Reverse Auctions

Reverse Auctions (On-line Bidding)

Reverse auctions (also known as on-line bidding) are web-based applications that facilitate a dynamic competitive bidding process for any product or service retailers or other businesses wish to source, from office supplies, consumable items, maintenance and repair operations, all the way to courier and snow removal services.

This process allows buyers to evaluate a significantly greater number of qualified suppliers in a much more efficient way than traditional methods, resulting in the optimal combination of price, quality and performance.

Purpose

To facilitate a dynamic, competitive, on-line bidding process that evaluates an increased number of pre-selected, qualified suppliers and results in a superior price/quality/performance mix.

To significantly increase the productivity of the purchasing department.

Process

  • Identify the product/service to be put up for auction – called the “auction event”.
  • Gather data on the incumbent vendor, current spend, contract and policies.
  • Establish detailed specifications including quality and performance requirements for the product/service and vendor.
  • Define the strategy and desired setup for the auction event i.e. which vendors will be invited to participate, what the benchmark pricing will be, length of the auction, what pre-information is desired etc.
  • Create program details on-line.
  • Invite chosen suppliers and advise on process.
  • Hold bidding event – typically 30 minutes.
  • Review results and award business to chosen supplier.

Results

The best price, at the specified level of quality, with an average savings of 15-20%.

An increase in the productivity of purchasing officers by a factor of 3-5 times vs. the traditional RFP process.

Case study # 6 describes how the reverse auction process saved a multi-billion dollar food distribution company $1.3 Million on its purchase of plastic wrap – the product that covers and protects the contents on pallets during shipment.