Railway Age -
[Cached Version]
Published on: 7/29/2001
Last Visited: 4/17/2002
Howard Levy, senior vice president of purchasing and materials at CSX Transportation, believes RailMarketplace is off to a promising start."We've started a process of strategic sourcing in a number of areas that has realized real-world, significant dollar savings," he says."But we're still in the early phases, and anything that's just a year old, particularly in the railroad industry, is still an infant.I do sense that some of the suppliers are concerned though, particularly with reverse auctions."
It is never too early for a problem to arise, and recent grumblings in portions of the railroad supply industry point to a possible confrontation over the reverse auction function of RailMarketplace.com.Concerned parties worry that the railroads may attempt to improve their bottom line by using reverse auctions to force suppliers to cut their prices.
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Levy believes reverse auctions, while important, will be of limited use."They are not something you do broadly across the board.They're sort of like any other major purchasing strategy area, like global sourcing, for example.Selectively, on some limited commodities, it makes sense to look at global sources.And on such non-strategic commodities as fuel, forklift trucks, or promotional items, reverse auctions may make sense."
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"I think some of what's being picked up out there in the industry is from suppliers concerned about how broadly reverse auctions may be used," says Levy."My perspective is that it is a limited, selective tool when used in its appropriate place."
Suppliers participating in a reverse auction may have different experiences depending on the railroad involved.CSXT, for example, runs its auctions under the notion that disclosure of bids generates more interest in the suppliers involved."By using the reverse auction and working jointly with marketing, we were once able to find a supplier with national reach," says Levy."This supplier got substantial additional business because of the visibility of a reverse auction, since ours is not a sealed-bid process or a hidden quote."BSNF, on the other hand, operates its reverse auctions in nearly the opposite fashion.
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"I think the keys to relieving the worries of some suppliers over reverse auctions are education, communication, and appropriate use, and I think all three need to happen," says Levy."To me, a reverse auction basically is a highly visible form of a request for quote, and in many cases it can be beneficial to the suppliers who are involved.I understand why some of the suppliers could be concerned because they may not understand it completely, but if it's used in the right places, it could save suppliers money as well.Again, it comes back to education, communication, and then we have the accountability as railroads to appropriately use it."
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"This is an evolutionary, entrepenuerial kind of website," says Levy."We have been very focused on providing value to the railroads and we believe there is real potential for doing to the same for the suppliers.
"We are definitely a work in progress, but the key thing is we are definitely open to supplier input and would like to move this in a direction that's not only good for the Class I railroads, but the suppliers as well."
Copyright © 2001.Simmons-Boardman Publishing Corp.