Thread: Anyone's customers doing reverse auction on there parts?

Another corporate idea for a race to the bottom!

What is that ??

We just had a customer, in the last 2 weeks start doing this. Must of been a group of buyers got together and came up with another buzz word type trick to cut costs and run vendors into the ground.Later Jason.

Sorry I'm from Canada too, don't understand what the statement means.

Part starts out at $100. Who here can make it for $95? Now $90. Etc. Ultimate race to bottom as the guy in china says he can make it for $5.

I didn't realize this was a new practice.

I did one reverse auction for the government. I put in my original bid and I guess no one bid lower, as we were awarded the contract.

I don't think it's all that new of a practice. That scheme just lets you know what customers to cut loose and which ones to keep.

Anyone seen shipping wars? They just under cut each other till theres no money left in it.

Isn't every job put out for bid to more than one shop a reverse auction? It is just closed bid, instead of open bidding.

You alone know what it cost you to make any certain part, what your overhead is and what you consider a fair profit margin. If someone else thinks they can do it for x dollars less let them. Unless you are way of the mark on your price, you will still be here after they are long gone. Companies will try any ruthless and underhanded trick to get cheap parts, which is what they end up with until they figure out the difference between usable parts and cheap parts. Sometimes you have to draw this to their attention. It won't likely have any immediate affect but will give you lots of ammunition when they come back looking for usable parts again.

Originally Posted by Dualkit

Isn't every job put out for bid to more than one shop a reverse auction? It is just closed bid, instead of open bidding.

Lol ...you sound like my father!! I agree , but the price they are putting out as the max price is

If I got the jist of this the bottom line is that the customer is shooting them selves in the foot. Customer says $50 part I say okay I'll do it for $20. Now that 30 dollar difference is going to come out some where: either inferior materials, out of tolerance, child labor, or back dooring materials. I realize the customer has the option of rejecting the parts, but you get what you pay for. Where do customers come up with this crap. It is a loose loose deal, you get rejected parts cause you cut corners & the customer has to go through the whole process again, setting him back on delivery.
Honesty, integrity and morals are antiques, be honest, develope relation ships; as of late these things have gone straight to the potty. I guess knowbody watches Sesame street any more and learns how to work together and benefit all. This kind of practice is one of many reasons the USA is going to hell in hand basket. Not to knock the practice totally but play fair and it might benefit both parties.

When a drawing is sent out for quotes, its expected that since everyone gets the same drawing, and all the information is on the drawing, then "theoretically" the customer will receive the part that is on the drawing, whatever be the price. Lowest bid wins, they said they'd do that's on the drawing for X $, other shop must really suck or have poor equipment if they cost XX$.

It's not uncommon to be told " we're currently paying $10 for these, can you do it for less ? " sometimes yes, sometimes no.
So, in one of them reverse auctions, I take it they'll get he lowest bid, then tell every shop quoting that it was who wants to beat it?
Sounds fun.

There are all sorts of folks with college degrees in marketing that cant find a job. They are all trying to be creative and make new positions for themselves. I recently meet one of them who has created his own consulting business helping large companies do reverse auctions for outsourced components. The Wall-mart strategy has paid off so well for them thaf now everyone feels the need to do the same thing in every industry.

For those who think this is nothing new you are wrong, yes people have always hoped to get a better price but it used to be based on the lowest price the market will bear. Now it is down to the person who is most able to be willing to accept the biggest loss or risk. It starts on the larger orders and slowly filters down to the smaller ones.

Very sad to see....

Charles

Originally Posted by SND

When a drawing it sent out for quotes, its expected that since everyone gets the same drawing, and all the information is on the drawing, then "theoretically" the customer will receive the part that is on the drawing, whatever be the price. Lowest bid wins, they said they'd do that's on the drawing for X $, other shop must really suck or have poor equipment if they cost XX$.

It's not uncommon to be told " we're currently paying $10 for these, can you do it for less ? " sometimes yes, sometimes no.
So, in one of them reverse auctions, I take it they'll get he lowest bid, then tell every shop quoting that it was who wants to beat it?
Sounds fun.

Yes, but ONLINE, and.....when the program decides, the end date of the auction is extended incrementally
asthe price keeps dropping.

Ahh, open for bid online, nice.
I think its great, its bound to eventually get rid of some competition, if we can call them that. More like, them making us look bad....

You bunch of pussies. If you can't compete by streamlining your process, getting faster, etc, you don't deserve the work. Why the fuck should the consumer have to pay higher prices so you don't have to engage your brain and come up with ways to do things less expensively? If another company can do things faster, it's probably because they're better, not because they're bottom feeders. Or maybe because they have expertise in that type of part. Or maybe they have a machine designed to make exactly that type of part. Bid it for the lowest price you can make your minimum acceptable profit, and let it be.

Originally Posted by Cornilsn

You bunch of pussies. If you can't compete by streamlining your process, getting faster, etc, you don't deserve the work. Why the fuck should the consumer have to pay higher prices so you don't have to engage your brain and come up with ways to do things less expensively? If another company can do things faster, it's probably because they're better, not because they're bottom feeders. Or maybe because they have expertise in that type of part. Or maybe they have a machine designed to make exactly that type of part. Bid it for the lowest price you can make your minimum acceptable profit, and let it be.

Valid point depending on what you are bidding on. If it is complex work or something that requires specialized machinery you were more likely beat out by someone with better machinery or methods for the job. If it is fairly simple stuff you were likely beat out by a bottom feeder. I knew a guy no longer in business that would bid prototype quantities at large production run prices, he was bidding $3 a part on five piece orders that took him all day to make. He figured it got his foot in the door. All he ended up doing is making $75 dollar parts for $3, I don't think he was in business for more than a year. He was a bottom feeder who benefited no one as his pricing was not sustainable.

Originally Posted by Cornilsn

You bunch of pussies. If you can't compete by streamlining your process, getting faster, etc, you don't deserve the work. Why the fuck should the consumer have to pay higher prices so you don't have to engage your brain and come up with ways to do things less expensively? If another company can do things faster, it's probably because they're better, not because they're bottom feeders. Or maybe because they have expertise in that type of part. Or maybe they have a machine designed to make exactly that type of part. Bid it for the lowest price you can make your minimum acceptable profit, and let it be.

The work is simple. I priced 4 different steel suppliers , the material alone was 70% of the job, plus shipping 8000 lbs on my dime. And your call me a pussy. Your something!