Online Reverse Auction Solutions and Optimizations
Running a reverse auction is a critical part of the strategic sourcing process once you get a feel for how one works. Without having online reverse auction solutions and optimizations and running an eAuction or reverse auction without some direction, you may not be getting the results you want in your overall strategic sourcing experience.
There are some strategies and methods to become accustomed to the role of reverse auctions in strategic sourcing, so your reverse auctions will be more successful.
Read on to learn more about online reverse auction solutions and optimizations and why reverse auctions are an important strategic sourcing tool.
Online Reverse Auction Solutions and Optimizations: What Is a Reverse Auction?
A reverse auction is very much like what it sounds like—instead of you bidding on goods and services, suppliers instead compete with each other to work with you by lowering their prices for their goods or service. It’s one of the important strategic sourcing techniques, especially with certain goods like raw materials, printing services, capital equipment, processed goods, components, among many other things.
This type of strategic sourcing methodology, however, does require some strategy to hit the right tone with your suppliers.
Online Reverse Auction Solutions and Optimizations: General Steps to Running a Reverse Auction
If you’re new to reverse auctions and want to use this strategic sourcing solution, the general way to run a reverse auction without necessarily thinking about strategy is:
- Invite two to three suppliers to your reverse auction.
- Ensure everyone is qualified and their goods/services are up to specification or code. In some cases, you might consider performing a pre-bod to accomplish this step.
- Perform a mock reverse auction that will be conducted exactly like the live one so that everyone is comfortable with the process.
- Once everyone is comfortable, perform the reverse auction with live bids.
- Award the business to the supplier that you wish to.
However, you will need additional strategic concepts and optimizations to fully realize all the benefits of this strategic sourcing best practice.
Online Reverse Auction Solutions: What Are Good Reverse Auction Strategies?
Best online reverse auction solutions include optimization strategies such as:
- Be completely transparent. Suppliers can be wary of engaging in reverse auctions, as they may not have experience with them. Be sure to run the mock auction so that your suppliers are comfortable with the process.
- Allow your auction to extend last-minute. Don’t let your auction be an eBay-style auction, and let things extend at the last minute if there is competition between suppliers.
- Minimum bid decrement. Allow suppliers to decrease their bids by a minimum amount to save everyone time.
- The best strategic sourcing software. Ensure that you have easy-to-use software that doesn’t require supplier training to use.
Suppliers can be wary of using reverse auctions, but this system does have its benefits, one of the main benefits being lack of favoritism. It also allows a chance for new suppliers to enter the playing field.
Online Reverse Auction Solutions: What Are the Benefits?
You may wonder, what are the benefits of strategic sourcing and online reverse auction solutions? For the purchaser, benefits of reverse auctions include lower purchase costs, time savings because of the compressed negotiation, and more ability to meet deadlines more easily. You also get the ability to work with new suppliers and build new relationships.
To learn more about online reverse auction solutions and optimizations or if you’d like an eAuction demo, contact EC Sourcing Group today at 973-936-9672. We want you to reimagine the way you think about procurement.