Not surprising

Or…only surprising that it took this long.

Found this link via the good folks over at Procurement Leaders.

Seems that Cypress Semiconductor, a decent sized company with very useful product, has made it a policy NOT to participate in reverse auctions.

None. Nope. Zip.

Reverse auctions, “dynamic bidding” or “e-sourcing” are all the buzz around the Procurement world.

Oh, procurement people are all a quiver about this new tool. Do a Google search for “procurement” and see how many links are about reverse auctions.

I may be curmudgeonly, but I actually cannot stand reverse auctions. I won’t do them and have not personally engaged in one in my procurement life.

To put it bluntly, I don’t believe in reverse auctions. They foster the “low cost at all costs” mentality that the Procurement world *seriously* needs to break out of.

I am a negotiator. Ok, so many people read the word “negotiator” and think THAT means low costs at all costs. It doesn’t. Not by a long shot. It means doing the best deal you can for The Company based on a variety of factors. Cost being one of them.

I have been able to close deals to the joy and satisfaction of my clients (and the supplier) that weren’t necessarily the lowest cost, but when you do the business case, you find it is a rockin’ deal.

This illustrates one main area where plenty of my fellow Procurement professionals fall down: They do not have good business sense.

You can run numbers all day long, squeeze dollars from every corner and bark about “total cost of ownership”, but there is far, far more to the “art of the deal” than that.

I talked about this a little in this post and have been thinking about it a lot.

Now is a great time for expansion of the value that procurement can add to an organization. Forcing reverse auction tools where they aren’t necessary won’t get you there. I find clients tend to be turned off by the reverse auction tool, and it makes them lose trust in procurement. This is bad.

I do believe reverse auction works for some commodities or some deals, but procurement tends to spread their tools and philosophy like peanut butter across all purchases. “If it worked for piece parts, it can work for professional services!”

There is a debate among procurement people that continues on. One side says, “buying a widget is buying a widget, it doesn’t matter…you use the same practices”. The other side says, “every commodity is different and how you approach the deal is different. The wise procurement person tailors their approach to what they are buying.”

You can guess which side is leaping about raving for the usage of e-sourcing for *everything*. (hint: the peanut butter people)

I’m actually glad to see a good-sized supplier put their foot down about the use of reverse auctions. To these suppliers, procurement may just say, “well fine, we won’t do business with you!”

But if enough valuable suppliers take the same stance, this isn’t realistic. Procurement is going to have to get smarter.

A lot smarter.