Thanks David, interesting post but I think it says more about the companies sales skills (or lack of them) that it can't get their intrinsic value across to customers prior to an eAuction.

There is a small part of me that wonders whether the eAuctions Cypress have faced have been run in an 'old school' manner that has attributed to the company taking this stance. To me an eAuction is purely a price negotation that should not be in isolation of a face to face negotiation regarding service, quality, delivery etc.

However, surely a good sales team would be focused on selling the customer a solution to their business problem (rather than just pushing a widget) and if they can do this then they would negate the need for a eAuction (and even RFP).

I think they like a lot of organisations are engaged too late in the buying process and aren't shaping their customers needs. Their press release says that they are still open to recieving RFP's - guess what - you're too late, someone else has shaped the needs and probably input to or even helped write the RFP you are about to recieve.

I think it's a pretty short sighted and frankly not very clever approach to take and I wonder if they will live to regret this in future.

I think you're probably right Alan - but then that doesn't take away from the comic brilliance of the press release. It has a certain Victor Meldrew about it!

I also wonder whether Cypress will issue a press release in 12 months time telling the world that they fully intend to embrace the benefits of reverse auctions.

I certainly wouldn't bet against it ;-)

I would say they had some bad e-sourcing experiences with buying companies. It's important for buyers to understand that how they behave in an e-sourcing tender process will impact future supplier cooperation on other tenders both for the company the buyer works for and also for other buying companies. E-auctions are just one step of the overall sourcing process.

I would tend to agree with Jessica that Cypress may have had a bad experience or three in the past...

They seem however to be under the misapprehension that the only decision criterion in an e-auction is price. That's obviously (for procurement professionals) far from the truth, and if Cypress believe they distinguish themselves from their competitors in terms of "...robust supply chain capabilities, flexible terms and conditions, corporate viability, product quality and the robustness of the entire product solution" then they should not shy away from participating in weighted e-auctions where price is not the sole consideration.

Personally, if I were dealing with Cypress, I would give them the opportunity to participate in my procurement process and e-auction, but if they declined to take part then that's their decision to take. If they lost business as a result then there would be feedback to that effect for them.

I suppose it's a valid stance to adopt, but I can't help but feel they will lose custom as a result.

I've been saying this for years. As a buyer, I would not use the results of a reverse auction to place an order because I know my markets, so don't need to rely on the inaccuracies of panic selling from potential suppliers, nor force them to prices that result in poor quality. Supply chains are complex and the cheapest option can wreck your long-term prospects with poor quality, delivery, technical support; many aspects not included in reverse auctions.

Any buyer excluding a supplier/manufacturer for not engaging in reverse auctions will get the results they deserve.

Cypress is a bit of a special case of course and the electronics market tends to be very open, so there is little need to enter into the madness of reverse auctions, the tool of the amateur buyer and seller.

Reverse Auction is to be positioned as the last step in the multi-step/round negotiation process. I have had good experience in overcoming the supplier resistance to participating in Reverse auctions when I inform the suppliers that the award be made based on the Total cost of ownership and Best value proposition. This approach has paved the way for creating a level playing field before reaching to the reverse auction step. This approach need to communicated to the suppliers in the first communication.

I could not disagree more with Martin’s comments. In general, eSourcing continues to revolutionize the way leading procurement organizations operate by enabling them to work more efficiently and effectively. The ability to quickly obtain quotations and/or proposal information from a large base of suppliers is enabling procurement decision makers to make more informed sourcing choices. It is the amateur buyer that is usually unable to realize these benefits.

Specifically, reverse auctions have proven to be an extremely valuable tool when used appropriately in my organization. Typically, reverse auctions have been thought of as a tool that is only applicable to commodities, but this is not the case. We have conducted thousands of reverse auctions all over the world for practically every product and service that we procure. The key is being able to define concrete specifications/business requirements for the product or service based on in depth knowledge of the marketplace. Once you have these defined you can use an auction to get the best price the market will bare from the most qualified suppliers.

Supplier conditioning is essential in confirming that your supply base fully understands your specifications/business requirements to ensure there are no surprises after bid day. Consistent supplier consistent from a strong procurement organization is also essential in letting suppliers know that, if they refuse to participate in an eSourcing process, they will not be considered for a business award.

I certainly agree that cost should not be the only factor in a sourcing decision, so eSourcing professionals need to ensure that suppliers are evaluated using other standards of capability such as quality, service, innovation, etc. In order to ensure that suppliers meet these standards, RFIs and/or RFPs should be used to “qualify” suppliers on the other important capability areas prior to extending an invitation to an auction. This will ensure that all suppliers competing in the auction are able to provide the product/service at the standards required.

If these principles are applied consistently, an organization can develop an eSourcing program that produces greater results than a traditional sourcing process in the areas of quality, service, price, technical support, etc, etc. This consistency will also create confidence in the supply base that the process is a transparent one that if fair to all.

Actually, if you understand the semicoductor solutions model, intellectual property in a high technology environment or had ever worked in the Electronics industry, TJ Rodgers' outlook on auctions would make sense to you.

Not a terribly illuminating comment, Kevin!

Perhaps you could clarify what you mean and help us to understand why you believe this.

I remembered a post from another website that I feel is relevant to this discussion. It takes apart the myths that are often used to discredit the role of eSourcing in the procurement process. I would be interested to hear disagreement with the points that are made. Thanks!

http://www.supplyexcellence.com/blog/2009/03/31/truth-about-e-sourcing/