Friday Rant: Return of the Lean Bigots (Part 1)
Webster's defines bigot as "a person obstinately or intolerantly devoted to his or her own opinions and prejudices." By this definition, it seems that there are few individuals I've met in the procurement ecosystem -- at least among academics, analysts and advisers -- who are not willing to at least entertain the option that an opinion is worthy of debate, or that a situation may have multiple shades of gray rather than existing in just a black or white context. But one individual who clearly fits the description of a bigot in the context of procurement is Dr. Bob Emiliani, who has made a career out of slamming reverse auctions in favor of lean supplier management practices.
Dr. Emiliani's most recent reverse auction tirades were featured in a Crain's Chicago article that painted a one-sided view (surprise, surprise) of reverse auctions (never mind the fact that in the Illinois state government, procurement corruption is rampant). Crain's suggests that "Critics of electronic reverse auctions say cut-throat bidding is not necessarily in the state's long-term interests" and uses a quote from Emiliani to highlight their point: "It's bad for the state, it's bad for Illinois business ... You're screwing your trading partner. How long do you think you can get away with that?"Of course what is worse for trading partners (not to mention Illinois residents and tax payers) is a lack of transparency in bidding processes that in part has led to my home state being made a mockery of in the NYT because of its inability to pay bills. After all, the more politicians offer pay backs through un-bid -- or under-bid -- contracts to the vendors whose contributions put them in office and then paid for their $3000 suits, the less likely tax payers are to participate by extension in a supplier kumbaya. That is, if we agree with Emiliani's thinking (never mind the fact that another state, Ohio, has saved millions using reverse auctions).
Without question, reverse auctions aren't perfect. They're not the ideal negotiation format under many circumstances -- but they do have a place and time. In fact, I'd argue that reverse auctions might be a whole lot less risky to the business than many of the lean tactics Emiliani espouses. After all, if you take inventory out of your supply chain (including reducing your supplier's inventory) in an environment of greater underlying commodity volatility/availability, supplier financial risk and working capital challenges (where suppliers can't easily borrow to ramp up production), you might as well roll the risk management dice to see if you'll come through the downturn unscathed without missing an order or pushing out your own lead times. Yet you won't read about how lean approaches can be the equivalent of supply chain Russian roulette from Dr. Emiliani or his colleagues, who preach a one-sided supply chain doctrinaire.
In a follow-up to this post next Friday, we'll offer additional details about how lean thinking and lean practices have worked together to create greater risk in the supply chain -- and why reverse auctions may actually be a preferred format and less risky tactic even in tough times (for both you and your suppliers). And to be fair, I'll present a counter-argument as well. Just as there is a place for reverse auctions and strategic sourcing, there is a place for lean as well, a large place in fact -- in certain cases at the same time. But there is no place for the type of supply chain or procurement bigotry that Emiliani espouses. "Screwing your suppliers?" Please ...
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Our research on reverse auctions, which ended in 2006, was never intended to “drive up the potential audience for the ‘lean’ services and training” that I provide, or to advance my “own practices and services as an alternative.” The reverse auction research is a completely separate activity from my work in Lean management, which has been solely focused on the narrow topic of Lean leadership for the last 15 years - not supply chain, reverse auctions, or anything else related to procurement. This is why our reverse auction research papers are posted on a different web site, http://www.technology.ccsu.edu/personnel/informati....
I have not, nor have I had any desire to “make a career out slamming reverse auctions.” Prior to becoming academics in 1999, my co-author and I worked at United Technologies (Pratt & Whitney) for many years. In the mid- and late 1990s, we were supply and commodity managers responsible for supplying commercial and military engine hardware to the assembly floor (annual spend of $106 million in 1997). We were charged with managing numerous reverse auctions and also implementing the results with our suppliers. So we have deep, direct, first-hand knowledge and experience with reverse auctions. (I was also responsible for implementing Lean in manufacturing, as a business unit manager in the mid-1990s, and in my tier 1/2/3 supply chain as a supply/commodity manager, in collaboration with our CI group).
“Regarding “seeking press coverage,” I do not do that. Reporters come to me and seek my views, based on the dozen academic, peer-reviewed papers that we have written. In about half the cases I turn down reporter’s requests for interviews and instead refer them to our papers which are posted online at http://www.technology.ccsu.edu/personnel/informati....
We benefitted financially from our reverse auction research twice in 2001, when we ran a total of two training workshops titled “Buyer and Seller Strategies for Online Reverse Auctions.” (I think we made $1500 per session). We did this as a university-sponsored activity, not as a private training session. We have not done any training since then, either for a university or for ourselves. I did reverse auction consulting once in late-2001 for one small business in the Hartford area. I have not done any consulting since then; I am simply a teacher and a writer.
Also, please note that in pursuing our research, we did not accept direct or indirect funding from any source, either in support of or against reverse auctions. All research was conducted as free and independent works by the author(s). Further, we did not directly own stock, long or short, in any provider of reverse auction services. These and other facts explaining our work and our intentions are contained in the FAQ section of our reverse auction web page located at http://www.technology.ccsu.edu/personnel/informati....
I am an advocate of non-zero-sum (win-win) sourcing strategies in the course I teach in supply chain management, and, generally, non-zero-sum approaches to management and business overall. My business experience and our research shows reverse auctions to be zero-sum (win-lose, at least for incumbent suppliers) in most cases, which is inconsistent with non-zero-sum Lean principles. We fully explain this in our numerous journal papers on reverse auctions.
Ultimately, I bet that we agree on far more than we disagree. By the way, I often use spendmatters.com content (with attribution, of course) in my lecture notes for the supply chain management course I teach once-a-year at CCSU because it keeps me up-to-date on various strategic sourcing and spend analytics topics.
Thank you,
Bob Emiliani
http://www.technology.ccsu.edu/personnel/informati...
Perhaps it is the misinterpretation of some of your arguments -- and I do believe based on a number of the points you make about “win/win” that we have some great common ground for a discussion -- but I’ve found myself defending the select applicability of auctions and direct negotiations after a number of executives have read what you have had to say on the subject and taken it at what I think is a surface reading level. This goes back many years and seems to come up in conversation at least once a quarter with someone on the practitioner or consulting side of the procurement and supplier management world.
If I was incorrect in the statements, I apologize, though as someone who has spent part of his earlier career in marketing, I think we would absolutely both agree pragmatically -- if not academically -- that a great way to call attention to an idea is to take an extreme opinion on it. The problem lies in situations where this opinion is taken: A) either as gospel; or B) out of context.
You have a lot of followers who are clearly not as rigorous and analytical as you are, and are not trained to question and probe -- or to rely on data in the same way. If I came off as too extreme or sensational in the way I presented my commentary, I apologize, but it is something I have been thinking about for a long time. No excuses, though.
I hope we can have a chat about our views here and hopefully find a way to let a good discussion and debate inform everyone’s opinion.