Reverse Auctions are widely adopted as an effective negotiation tool. The advantages of using online auctions are several and the downsides, if managed effectively, are minimal.
Why will you use it?
While there are several tools available, some critical features impact the outcome of a reverse auction.
The ability to compare prices from dis-similar suppliers by transforming their online bids with multiple price and non-price factors. e.g. the need to transform the submitted bids with factors related to their technical competence, manufacturing capability, service quality levels, etc. The key aspect here is that suppliers are unaware of this price transformation and the competitive feedback displayed about other supplier bids is also computed accordingly.
Frequently Asked Questions:
Are there any costs for the supplier to participate in the reverse auction?
No, suppliers can participate in reverse auctions for no extra cost.
Can reverse auctions be conducted for all types of goods & services?
Simply put, reverse auctions work best when the market is competitive and the number of qualified suppliers exceeds the number of suppliers that would be eventually awarded the business. This is why indirect items are best suited for reverse auctions.
That said, auctions are deployed for strategic buying by many organizations across the globe. In such scenarios, managing the suppliers and addressing their concerns are vital.
Are suppliers comfortable participating in online auctions?
Reverse auctions have been used as an effective negotiation tool for more than 2 decades. Suppliers understand that this is a transparent mechanism and lowers their cost of customer acquisition greatly. Suppliers however could have some concerns that need to be proactively addressed by the buyer.
Do suppliers need to install any IT software on their computers in order to participate?
No. Our eSourcing solutions are securely hosted on the cloud via AWS. Suppliers need a reasonably stable internet connection and a computer/ laptop/ phone in order to place their online bids.