Does the rise of eAuctions mean the professions’ hard-won negotiation skills are now irrelevant?
On Procurious, we’re keeping a close eye on the rise of procurement-related technology and what it means for roles and skill-sets across the profession. One such technology – the eAuction – has proven itself to be a highly efficient way of conducting a sourcing event and driving prices down. But does the advent of eAuctions mean that procurement professionals’ negotiation skills are no longer required?
This was one of the topics discussed at a Negotiation Roundtable organised by CABL (Conti Advanced Business Learning) and facilitated by its Founder, Giuseppe Conti.
Keep your options open
Thierry Blomet, Kemira’s Senior VP of Global Sourcing, told the roundtable that in his experience, the contract cannot always be awarded immediately after the eAuction. “We had an eAuction where it became clear that there were so many moving parts and questions that could not be answered during the event itself. We realised there’d be the need for additional discussion, so we used the outcome of the eAuction to narrow the bidders down to a small group of preferred suppliers, and continued the conversation from there.”
In other words, if you want to keep your options open, it’s important to communicate to suppliers that you may make the decision not to award at the conclusion of the eAuction. Instead, you may move the leading suppliers to a next-step status.
The nature of the eAuction itself presets your ability to negotiate during the event. There’s a bewildering array of eAuction formats – Dutch, Japanese, Brazilian, English to name a few – so it’s important to do your research. Blomet comments, “If you try to condense the event to 30 minutes, for example, you leave very little room to negotiate. A longer event leaves more room for something to happen and for you to react accordingly.”
Francesco Lucchetta, Director of Strategic Supply at Pentair, says the ability to play with the visibility of quotes – so participants in the same eAuction can see each other’s bids – can be very helpful in encouraging competition. He warns, though, that the contract should have been established and its terms accepted by the bidders well before the eAuction takes place. “Make sure your suppliers have accepted your contractual terms, so no more discussions need to happen once the award is in place.”
Blomet notes that there are a lot of ethical aspects that need to be clearly communicated and understood before an eAuction. “You need to be able to define any red lines, and make sure participating suppliers understand. During the eAuction, ethical breaches could include inviting a fake vendor, or having a hidden way of scoring. It’s a matter of credibility.”
Tamara Taubert, Procter and Gamble’s Global Capability Purchasing Leader, comments that purchasing teams always need to behave in ways that are consistent with their values, and this includes running an eAuction. “Think about how you will behave as a company during the event. If the information about the event became public in 5, 10 or 20 years from now, would you be comfortable with that? You need to guarantee fair and ethical treatment of all participants.”
In fact, unethical behaviour by some corporations using eAuctions means that many suppliers are uncomfortable with the concept. Blomet notes that some large corporations have established that they do not participate in reverse auctions as a rule. “There have been a lot of issues in the past caused by poor communication, poor management, unethical behaviour, or suppliers simply being uncomfortable with the technology.”
This suggests there’s work to be done to improve the reputation of ethically-driven eAuctions.
Interested in attending a CABL Negotiation workshop? Click here to find out more. The founder, Giuseppe Conti, has over 20 years of Procurement experience with leading multinationals and over 10 years of negotiation teaching experience at leading Business Schools (including Oxford, HEC Paris, IMD and ESADE).