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Reverse Auctions -- Sold to the Lowest Bidder

October 2003 By Mark Smith
Technology Editor
Just when it seemed safe to go back online, the specter of short-sighted Internet business models has risen to threaten print margins. It's the players, more so than the concept, that is new.

Reverse auctions are now being touted by accounting firms and business consultants as a means for Corporate America to dramatically cut the cost of print work. The nature of the players means printing isn't necessarily even the main target, but rather gets lumped into a broader procurement strategy for commodities.

Given the growing level of concern he was hearing from printers, Robert Lindgren—president of Printing Industries Association of Southern California (PIASC) in Los Angeles—felt compelled to raise the issue in a recent issue of the association's newsletter.

According to Lindgren, the process starts with the buyer designating a pre-qualified set of print suppliers. After job specifics are disseminated, these companies are given a window of time to enter their bids in an online environment. The identity of bidders is kept hidden, but each can see all the amounts being entered in real time.

"It's a 'reverse auction' because the bids start high and go lower," Lindgren notes. "The concern is that this process will lead to printing being given away."

Sandy Alexander, in Clifton, NJ, has been one of the printing companies playing a leadership role in the industry's response to reverse auctions. Members of its management have been actively involved with an informal task force started by the Association of Graphic Communications (AGC) in New York City. Roy Grossman, president and CEO, and Jonathan Fogel, senior vice president and director of marketing, also made a presentation on reverse auctions at the 2003 PIA (Printing Industries of America) President's Conference.

Just a Passing Fad?

Corporate initiatives of this type usually have a life span of around two years and then more often than not go by the wayside, Grossman says. "We're probably about nine months into this being a fairly widespread phenomenon," he notes.

"Typically what happens is a consultant sells the concept to a CFO, who usually does not have a lot of knowledge about the printing business. The CFO is naturally very excited by the reported savings. Without having a thorough understanding of all the implications of how a reverse auction impacts that transaction, the company exec will issue an edict that the program be instituted," Grossman explains.
 

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