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Supply chain management: leveraging reverse auctions

Published on May 31, 2020   15 min

A selection of talks on Technology & Operations

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0:00
"Supply Chain Management: Leveraging Reverse Auctions", presented by Dr. Darren Prokop, Professor of Logistics, University of Alaska Anchorage.
0:12
What is supply chain management? It is the linkage of organizations in order to meet some strategic goal. Linkages could be achieved through contractual relationships, or through mergers and acquisitions. Linkages could be more informal and involve a joint venture or strategic alliance covering a more limited business activity. In any case, the intent of supply chain management is to foster trusting relationships whereby the partners are more valuable together than apart.
0:42
If a firm is looking for a vendor to supply an input for its production of a good or service, it certainly wants to find the best one it can. Mutual trust can be established through a negotiation of terms and codified in a legal contract. But this presupposes that the vendor in question is indeed the best one. If there are many vendors from which to choose, how can the firm best devote its limited time and money to finding the best supply chain partner?
1:12
Two alternatives involve, one, request for a business proposal or two, conduct a reverse auction. Each of these options has its place in supply chain management, and each has its drawbacks. Yet two supposed drawbacks to reverse auctions are that they are complicated and unfair. Ironically, these two drawbacks can apply just as well to requests for business proposals. What is misunderstood is that under the right conditions, reverse auctions are more objective and can foster stronger supply chain partnerships.

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