Wood pallet suppliers' reaction to online reverse auctions

M.L. Emiliani · D.J. Stec

53 citations0/0 files storedSupply Chain Management An International Journal

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Auction Theory and Applications Supply Chain and Inventory Management Public Procurement and Policy

Abstract

Purpose The purpose of this paper is to quantitatively assess wood pallet suppliers' reaction to online reverse auctions and its impact on their business policies and practices. Design/methodology/approach Survey method was used to determine how pallet suppliers react to online reverse auctions. Findings Determines that pallet suppliers do not realize the benefits claimed by online reverse auction service providers. Identifies new sources of costs which accrue to buyers and are not accounted for in so‐called “total cost” request for quotes including: retaliatory pricing practices, less cooperative relationships, and sourcing work back to the original supplier. The qualitative benefits identified for suppliers by third‐party online reverse auction service providers are overstated or false. Research limitations/implications The present work can be extended to other commodity categories to identify similarities and differences in how suppliers react to online reverse auctions, understand the domain of successful and unsuccessful application of the online reverse auction tool, and provide further insight into the evolution of buyer‐seller relationships, including embedded organizational routines such as power‐based bargaining. Practical implications Findings mirror the results found in a previous study that examined aerospace parts suppliers' reaction to online reverse auctions, and indicates that market makers have consistently overstated the benefits of online reverse auctions to both sellers and buyers, and the use of this tool will typically result in unfavorable outcomes for both buyers and sellers. Originality/value This paper will be of interest to buyers, sellers, and market makers, as it identifies important problems with online reverse auctions, and suggests questions that buyers should ask market makers to ensure better sourcing decisions.

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References

1992The machine that changed the world 2000Creating and managing a high-performance knowledge-sharing network: the Toyota case 1998The hidden traps in decision making.1994Strategic Industrial Sourcing 1999The Evolution of a Manufacturing System at Toyota 2000The Evolution of a Manufacturing System at Toyota 1999Supply Chain Development for the Lean Enterprise: Interorganizational Cost Management 2000Business‐to‐business online auctions: key issues for purchasing process improvement

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2005Regulating B2B online reverse auctions through voluntary codes of conduct 2007Coercion and reverse auctions 2007E‐Reverse Auctions Revisited: An Analysis of Context, Buyer–Supplier Relations and Information Behavior 2010Understanding e‐auction use by procurement professionals: motivation, attitudes and perceptions 2008Do all suppliers dislike electronic reverse auctions?2008Diffusion of online reverse auctions for B2B procurement: an exploratory study

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