TLMI criticizes
reverse auctions
In a rare move, the Tag & Label Manufacturers Institute (TLMI) has issued a formal statement charging that a growing practice among label buyers today is harmful to the industries involved, and that TLMI members want it stopped.
The practice is reverse auctions, Internet-based bidding events that can result in deep cuts in the price of printed labels. TLMI contends that such auctions can lead to the sacrifice of quality “and other critical factors”, and that the impact of inferior labels eventually will outweigh the short-term satisfaction of cost-conscious purchasing directors.
“Some members, and some board members, are very concerned about this issue,” says TLMI president John Bankson. “Part of our mission statement is to address issues that are pertinent to the success of the industry, and they felt that this is one of them.”
The statement reads, in part:
“The Tag & Label Manufacturers Institute, the leading trade organization representing tag and label converters and suppliers in North America, recently expressed its concern about the emergence of ‘reverse auctions’ as a purchasing method by a growing number of label buyers.
“TLMI sees the process of ‘reverse auctions’, which involve two or more converters ‘bidding’ to lower the price of a given job to the end user, as focusing solely on cost to the virtual exclusion of the other critical factors end users should consider in selecting a converter: service, innovation and quality.
“TLMI feels that reverse auctions are counter-productive to the procurement of labels, which require an ongoing relationship or heavily connected processes between the supplier and the customer. Many TLMI converter members feel it is far more important for label products to run well in a customer’s plant in order to minimize the total applied cost and for our labels to help sell the customer’s products. Reverse auctions, however effective in the short run, will come home to roost in ways that may harm our customers’ business in the long run. TLMI members, as guardians in the industry, would like to prevent this from happening.
“TLMI believes that many converters who take part in reverse auctions feel they have little choice, particularly when an existing customer decides to hold a reverse auction on a job the converter has previously run and invites them to take part. Others who participate simply have so much excess capacity in today’s difficult economy that they’d rather make ‘almost no profit’ than ‘no profit’ at all.
“Factors such as delivery times, print and substrate quality may ultimately be sacrificed, at least temporarily, by purchasing agents focused solely on price considerations. The end result is often an inferior label and unmet delivery dates.
“TLMI noted that while cost has been and always will be one consideration of label buyers making purchasing decisions, it urged them to consider other ‘intangibles’ when selecting a converter — particularly in light of the fact that the vast majority of labels produced by TLMI converter members are custom-made, rather than commodities.
“TLMI members are widely acknowledged as being leaders in innovation, and on having the knowledge, skills and equipment that adds value to the customer’s product. It’s known as ‘value-added.’ That’s what TLMI members do best, and just maybe you can’t put a price on that.”