eAuction is more than just a cost saving tool

Authored by Usama Shahid

eAuction is also known as a reverse/forward auction. More importantly, when used properly, a reverse auction offers more than just cost savings potential for the buyer and more than just the opportunity to win new business for the seller. Buyers get increased market transparency, decreased error rates, easy apples-to-apples bid comparisons, cycle time reductions, and a platform for supplier improvement while suppliers get increased efficiency, process transparency, more communication, a lower cost of sale, and more benefit from knowing the buyer did upfront planning, is capable of comparing bids apples-to-apples, and will be able to present the supplier with a solid reason as to why the supplier did, or did not, receive an award.

However reverse auctions only succeed when they are used ethically and when both buyers and suppliers follow a strict code of ethics. Buyers need to define rules up front, adhere to those rules from initial supplier invitations through final award, hold all supplier information in strict confidence, intend to award the business to the winner, and award the business in a timely fashion. Suppliers must follow the rules, hold all information furnished by the buyer in strict confidence, only participate if the supplier is able to meet the requirements, accept that all bids are legally binding and only submit bids it can support, and be willing to enter into a contract promptly upon auction completion if it wins the business.

The complexity of reverse auction software ranges in complexity from a simple single sealed bid auction, to a reserve price reverse auction with masked bidders and automated extensions, and some platforms will support ten or more types of reverse auctions, including fixed-price, Japanese, Brazilian, Vicky, English, dutch, and Yankee. Regardless of the complexity of auctions supported, most reverse auction platforms will support bid management, lots, overtime, and multiple bid views. More advanced software will allow for bids on partial lots and lot bundles, non-price terms of service bids, and goals.

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