NAPL article profiles strategies for dealing with reverse auctions
Press release from the issuing company
PARAMUS, N.J., FEBRUARY 11, 2004 – Fearing reverse auctions will undermine what’s left of their profitability and erode carefully nourished customer relationships, a number of printers are either refusing to participate in this online procurement method or submitting a single bid and then “walking away.” These and other strategies for dealing with reverse auctions are highlighted in the article, “Forward Thinking On Reverse Auctions,” written by NAPL staff editor Cynthia Valentino and running in the Spring, 2004, issue of NAPL’s Print Profit newsletter.
Reverse auctions are a buyer-initiated, online method of print procurement in which multiple print suppliers compete for a particular job or contract in an open-bid process (“open” in terms of bid amounts, but not in terms of who submitted the bid). Typically, bid amounts progressively decrease as printers vie to submit the lowest bid.
Sandy Alexander, Inc. has “been a major advocate of the strategy of bidding once and then walking away,” Roy Grossman, president of the Clinton, N.J.-based printer told NAPL. “Submitting a fair bid and then turning the computer off helps dilute the effectiveness of reverse auctions. The problem is that by doing that, you may be walking away from business. But if you don’t take a stand, the practice will grow, and that’s not good for the industry or for our customers.”
Brian Thebault, president and CEO of printer L.P. Thebault Company, Parsippany, N.J., “submits a fair, competitive price and then, that’s it—we walk away. If we didn’t do that, if we started our bidding at one level and then went down, we’d lose credibility that our first bid was a fair one.”
Bloomington Offset Process, Inc., “handles online bidding just as it would a sealed bid,” according to Jeff Fritzen, executive vice president, of the Bloomington, Ill.-based printer. “With sealed bids, we submit our best price and wait to see where we stand. With reverse auctions, we can see the other bids, so there’s a temptation to go lower and lower. But that gets you into trouble when the bids go down to ridiculous, even below-cost levels. If we participated in that way, we’d only be building the credibility of the process, and we don’t want to do that because it’s a flawed process.”
The article examines additional strategies printers can use to counteract reverse auctions’ downward pressure on prices:
• Get your company in “fighting” shape to compete more effectively in a price-focused marketplace by reducing waste and increasing efficiencies.
• Help customers shift their thinking from “price” to “value.”
Published quarterly and distributed exclusively to NAPL corporate and financial track members, NAPL’s Print Profit newsletter covers a range of financial management issues faced by today’s printing and graphic communications companies.
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