When the Final Reverse Auction Price Becomes a Starting Point…

I loved the coverage of this story over on the Strategic Sorcerer. Apparently, the Feds are looking to seize the property of a couple that defrauded Best Buy following a reverse auction. How'd they do it? Apparently, "Chip Factory [which is now accused of defrauding Best Buy out of millions of dollars] submitted lowest bid prices through online reverse auctions run by a company identified as National Parts, Inc. Once the job was secure, Chip Factory basically charged Best Buy whatever the hell they wanted, or as the courts called it 'a price significantly higher than its bid price'". Best Buy had a hand in the scandal as well: "The former Best Buy vendor-relations manager, Robert Bossany, has also been charged with multiple crimes including money laundering for allegedly taking kickbacks from Chip Factory before being fired."

My big question here is simple: how were a supplier and an employee able to defraud a company that ran a very sophisticated procurement and IT shop? In our own analysis of Best Buy -- my firm, Azul Partners, maintains a database which tracks approximately 30 fields (e.g., industry awards won, technology used, etc.), allowing us to measure procurement, supply chain and IT sophistication of the Global 2000 for marketing purposes -- we ranked the venerable electronics retailer as one of the three Innovators on the Geoffrey Moore adoption scale in retail. Translation for non-Crossing the Chasm readers: Best Buy ranks in the top 2% of all retailers in our analysis of Spend Management sophistication. Clearly, this means that there are many retailers and other companies with purchasing and payment controls that would make Best Buy's look bullet proof. Methinks there will be many more scandals like this to surface.

- Jason Busch

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