E-AUCTION BIDDING IN THE PROCUREMENT PROCESS
In an age where innovation is running rampant, there are constant updates to industry standards, tech implementation, and countless other business activities that are normally conducted within a week. Procurement teams especially need to stay up to date on the latest trends and technologies that are available to them. As with any rapidly advancing industry, procurement teams can quickly be outpaced by competitors if they aren’t using the same standard of tools and technology.
The same can be said for their own contracts and suppliers. If a company isn’t keeping up to date with the latest procurement strategies, that company is likely going to lose out on the most competitive suppliers with the best prices. This affects long-term cash flow, long-term savings, and much more. An e-auction, however, is a built-in function of most procurement software, which allows companies to seek suppliers at the lowest overall cost.
Developing a comprehensive and effective procurement strategy that addresses an organization’s specific procurement needs is an integral aspect of optimizing procurement teams. Building an e-auction process into the procurement toolbox elevates procurement teams, and enables stronger, faster, and higher quality procurement actions.
An e-auction is a process in which a company seeking a supplier puts out a request for bids on a specific contract, and suppliers are then able to submit their best price offers to fulfill that contract. Oftentimes, a company seeking a supplier through an e-auction will first take the time to filter out vendors on any number of stipulations specific to the contract. This vetting process is normally conducted through a short survey which provides insight to the company on a few key details. Once the company has crafted its shortlist of suppliers, they can set a date and time; and make the auction live. During the e-auction, suppliers will have a chance to bid against one another, until the lowest offer is made. At this point, the auction is closed, and the company proceeds with the onboarding process for their newfound supplier.
E-auctions lead to better inventory-sourcing from quality suppliers, a shortened procurement life-cycle, and year-after-year savings that otherwise couldn’t be matched. Vendors also benefit from the e-auction process. On the supplier side of things, e-auctions offer an abundance of opportunities for smaller and start-up suppliers looking to grow their book of business, as well as larger vendors seeking extra opportunities in the marketplace. Smaller vendors and start-up suppliers are able to participate in e-auctions and have an equal opportunity to submit bids and see if they can win some additional contracts.
The real benefit that both vendors and companies see, however, is the reduction in time spent negotiating. Moving away from the years that involved intense negotiations that could last days or weeks between a single company and a single vendor, e-auctions allow companies to hold a single negotiation with a selected group of vendors and suppliers that they have already approved.
The e-auction process in procurement is also known as a reverse auction. Rather than a seller making the listing, accepting bids, and awarding the highest bidder with the auctioned item, the process happens in the opposite direction. The buyer, or company in search of a vendor in this instance, puts out a listing. Then sellers take turns bidding a price at which they would offer those goods and services until the lowest bidder wins. This helps companies find the true market value of the products and services they’re sourcing, as well as spiking company savings and reducing the overall cost of procurement – an important metric that should be evaluated periodically alongside the rest of the procurement process.
There is a multitude of benefits that stem from implementing an e-auction or reverse auction into an organization’s procurement process. These benefits range from reducing the annual cost-of-procurement, narrowing down the true market value of requested goods and services, and increasing the company’s overall savings. All while maintaining an excellent standard of supplier expectations and compliance.
Elevate your brands’ procurement strategies with powerful and robust software available from ProcurePort. Software that enables procurement professionals to make informed decisions driven by data and real-time marketplace information. Visit ProcurePort and take a tour of the amazing procurement software available today!