The Purchasing Auctions concept is as simple as it is radical. It encourages suppliers to compete for your orders via the medium of a live, open, electronic auction. No further need for hospitality junkets, no more haggling, and you can put the concept of sealed bids behind you!
Major companies and shrewd buyers who thought they were already getting rock-bottom prices have been able to save more than 15%, on average, buying goods, materials, and even services via the medium of auctions.
You can cut costs by automating/computerising orders, payments, and product information and by eliminating the host of faxes and invoices that conventional purchasing inevitably attracts. The problem is, automation attacks only transactions costs. Internet auctions can actually slice the price of the goods and services purchased. That's a formula for far bigger savings!
Traditionally, the buying process is very simple. Before a contract expires, the buyer sends out a Request for Proposal (including specification) to existing suppliers and possibly a few other new candidates. Most RFPs don't spell out all the relevant detail: including a tight specification, delivery schedule, payment details, how much inventory the supplier might hold, etc. This fine detail can have an enormous impact on the total cost of acquisition. Consequently, when the bids come in, only the products are the same; frequently, everything else is different, from the payment terms to who's responsible for product support etc. So it becomes extremely difficult to pick the best deal. To make matters worse, the bids are sealed, and usually go just one round. The suppliers have no idea what prices their competitors are offering and take a blind guess as to how low they must go to win. This could deter some suppliers from bidding.
In the end, most companies choose the path of least resistance. They know precisely what the current supplier's package is costing them, so why take a chance? If the seller they know is willing to keep the price more or less flat it is likely to keep the business - the incumbent almost always wins.
In our view, this does not make sense for the buyer or the efficient and competitive supplier. The problem lies in the opaque RFP process. By standardising absolutely everything in the RFP, Purchasing Auctions introduces fair and open competition via the medium of an auction. Suppliers must offer to deliver the same part to the same schedule, for the same payment terms, etc. Each package is exactly the same, making comparison of the bids relatively simple and all that remains is to find the lowest price.
The best way to do that is through an auction!
However, this apparent panacea to procurement woes introduces another dimension: auctions need thorough & detailed preparation
Purchasing Auctions can assist with all these tasks, but recognise that this can attract further costs and would rather train your staff to prepare for and run your own auctions.
The auction itself is a highly charged event - called a "Reverse or Dutch" auction because the price starts high and moves downward. Linked over the Internet, the suppliers don't have to guess what their competitors are up to - they are able to see in real time exactly how much the opposition is bidding (not who the bidder is), - and how low they must go to win the order. The whole event is transparent, quickly concluded and delivers a complete audit trail within a secure and neutral environment. The emotion and negotiating hassle is taken out of the equation and invariably the price is the most competitive available.
Why not register now to take advantage of this significant opportunity...
I'm a Purchaser I'm a Supplier
