What Do CAPs Latest Findings Tell Us (Besides the Fact Auction Usage is Down)?

Supply Chain Digest recently did a good job summarizing some of the highlights of CAPs latest cross-industry benchmark report on procurement and sourcing. I wrote about this topic in late June. You can find my earlier post here. SCD calls out a number of areas that mention again "for the third straight year, procurement operating expense as a percent of company revenue remained at .36%, meaning the relative cost of the procurement function itself has neither risen nor fallen during that time." Another insightful metric is that "Offshore spend as a percent of total spend rose substantially in 2007, rising to 25.92% of the total versus 22.49% in 2006." And it's also good new news to note that "the percent of suppliers being reported as 'e-Procurement enabled' rose sharply in 2007 to 19.6%, up from 16.46% in 2006."

What's the one surprising factoid in the report? Reverse auction usage is down. SCD notes "the percent of spend that went through e-Auctions declined in 2007 to just 2.58%, down from 3.18% in 2006." Anecdotally, I suggested the same thing earlier in the year in a previous post on Spend Matters where I commented that "as companies have transitioned to self-service models, I fear that declining transparency -- and a lack of market rules enforcement -- have damaged the credibility of auctions in the eyes of many suppliers beyond the point of repair. Perhaps this explains why, I'd argue, actual reverse auction usage is down inside many companies despite the widespread availability of tools to all sourcing professionals (this is my observation, not an empirically based fact, mind you)."

I’d be curious if Spend Matters readers could speculate on other reasons for declining reverse auction usage as well.

- Jason Busch

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