The Yin: The linchpin for a successful supply-chain management department is to locate the best suppliers and then develop the right relationship with them. Some important aspects of the right relationship include a common vision, an understanding of what each partner is required to do, the ability to work together across many corporate functions and sometimes corporate cultures, a willingness to adjust and adapt in order to create increased value in the marketplace and, of course, there is chemistry.

The most important ingredient in this chemistry is trust. Trust promotes flexibility, risk taking, collaborative continuous improvement, creativity, innovation, idea generation, shared information, shared resources and sometimes shared cost while recognizing and never forgetting vulnerability.

The Yang: The discovery of superior sources of supply is one of the most time-consuming but most important responsibilities of a good strategic sourcing manager's time. Electronic tools and their ability to simplify supplier outreach and supplier management makes reverse auctions a more efficient process option as well as a less ambiguous task.

The Yin: Vulnerability is a critical concept that we sometimes forget in these partnerships. In a customer/supplier relationship, even when everything I mentioned above is handled well, there is vulnerability to each side as well as a mutual desire to protect the partnership.

Often, these relationships have created enough trust that just a few individuals in each company know important details. Prints aren't always up to date (and yes, even when working with ISO- and QS-approved customers, we still find many blueprints to be inadequate and incorrect), specifications are known by the manufacturing supplier and possibly the customers' engineers or buyer, but documentation often reflects specifications from revisions made long, long ago.

Knowing how to implement cost savings based on buying patterns and combination opportunities, being ISO- and QS-approved and recognizing that suggestions for cost improvement generally require a thorough understanding of the customer's product and the product's end use, are often forgotten when the supply chain decides to embrace the reverse-auction phenomenon.

In our experience, supply-chain directives come from teams assembled at the corporate level. Generally, these individuals or teams are far removed from the day-to-day realities of manufacturing where the relationship is truly developed and earned every day. It's here that design, development, testing, approvals, improvements and procurement occur. It's here where the rubber meets the road (or, if you prefer, the adhesive hits the liner).

The Yang: Reverse auctions are not really a phenomenon considering FreeMarkets has helped clients source more than $70 billion in goods and services since 1995, and over $2.5 billion related to the paper and packaging industry. Electronic Supply Chain Management tools should be viewed no differently than converters investing in more productive printing presses or related equipment (both tools help organizations reduce their cost structure).

From my experience, and from many discussions with other converters, I believe that the overall feeling our industry has toward reverse auctions can be summed up in a few words, "Partnerships have changed. Now it is often 'lip service' that incorporates hollow promises, shallow commitments and some dandy clichés about win-win philosophies, shared risks and rewards...and the best one yet, long-term partnerships." Dispelling that feeling is the challenge for today's supply-chain manager.

To be fair, today's changed partnerships go well beyond the impact of auctions. Relationships are much harder to develop these days. Employee turnover is rampant, faster-paced workplaces are the norm and more emphasis on suppliers taking responsibility for value-added activities all add to the pressures for supply-chain management and suppliers.

Competitive pressures are being experienced all over the world, which tells me that the need for real trust and deeper, more effective collaboration is more important now than ever before in the supplier/customer relationship. If you are not discovering new methods to help your customers save money, improve their processes, better their product offerings to their customers or shorten their time-to-market, then trying to "reverse" a "reverse auction" will be difficult—if not impossible.

A software and service provider like FreeMarkets sees the reverse-auction experience as a means to an end, and not an end unto itself. Specifically, their clients use this methodology to learn the current market price, not necessarily the lowest price, but to also figure out where the floor of the market is. Then, they can justify going slightly higher for reasons such as incumbency comfort, services, ISO approvals or Six-Sigma certifications.

In fairness to the auction process, Jeff Zeman, FreeMarkets national account executive, wants us all to remember that reverse auctions are a negotiating format and not a silver bullet or a replacement for sound strategic-sourcing practices. To be fair to my colleagues and their voices of concern, that silver bullet has whiz-zed by too close, too often and too many times for the wrong reasons.

The 2004 TLMI Converter Meeting held in late February was amazing. We enjoyed the yin and the yang of speakers on that Monday morning. Meeting chair Jeff Dunphy, president/CEO of Design Label Mfg., arranged one of the finest content meetings I've experienced in a while.

I heard the idea for this meeting's speakers while talking with TLMI executive director Frank Sablone shortly after the October 2003 annual meeting. It was then I learned that a representative from FreeMarkets would attend to give us a better understanding of the reverse-auction process and methodology. After suggesting that Jeff and Frank employ metal detectors on the audience and position the speaker behind bulletproof glass, I decided to give this brave soul my complete attention as he showed great courage to stand before our group.

But let me first explain the "yin" of that morning. Our keynote speaker, Warren Greshes, president of Speaking of Success, spent an hour describing how to differentiate yourself from the competition and how to create, communicate and sell value to your clients rather than get stuck selling price. Many in the audience were buzzing with excitement as the next speakers were to be Mark Dawkins, director of purchasing for Fasson Roll North America, who has had experience with reverse auctions on both sides of the fence, and FreeMarkets' Jeff Zeman.

A few days later I faced the task of writing this column and contacted several of the meeting's speakers to ask for their collaboration in summarizing their opinions as a benefit to those who didn't attend. To date, they've all agreed. My next column will provide a forum for Warren, Mark and Jeff to discuss their beliefs as well as answer questions regarding the reverse-auction process.

E-mail your questions to me at Suzanne.Zaccone@graphicsolutionsinc.com

When it comes to reverse auctions, try to keep one aspect in mind: Buyers are faced with the same dilemmas as their suppliers—top-line growth, bottom-line improvement, and overall efficiency. This tool is just one cog in the business wheel. For those converters who understand, accept and embrace the process, it might be a viable channel to new markets. Those businesses that understand the opportunity must also have a business based on investment, innovation and flexibility.

On a lighter note, later this year I'll be interviewing our speaker from Tuesday, Lisa Lang, Ph.D., president, The Science of Business, who will discuss converter profitability in general and the dynamics of reverse-auction profitability.