When I tell people e-auctions are a negotiation tool in the toolbox, they often go straight to “e-auctions are a hammer.” But a hammer doesn’t have flexibility or grace, it can basically do one thing. I say e-auctions are a chainsaw. If that evokes a slightly visceral reaction for you, that’s intentional. A lot of people have a very visceral reaction to e-auctions, including fear. Today I’m going to talk about why a chainsaw is a good metaphor for e-auctions as a tool, and what we can learn about e-auctions by thinking of them this way.
Power and Fear
Many people who do not use a chainsaw regularly are afraid of them. They can be dangerous. They are loud. They are often used in scary movies by villains as a weapon and seldom used by heroes. Chainsaws are powerful and far faster than their manual saw counterparts.
So many of these things also apply to e-auctions. Many people react to them with fear, driven by a poor experience or what they have heard. Hopefully villains aren’t using them in scary movies (“And NOW, hero, I’m going to send you through e-auction! Bwa ha ha ha!”), but any tool’s purpose is only as good as its wielder. E-auctions are far faster than their in-person, virtual, or phone call negotiation counterparts. There are times when you still choose a manual saw, just as there are times when the right answer is to sit across the conference table from your supplier representative and hash things out over two days. But once you have a faster answer, the older and slower way feels antiquated.
Specialized Equipment
Using a chainsaw requires some specialized equipment in addition to the chainsaw itself. You need some personalized protective equipment; at the very least you need eye protection, gloves, and hearing protection. You may also need a helmet, chaps, a breathing mask, and steel-toed shoes to prevent injury. Everyone who uses a chainsaw regularly has a favorite brand, and reasons it’s their favorite. Some brands have more bells and whistles, such as anti-vibration, gasoline- or electric-powered motors, automatic lubrication, or a longer battery life. Sometimes cheap chainsaws are indeed cheap and harder to use without all of those extra features.
Running an e-auction program takes more than just an e-auction platform. It requires some ability to gather and exchange requirements with suppliers, possibly as part of a Request for Proposal (RFP) or Procure-to-Pay (P2P) platform. You can run an e-auction program when you’re running RFPs through email, but it works a bit better when you’re running a more complete version of the sourcing process. You may need full contracts with suppliers to ensure the e-auction results aren’t lost in the realities of day-to-day business. The equivalent of safety gear is running an RFP ahead of the e-auction (especially with complex bids) and having strong go/no-go criteria in place to protect against bad outcomes. Different e-auction platforms have different bells and whistles, such as bid transformation, individual supplier ceilings, the ability to change parameters mid-auction, or integrations with your RFP and ERP programs. Sometimes a very bare bones e-auction platform is all that’s needed, and sometimes some extra features make everything run more smoothly. Also, everyone has a favorite!
Flexibility
Chainsaws are a surprisingly flexible tool. They are primarily used for cutting down trees either to clear a forest or harvest lumber for other uses. But that’s not all they do. Chainsaws can do the work of creating firewood once the tree is cut down without any other tools. They can be used to prune trees so they are more able to grow or are more productive. They are used to clear brush and weeds, either as part of managing land or to create a firebreak that prevents a wildfire from spreading. They can create gorgeous and delicate art, and people compete in competitions for the most beautiful chainsaw art (Consider searching for a chainsaw competition video or watch this short three-minute video about one here to see what I mean). Chainsaws can also cut concrete, plastic, or ice, not just wood (possibly with some modifications to cut those other materials).
E-auctions are similarly surprisingly flexible. Conventional wisdom is that e-auctions are only for materials and reducing cost with no regard to quality or non-monetary value. None of this is true and they are a very flexible tool. E-auctions can be used with or without an RFP, depending on the category or project. They can be used before or after a contract is written, and can be structured as multiple lines or just one. They can include bid transformations to account for transition costs and discrepancies in supplier contract terms. E-auctions can be used for almost any category and any amount of spend. Just as chainsaws can cut material other than wood, e-auctions can be used to optimize value for more than price. You can e-auction lead time or emissions reductions. You can forward auction how much value you will get for a set budget, like the number of sales leads provided for a set cost.
(Side note: if you watched the video I linked, there’s an auction in it! They mention forward auctioning the chainsaw art created in their speed competition round, which I found delightful!)
The Human Factor
When wielding a chainsaw, the operator has to have enough training that they know how to use the tool without hurting themselves. Even after some brief training and minimal capability, it may take years to be able to create a carved masterpiece or safely take down a full-sized tree while also climbing it. Watching someone work with a chainsaw, especially if they are creating art, can be fun and entertaining to watch. The Iowa State Fair has someone carving wood into art with a chainsaw every year. While using a chainsaw, the operator has to be aware of the environment around them. How will the material fall once it is cut? Is anyone standing too close? How does what they do impact those around them? Is the noise an issue for anyone nearby? Where will any sawdust or other waste materials go? Chainsaws cannot operate in a bubble, they are part of a job site or a demonstration stage.
When building, running, and completing an e-auction, the e-auction team needs to understand the tool enough to avoid bad outcomes. An intern can be taught to build an e-auction in minutes, but it takes months or years to be able to make the right decisions and pick the right strategy for very complex or strategic categories. Watching an e-auction can be incredibly entertaining; I have it on good authority that an e-auction is a popcorn-and-coca-cola event at Google. Those involved in building the e-auction have to keep in mind how that negotiation tool affects the rest of the procurement environment. How will this group of suppliers react? Is extra training needed? Is the buyer or category manager fully on board so they can have constructive conversations with their suppliers before and after e-auction? Are there any particularly influential executives or leadership team members keeping an eye on this e-auction or holding a stake in the outcome? E-auctions don’t happen in a bubble either, they are part of the full supply chain and supply chain strategy for a business.
The more I think about this particular metaphor, the more I like it. While I’m likely to refine my thinking with time and may find a fatal flaw in the e-auctions-are-chainsaws logic, for now I’m going to keep using it to organize and frame my thoughts. If you have a hammer, everything looks like a nail. But if you have a chainsaw, you can carefully shape the world around you.
If you want to talk about creative and safe chainsaw/e-auction use, let’s chat. If you’d like to get these articles weekly straight to your inbox and never miss one, sign up for my newsletter.
My book, Transform Procurement: The Value of E-auctions is now available in ebook and paperback formats: https://www.amazon.com/dp/B0F79T6F25
