Aerospace parts suppliers’ reaction to online reverse auctions

Presents the results of a survey conducted among aerospace part and sub‐assembly suppliers to quantitatively assess their reaction to online reverse auctions and its impact on their business policies and practices. Findings are compared to the qualitative benefits identified for suppliers by third party online reverse auction service providers. Determines that incumbent suppliers do not realize the benefits suggested by online reverse auction service providers. Identifies new sources of costs which accrue to buyers and are not accounted for in so‐called “total cost” request for quotes, including retaliatory pricing practices, less cooperative relationships, and sourcing work back to the original supplier. Concludes that both buyers and sellers participating in online reverse auctions will likely encounter unfavorable outcomes, thus questioning the effectiveness of this new purchasing tool as a means of reducing the unit price of buyer‐designed engineered components.