Reverse Auction? No thanks!
For organisations seeking an effective Print and Digital Solution is the ‘Reverse Auction’ an appropriate tool to form part of the evaluation/award process?
Although the concept of a reverse auction would seem to be a good way of driving down the price……Beware!
There is a time and a place in procurement for reverse auctions but, in my view, there are only certain circumstances where this tool can bring real value.
It can work for commodities and it can work in the services environment. However, it can have a negative and detrimental effect to the effective delivery of the contract in a print management situation. If the print manager is sourcing goods from an extensive supplier base and is faced (as is commonplace these days) with perpetually diminishing management fees/mark-ups, something will give. The print manager relies on the agreed management fee/mark-up to run the service and to generate profit. It is these fees that suffer if the reverse auction is applied to the procurement competition as inevitably, it is generally only these fees that are in the direct control of the print manager, particularly at the time of the auction. It would be difficult, if not impossible for the print manager to have access to the decision makers across the supplier base to satisfy the auction process and it would also be risky for the print manager to unilaterally reduce the cost of print at production without the individual agreement of suppliers.
So, generally, the only moveable element that can realistically be influenced by the reverse auction is the management fee/mark-up. These fees support good customer service; the provision of comprehensive systems managing the contracts/projects; profit for the business and the provision of quality products from a print market that, for all our benefit, needs to continue to be sustainable. Take away the fee and the customer risks:
- A reduction or loss of customer service – potentially fewer resources can be provided to service the contract because less revenue from the management fee/mark-up has been made available – staff assigned may have substantially less time to properly help, advise and manage the contract due to their increased workload
- A lack of investment in systems managing the work – in our experience systems need constant attention to keep them in pristine order, reliable and up-to-date and working efficiently 24/7/365
- A loss in quality as the print manager tries to find legitimate ways to cut corners
- A loss in profit culminating in a contract that has no value to the print manager and therefore the contract is at risk altogether
Jeopardising the potential for open, honest and transparent trading – the print manager may take the view that if the management fee / mark-up is not generating sufficient revenue to cover costs and profit, they will have to go back to the supply base and increase any supplier discounts/rebates that may be in place
Driving any value out of the print market and driving print suppliers out of business
We have avoided any competition where a reverse auction is a possibility – we simply see no point in wasting our time and risking any of the elements above. We believe it is essential to provide good service, quality products and excellent systems and we want to enjoy an appropriate and respectable profit for doing this, and most importantly, we want to promote a sustainable print market for as long as we can.
CDS is a supplier on the CCS Framework RM3785 – Print and Digital Solutions. The Crown Commercial Service (CCS) framework offers all Public Sector organisations the flexibility to source a fully-managed, end-to-end print and digital solution that includes associated services, such as design, storage, fulfilment and distribution, postal dispatch, scanning and stock management. The framework offers a straightforward, quick, cost efficient and direct route to market.
My company CDS trades ethically, honestly, and transparently. We promote a sustainable print market whilst being firm but fair with the supply base and most importantly, we pay our suppliers promptly.