Supply Excellence — Still More Reverse Auction Fodder

Still More Reverse Auction Fodder

December 11th, 2007 · by Tim Minahan · No Comments · best practices, sourcing

As the brouhaha surrounding the reverse auction posts on these pages rages on, I thought I would add some fuel to the fire by sharing more early findings from the Center for Advance Purchasing Studies (CAPS) ongoing investigation into this area.

As noted here last week, CAPS is conducting a review of enterprise procurement technology strategies, including the use of reverse auctions. Early findings from the study indicate that reverse auctions are used for only a fraction of total spending.

Other interesting early findings from the CAPS investigation include:

More than half of study participants have run an average of 110 awarded auctions.
Average dollar value for these auctions totaled $2 million per auction.
32% of reverse auction awards were for direct materials or goods; 26% were for indirect goods; and 35% were for services.

The latter finding busts myths that reverse auctions are only applicable for commodity items and raw materials. Increasingly, e-sourcing users are applying reverse auctions to a wider range of service categories — from travel to consulting — for highly positive results.

For example, Sun Microsystems is applying reverse auctions — what the high-tech manufacturer calls “dynamic bidding” — to business services from temp labor to field service support to, believe it or not, IT outsourcing and procurement outsourcing services. Similarly, KLM Royal Dutch Airways runs a daily reverse auction to capitalize on changes in supply availability for hotel lodging.

The full CAPS report is not yet published. However, you can check out the raw data and run your own analysis here. The final report will be published to the CAPS Website, when available.

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