Following on from my previous post about eAuctions, I have given some thought to how to rethink how we negotiate in the electronic age.
Firstly, why an auction? We never ran auctions offline. Imagine a world where all your suppliers gather in the room whilst you (the buyer) act as auctioneer and award business to the lowest bidder. Never happened.
Now a negotiation – they happen all the time offline and maybe we can improve them tremendously by doing them online without resorting to an auction environment.
What if the stage after the RFP was not an eAuction but an eNegotiation?
We should keep some principles of an eauction:
Pricing submitted electronically
Suppliers see where they sit in the order
But we should change some:
Negotiations take place over an extended period – three days for example
Over this time the amount of communication should be increased (not limited). This is where the skills of the buyer are deployed to help suppliers find the lowest price that they are comfortable with.
However extending the period of price bidding should reduce the frantic auction like activity. (and gamesmanship often with limited number of suppliers)
Other non-price elements can be collaborated on such that various scenarios can be run in collaboration between the buyer and supplier. This should allow all the key elements of the contract (services, SLAs, productivity improvements, RPI, indemnity, acceptance/defect periods, termination, exit management etc etc) to be tailored by the supplier in conjunction with the pricing.
Buyers should be able to close the negotiation when they are happy, this can be done with no notice to the suppliers to avoid suppliers holding back their ‘final price’ until the last minute.
What do you think? What else would you change or add?
