Mention the phrase "reverse auction" and three separate groups emerge. The "pros", the "cons" and the "I don't knows." "Pros" favor the idea as an additional vehicle in which costs can be reduced. "Cons" dislike the concept, as margin levels can be affected. The "I don't know" group is caught in the middle trying to glean usable information being tossed between groups.

Anything you have heard about reverse auctions is or was true at some point. Cost reductions can be obtained, some margins were affected, unethical practices occurred; new supplier-buyer relationships formed, etc. Regardless, one thing is certain: a reverse auction event is just one tool used to obtain the lowest total cost of ownership, and it is a tool that will continue to be used in the foreseeable future.

Avoidance will only guarantee a loss of business opportunities. The basic fundamentals are no different than any other buyer-seller transaction. Requirements are identified, request for quotes (RFQs) prepared, potential suppliers identified, bids prepared and submitted, prices evaluated and contracts awarded.

What is different is the technology used to conduct those activities. Proficiency and understanding of the event only can be gained from participation. Gaining insight or an appreciation doesn't mean jumping feet first into an event.

There are ways to experience an event without being directly involved. Seek out customer or supplier organizations that you already know conduct auctions. Request the opportunity to observe an event first hand. Keep an open mind, ask questions, and strive to learn from the observed activities that are going on.

One key to a successful auction event, regardless if you are the buyer or the seller, is preparation. From the seller's view, know what challenges the buyer is seeking a solution to. Fully evaluate their requirements and the potential volume involved. Be honest with your own operation's capabilities. Can you provide what the buyer is seeking in the timeframe and quantities needed?

Don't be afraid to involve your master distributor or manufacturing supplier and get them involved early on. Ask your suppliers for price concessions or rebates based on the potential added business volume. Doing so should allow you adequate time to analyze what your lowest potential bid will be. Keep in mind, the event sessions are divided into small time periods ranging from 10 minutes to an hour, depending on total spend and complexity involved. Time just isn't available during the conduct of the event to scramble and obtain ' 'better'' pricing.

"Ruined relationships" is often used as a defense to justify not participating in a reverse auction. Take a moment and really think about what a relationship is. This is an entity that grows, shrinks and shifts with time and personal involvement. The event itself may be somewhat impersonal, but the time to build that relationship is in the preparation phase prior to and shortly after the actual event.

Many books and papers have been written about reverse auctions. The intent of these thoughts has been to express that they should not be feared or avoided. Rather, they should be seen as a business strategy that can be developed and successfully added to your tool bag, under the right conditions.