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A Personal Lesson: Reaching the Limits of Reverse Auctions and Strategic Sourcing: When Collaborative and Quantitative Approaches Would Have Delivered More

This Spend Matters and MetalMiner Perspective provides a first person account of how legacy e-sourcing approaches (and reverse auctions in particular) can come up short when it comes to navigating the waters of more complex categories and larger sourcing events. Written in first person and in a straightforward manner, the informality of the white paper masks the complicated nature of the arguments and instructive lessons it makes. Included are examples of specifically how optimization and advanced sourcing can change the strategic sourcing process as well as lessons learned from the advent of new approaches to creating markets and events using the latest in data gathering and analysis techniques. The Perspective also includes a case study in the market for sourcing tin cans.

The paper suggests that newer sourcing models can also be a catalyst to incorporate related problem sets (and opportunities) into a sourcing decision for the first time. For example, sourcing optimization can make organizations more risk aware of decisions that prioritize reduced-unit cost at the expense of geographic concentration of suppliers, distribution facilities, etc. Moreover, when it comes to general supplier management, sourcing optimization can play a key role in fostering and developing relationships founded on trust, transparency and continuous collaboration, rather than one-time sourcing and contracted related efforts. Depending on one’s sourcing philosophy and general approach, this can be the difference between a hammer and a firm handshake, albeit a potential hand crusher that still gets the attention of the supplier in the manner desired.