Companies often use eAuctions to reduce prices in their supply chain. A reverse online auction can bring competition to an area of your supply chain where you may not have received competitive bids for a while. In addition, eAuctions offer an opportunity for new suppliers to get into the game.
Level the Playing Field
One reason reverse auction solutions can help you find suppliers is that new participants can compete on an even level with your long-time suppliers. Publishing the requirements in an open, online RFP will make sure everybody involved in the bidding process knows what the required levels of service are among all the participants. Potential suppliers will be confident they know as much about the contract being bid as anyone else in the eAuction, and they will know how much they want to compete for the business.
Few industries rival automobile manufacturing in the number and complexity of supplier relationships necessary to bring a product to market. Automobile manufacturers in the US historically had horrible buyer-supplier relations with their subcontractors. The auto companies believed they needed to play “hardball” with their suppliers to make sure they got the best price. But, when Japanese automakers set up shop in America, they often got better pricing. Research showed that the Japanese companies had opened their books to their suppliers, making them full partners in the end product. This difference gave the Japanese automakers had better leverage to ask for more competitive pricing in their supply contracts.
Publish all requirements and invite new suppliers to pre-qualify against this base document before you open your reverse auction. Once you’ve been able to assure that everyone who wants to compete can supply the required level of service, you can invite them to take part in an open reverse auction online. By providing as much information upfront and conducting the bidding process in the open, your suppliers will know what they are competing with. This confidence will enable them to give you the best deal possible.
Stay Up-To-Date in the Market
A reverse auction solution can also be an easy way to keep your finger on the pulse of the market. It’s difficult to keep up-to-date on current pricing and procedures going on in every industry you’re sourcing from, so it’s easy to lose track once you’ve been working with the same supplier year after year. Your best deal when you started with this supplier may not be your best deal today.
Set up a reverse auction online to allow competition back into your contracting process for existing suppliers. With new offers, you’ll see what’s happening in the market today. You’ll also get up-to-speed on unfamiliar new markets. By drawing several competitors to the table to bid an eAuction contract, you will not only find the best price but also find the current level of services and systems you should expect from suppliers in that field.
Let New Suppliers Define Their Abilities
New supplier sourcing is often a time-consuming process. Many buyers don’t have the time to track down potential suppliers and research their capabilities in depth. When you set up and advertise a reverse eAuction, you’ll have the opportunity to attract suppliers to you. You’ll be able to field offers and quality new partners before the bidding ever starts, instead of spending your time sourcing.
This extra time will give you the opportunity to drill down past the general attributes you can get from a supplier directory. ThomasNet recommends using any opportunity to go beyond the basics and find out things such as average delivery time, payment or financing terms, and any data a potential supplier can deliver to their customers before, during or after production. These could be key when deciding which supplier is going to give you the best offer at auction time. Contact ProcurePort’s team of experts to help you set up an efficient reverse auction solution.