Elaine Watson
Online auctions do not damage relationships between suppliers and retailers and have not had a detrimental effect on service levels or product quality, claims a major new piece of research into the controversial buying tool.
The first significant piece of research into the technology from the University of the West of England and the Chartered Institute of Purchasing covered 515 e-auctions across a range of sectors in a bid to assess their impact on relationships between buyers and suppliers.
And while some suppliers remained sceptical, most felt the advantages of being able to react to competitors' prices outweighed the disadvantages, according to CIP's e-practice development officer Helen Alder.
"We know e-auctions have had a lot of bad press, but our research simply doesn't bear out claims that suppliers can't stand them."
Moreover, the research, conducted over a six month period through a series of telephone interviews with buyers and suppliers, revealed incumbents only won 60% of e-auctions, "exploding the myth" that they are merely a blunt tool for beating incumbents with, she added.
And the lowest price only won in 50% of cases evidence that buyers were taking other variables apart from price into account, rather than proof bidders do not enter the auction on equal terms, she insisted.
"Suppliers have to be within a cluster of low prices to have a chance but beyond that, various factors come into play, such as the cost of switching, quality and volume issues and so on."
Despite warnings that the relentless focus on driving down prices would impact service levels, reduce innovation, and damage product quality, buyers surveyed said they had seen significant improvements in all of these areas as a result of using the technology, she claimed.
"Auctions have actually marginalised price within the ongoing buyer/supplier relationship.
"By this, we mean that by using the auction process to obtain a competitive market rate, buyers and suppliers can now concentrate on contract execution."
The research was commissioned by Oracle and sponsored by BT.
{{NEWS }}
Online auctions do not damage relationships between suppliers and retailers and have not had a detrimental effect on service levels or product quality, claims a major new piece of research into the controversial buying tool.
The first significant piece of research into the technology from the University of the West of England and the Chartered Institute of Purchasing covered 515 e-auctions across a range of sectors in a bid to assess their impact on relationships between buyers and suppliers.
And while some suppliers remained sceptical, most felt the advantages of being able to react to competitors' prices outweighed the disadvantages, according to CIP's e-practice development officer Helen Alder.
"We know e-auctions have had a lot of bad press, but our research simply doesn't bear out claims that suppliers can't stand them."
Moreover, the research, conducted over a six month period through a series of telephone interviews with buyers and suppliers, revealed incumbents only won 60% of e-auctions, "exploding the myth" that they are merely a blunt tool for beating incumbents with, she added.
And the lowest price only won in 50% of cases evidence that buyers were taking other variables apart from price into account, rather than proof bidders do not enter the auction on equal terms, she insisted.
"Suppliers have to be within a cluster of low prices to have a chance but beyond that, various factors come into play, such as the cost of switching, quality and volume issues and so on."
Despite warnings that the relentless focus on driving down prices would impact service levels, reduce innovation, and damage product quality, buyers surveyed said they had seen significant improvements in all of these areas as a result of using the technology, she claimed.
"Auctions have actually marginalised price within the ongoing buyer/supplier relationship.
"By this, we mean that by using the auction process to obtain a competitive market rate, buyers and suppliers can now concentrate on contract execution."
The research was commissioned by Oracle and sponsored by BT.
{{NEWS }}
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