(2/02/2012) What is in your Toolbox?
We all have tools that we use in our professions. Once we have the basic set and are comfortable with them, we sometimes do not upgrade those tools as we mature. We can get complacent. If you haven't reviewed your toolbox contents lately, we recommend that you do and see what options might be available to you to enhance your productivity.
Reverse auctions are not a new concept yet I find many organizations have not utilized them in their sourcing toolkit. Here is a quick description from the eSourcing Wiki:
Over the years, various auction formats were devised and executed, including the most well-known format, the reverse auction. Rather than having one seller with many buyers, a reverse auction involved one buyer with many sellers. Sellers placed decreasing bids on a set of goods or services and followed the same set of rules.
This is opposite of what the general public understands an auction to be with the price increasing over time, such as on eBay. Did you know that eBay started in 1995 and went public in 1998? That is a long time ago and many transactions have passed, especially in light of the growth of the internet and mobile devices!
With that in mind, we know many procurement organizations have been utilizing reverse auction software for 10+ years and have reaped tremendous benefits. They have condensed the negotiation timeline, increased the competitiveness of the bidding process and opened transparency in the marketplace. The process has been standardized which allows consistency among the staff and across categories.
The strategy is to make sure to communicate to the bidding suppliers what the outcome will be. Is this a winner take all or is this just the pricing tool for 'best and final' offers? Having a 'mock auction' for training prior to the main event is critical for a successful auction. Everyone needs to be comfortable with the mechanics so they feel they had a fair opportunity for the business.
This overview by Epiq offers a detailed, simple explanation of reverse auctions. If you are not familiar with them, take a minute to read it and you will get some insight.
Buyers Meeting Point has consolidated a great deal of information on various suppliers of auction technology as well as other esourcing tools. Here is the link if you are interested in knowing more.
