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Reverse Auctions for Stretch Film

If you are a supplier you have probably been invited, or sometimes commanded, to participate in a reverse
auction by one or more of your customers. Often, the auction is for the business you already have with the
customer, and have had for many years. In the reverse auction, all the good things you have done for your
customer over the years are going to be ignored, and you may lose your buisness to someone who may not
even understand the "real customer requirements". Likewise, if you are a user, you have at least toyed with
the idea of seeing how much you can "save" by putting your requirements out to bid in a reverse auction.
Today, we are only going to consider reverse auctions as they pertain to the use of stretch film in your
company.

The reverse auction gets it's name because the prices "descend over time"
while the auction, usually done on the internet, is taking place. The entire
auction can take place in a total of 10 to 30 minutes with 1 or 2 minutes
extensions if a new bid is received during the final seconds of the auction.
The extension is to see if anyone else wants to make another and lower bid.

Reverse auctions have been around since about 1995 and were viewed as an innovative tool that would
change the course of industrial procurement. The promise was that these on-line auctions would speed up
the procurement process and provide greater savings to the user as the suppliers fought over his business
with the ultimate deadline of the closing bell approaching. If you were or are the incumbent supplier you
must have the lowest price to keep the business, and if not, all you have to do is cut the price to secure it.

We have particapated in a number of reverse auctions and have been successful as many times as not. But I
can tell you right now that I don't like them for a number of reasons which I am going to share with you.

l Reverse auctions are coercive in regard to incumbent suppliers and ignore all the "partnership" and
customer support that have taken place over the years. The supplier who knows your stretch film
requirements best, who has made the emergency shipments to keep the plant running, who has trained
your people on the proper use of the stretch film, who knows the high maintenance level your facility
requires, is now going to be put on the spot of giving you a price that is lower than some other supplier
who does not understand your requirements, uses cheaper and poorer materials in his film, may not
even know what customer service and support are, and who is just throwing out a price without a full
understanding of all that is involved. The ethics of reverse auctions can certainly be called into
question.

l Ok, lets leave ethics out of it. The real bottom line reason I think reverse auctions are bad for both
the supplier and the user is that they ignore the "value added" aspect of stretch film. Stretch film is
not a commodity product no matter what a lot of "non-valued added " film makers would like for you to
believe. It can actually be one of the most sophisticated products that you will ever use.

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