that includes the ongoing assurance of the commercial competitiveness of
whatever good or service is being purchased. This in turn generates trust, both
for the buyer and the supplier, that the goods or services will not be retendered
without prior discussion.
The underlying commercial structure of an account is not the
be all and end all, and nor does it need to be. A good SRM however will ensure that a
mechanism exists to define how and when the competitiveness of the goods or
services provided will be ratified. It may be that the approach, agreed by all
parties involved, is to confirm the competitiveness in the most transparent way
possible – a full market test. If this is the case then it would make sense to
test the market in the most efficient, effective and ultimately transparent way
possible, utilizing the latest available eAuction technology.
I would also take umbrage with the view that the use of eAuctions
removes the use of a key part of any procurement activity, the important skill
of human-human communication and interaction. Generations of individuals are
now growing up adapting to the world of social media and differing
communication channels. Whilst interaction through technology has its drawbacks
it also has massive advantages as well and let’s face it, we aren’t going back
to a time before computers and the internet. I’m not saying that interaction
through these channels is better, just different.
Over time we will begin to adapt and see this form of
communication as totally normal but for now let’s address the oft-raised
concern that eAuctions embody an impersonal procurement approach or indeed have
an effect on a supplier relationship or their ongoing performance. I think it
simply comes down to the way that the use of the eAuction is positioned in the
first place. If positioned, as outlined above, as part of a defined,
transparent way, to validate the cost effectiveness of an account then there
are no other methods so effective at the job.
So in conclusion eAuctions and SRM are not mutually
exclusive and do not need to be seen as such. An effective SRM must include an
agreed mechanism to test the commercial validity of the account and an eAuction
is the must transparent, effective and efficient way of conducting the market
test. The technology isn’t going away and needs to be utilised by procurement
teams to manage relationships and realize further benefits.
Next week I will be discussing the various different types
of eAuction available to the procurement professional along with their
respective appropriateness, strengths and weaknesses.
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