The idea of reverse-auctioning appears to be a great strategy for Sun. Online bidding for business would eliminate headcount at Sun, since the Internet would do most of the work automatically. It would allow Sun to choose their supplier by cost and match that with their internal aggregated demand figures. This would raise competition between suppliers and allow Sun to reduce their procurement costs. Sun would have to take many factors into consideration when bidding on suppliers such that quality and integrity are not affected, thus tampering with their relationships with their suppliers.
Advantages: A dynamic bidding system has the potential to reduce costs through price flexibility; it is fast and conveniently transacted through the Internet, and allows for expanded competition among suppliers.
Disadvantages: With so much focus on lower prices, initial quality would be affected, current supplier relationships would deteriorate, collusion of suppliers could result, and the possibility of an Internet security threat could arise.
Sun prides itself on strategic supplier relationships. Making this type of change in procurement strategy may affect these relationships. Sun management has to decide if it wants to continue its ethical business through strong supplier relationships, or follow the greed trail of money-hungry corporations. I would involve top management from all of my major suppliers in making such a decision and let them see my side of the business. I have to cut costs, so we can work together to reduce cost of goods sold, or we may have to pursue a dynamic bidding procurement strategy.
I actually was involved in a similar situation at General Motors. We had a part-quality issue on tailgate straps. There was a 600,000 vehicle recall for faulty tailgate straps. We had to order 2 Million new, reliable straps immediately at our plant and an auction was setup locally (not over the Internet) among several area suppliers. I did not attend the auction, but I remember looking at some of the requirements of the contract. One requirement that stated the supplier would be responsible for any and all costs associated with future faulty parts, costs related to lost production due to material shortages, and costs related to repair associated with initial quality. This may not be completely related to my personal experience, but it definitely provided me with some background as to what issues Sonia was dealing with in the case.