Getting the Best Out of Reverse Auction

In an earlier post, we told you about reverse auctions and how they help an organization choose their suppliers. In this post, we’ll look at some ways how your organization can get the best out of a reverse auction.

Do you need one?

Before you follow the general trend and implement a reverse auction process, ask yourself, do you really need to? Reverse auction generally increases your procurement division’s workload and requires some initial investment. You’ll have to work with your suppliers more closely and create a platform to bring them all together. The timelines have to be defined. Pricing decisions have to be made. The auction process has to be closely monitored.

Also, ask yourself, do you really have the numbers to warrant a reverse auction process? If the procurement volume is small, it might be a long time since before you see any ROI.

Vet them before you get them

Price is not the only parameter on which we select our suppliers. Equally important is reliability in delivery terms and timelines. Before you invite a supplier to take part in the reverse auction process, thoroughly vet them to ensure that they are reliable. Also, ensure that they are all at the same level. What if someone offers you supplies of lower quality for a cheaper price against good quality supplies that cost significantly more? It’s better to have suppliers whose product lines and delivery terms are the same or reasonably similar so that your decisions become easier (only parameter now can be price).

It’s a numbers game.

For your organization to really reap the benefits of reverse auctions, both your procurement volume and the number of suppliers need to be high. High volume transactions also help the suppliers as they can now compensate any loss they might have faced in the bid by supplying higher volumes.

Try to invite as many suppliers as possible. A little competition will help drive the price down.

Click on the link to know more about an online procurement solution that helps you implement reverse auction for your organization.

Leave a comment if you know more ways to make a reverse auction a success.