When Suppliers Just Say No to Reverse Auctions

Courtesy of Procurement Leaders Blog comes a fascinating little number about how Cypress Semiconductor Corporation is just saying no to participating as a supplier in reverse auctions. Quoting a press release from Cypress, the post notes the supplier "will not participate in any reverse auctions, including sealed-bid or iterative-bid varieties. Furthermore, the policy precludes participation in procurement programs or tactics that eliminate straightforward negotiations." What's Cypress main argument for taking such a strong stance against online sourcing? The company "prides itself on delivering more value to customers than its competitors, including robust supply chain capabilities, flexible terms and conditions, corporate viability, product quality and the robustness of the entire product solution. Cypress customers enjoy higher value even when they do not pay the lowest price."

I'm willing to bet that Cypress had a number of negative experiences with reverse auctions before putting this news release out on the wire. It's a shame for two key reasons. The first is that far too many organizations still blindly run sourcing events without regard to using the right negotiation format (e.g., multi-attribute auctions or optimization vs. unit price only) while at the same time violating established marketplace rules that give some suppliers a leg-up on others (e.g., pushing messages to select suppliers vs. the overall market and telling them where they need to be to win the business during an event). The second reason this is disappointing is that Cypress' tirade here will contribute to reverse auction curmudgeons who are always looking for tidbits to toss into their anti online sourcing arsenal. Still, I don't necessarily blame the messenger. I suspect there's far more to this story than what Cypress is letting on. Perhaps there's a lesson for all of us in this venting.

Jason Busch

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