Procurement Leaders opened its latest issue with the words “Good news, we’re in recession”. I’ve long agreed with this view, as you know, so it’s good to hear the likes of Jason Smith, Principal Advisor of KPMG’s procurement advisory service, reported in Procurement Leaders on the subject:
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We launched a new kind of eAuction format just under a year ago… A multi-directional eAuction.
Multi Directional Reverse eAuctions are useful when you have some elements you want suppliers to bid down (e.g. unit cost) and others you want to bid upwards (e.g. a rebate, marketing money etc). Without multi-directional eAuctions you have to find some complicated way of calculating net prices and having suppliers input those net prices into the auction. With multi-directional eAuctions this is all taken care of by the system. (more…)
I am not a big fan of reverse Dutch auctions on the internet, from either the buyer’s or the seller’s point of view.
Dutch auctions were initially invented and adopted to speed up the sale of flowers in Amsterdam. Potential flower buyers would sit in a room which contained a clock. The clock would initially show a very high price - much higher than any flower buyer would be prepared to pay. The price shown on the clock would then tick downwards until it reached a price that one buyer was happy with. The buyer would press a button to “stop the clock” and could buy as many lots of flowers as they wanted at the price shown on the clock. If more flowers remained to be sold then the clock would continue downwards until all the flowers had been sold.
Software providers have adapted this kind of auction to internet procurement auctions, but the practical implementation leads a lot to be desired. (more…)
A few years back we did some work with Oxford University. They were interested in how procurement auctions fitted into the bigger auction picture. We were interested in finding out how in line with auction theory we were. I was looking through my old material from that study and I want to share a neat graph from that work that models how expected savings rise the more suppliers you include in an auction.
If you assume that all suppliers in a marketplace have a price evenly distributed between a low price and a high price then, on average, the savings you would get increase as shown in the graphic above. This helps emphasise that 4 bidders is a good number for a reverse English auction, as I have often said. But one thing to clarify: this is a model - you can do better than the model by ensuring that when you select potential suppliers that you are selecting suppliers who have a lower price rather than selecting suppliers at random from the marketplace.
Read more about eAuctions at Alan Buxton’s eSourcing Place
I was recently asked if reverse Japanese auctions are only appropriate when there are just a few suppliers bidding.
Briefly the answer is that in theory a reverse Japanese auction will work just fine all the time. But in practice you’re best off keeping to Japanese auctions where there are fewer suppliers. (more…)
Always good to see some (positive) coverage of eAuctions in the trade press. Here’s an article from Purchasing.com about BlueBird’s use of eAuctions. For non-US readers, Blue Bird make those iconic yellow N. American school buses. (more…)
Posted by alanbuxton
This is the 7th and final posting from my eWorld presentation series.
My last eWorld tip is, again, arguably as much about strategic sourcing as it is about eAuctions. But again, the clarity and open-ness of the eAuction process brings the issue out into stark relief.
As usual, I have a story to illustrate the example. (more…)
Posted by alanbuxton
Nearly there now: I’ve summarised the recent history of auction types and given examples of how differnet auction types achieve better results in different supply markets. And so far I’ve provided 3 tips that I’ve seen help TradingPartners (and hopefully you) run better reverse auctions. (more…)
Posted by alanbuxton
I am sometimes nervous of showing this information because it is a warts-and-all summary of the case where we have managed a reverse auction for the same client, for the same category, two years running. (more…)
Posted by alanbuxton
An effective instant messaging strategy is critically important if you want to get the maximum benefit out of your reverse auctions.
Here’s my slide to illustrate the point: you will need to click to enlarge.
There are 6 suppliers, A through E bidding in an eAuction that started at 11am and ran until just short of 1pm. This was for an eAuction for pet food, but the same applies to every category I have seen.
