While it would be great if businesses ran on hopes and dreams, in reality, they run on money and supplies. Whether you’re stocking a store, acquiring materials for your own manufacturing process, or simply procuring five years’ worth of office supplies, you have two major choices when looking for a new procurement contract and lower procurement costs. You can either stick with your most recent supplier and the price list you know or look around for quotes from other suppliers and try to get the best deal.
Naturally, you want a bargain on high-quality products at low costs but calling around for quotes is an incredible hassle and one that doesn’t always result in a better deal. The good news is that there is a way to save big on procurement without sacrificing familiarity or quality or spending the next ten days on the phone talking to suppliers about lowering their bids. The key is to host a reverse auction.
Check out this list of product and service categories that are suitable candidates for a Reverse Auction process.
Reverse Auctions Are Made to Save You Money
A reverse auction is something that could only exist in the B2B world where one company has money to spend and suppliers are willing to compete on price. In essence, the entire structure was created to help people like you looking for the lowest possible procurement cost connect to suppliers who are willing to meet your needs. If you’ve had trouble getting fair, competitive, or convenient quotes in the past, the reverse auction is the natural solution.
Reverse auctions do not have to be always about cost savings. They can also be used to ensure that you are getting true market pricing. Market conditions change frequently, and if your suppliers are not accommodating these changes in their pricing models, you may be paying more for materials and services that can be procured at a discount.
Now let’s go into how it works. In a standard auction, the seller acts as a host and the buyers bid better and better prices to win an item. However, in a reverse auction, you, the buyer, are the host and suppliers who want your business bid lower and lower prices for the goods or services you need.
The beauty of the reverse auction is the fact that it’s in real time and the suppliers are aware that they are being outbid in the moment. This natural sense of competition and awareness that another supplier has just bid lower, evaporates all their hesitance about lowering prices. In a reverse auction, they can’t wait you out so you’ll accept their offer. Suppliers are responsible for offering you the best possible deal so you can decide at the end of the auction on who to award your business based on a combination of price and quality. No more wasting time waiting for bids to come in or wondering who may or may not have a lower offer later on.
Lower Procurement Costs
No doubt you have a certain amount of budget allocated to procurement this year, and you may even be offering a multi-year contract to sweeten the pot for your eager suppliers. However, with the reverse auction bidding system, you may be surprised just how low your suppliers’ prices can get. As the suppliers compete with each other for your business, they are likely to dip lower than standard, possibly even lower than their discount prices in order to secure your large spend budget for what they can supply.
The result? An astoundingly low procurement cost for your company this year and potentially several years into the future. After all, you’re very likely to pay much less per supply unit even if you’re working on a multi-year contract with your lowest bidding supplier. No matter which way you look at it, when the suppliers themselves lower the cost, your company reaps the savings.
More Than Just Procurement Savings
Of course, your savings are on more than just procurement alone. Each bid also includes details on additional price components like shipping, taxes, cost of exchange, and so on and these can make a difference from bid to bid. In fact, you don’t even have to accept the lowest bid if another has a better overall deal when you take into account these peripheral expenses. This means that the supplier you choose will not only be offering you a fantastic bulk discount, they will also have the best possible prices on shipping and fees that might otherwise quietly eat into your cost savings.
Cutting Out the Quotes Phase
In addition to the procurement cost reduction involved in hosting a reverse auction, there’s one more perk that you’re sure to appreciate. No more collecting quotes. While you may still stay in contact with your alternate suppliers and invite them to the next auction to compete for your business, you will never again have to call everyone up, get their quotes, compare the quotes, then call them again to see if they can beat the lowest.
Companies have been trying to get the lowest bidder for years, but they usually manage this by spending days on the phone asking for quotes and comparing costs. With a reverse auction, the only phone call you have to make is an invitation to join you on the auction platform (like ProcurePort) to read your supply specifications and participate in the practice auction. The quotes will take care of themselves from there.
Whether you’re looking for goods or services, short or long term, your procurement budget stays the same no matter what methods you use to find your supply. This year, surprise your supervisors and delight your CFO by coming in with an incredible low bid from one of your favorite suppliers. With a reverse auction, your suppliers will low bid themselves for your benefit, ultimately resulting in a much lower procurement cost.
Learn How Reverse Auctions Can Lower Procurement Costs
Reverse auctions can help you save 18-40% on addressable spend. ProcurePort’s world-class reverse auction technology is helping organizations like yours leverage this unique sourcing method to save money and time. ProcurePort provides a simple to use, easy to implement and affordable Reverse Auction Software solution which can cut procurement costs and add to your organization’s bottom line.
Contact us today to request a demo of ProcurePort’s e-Sourcing solution suite. Let us help you lower procurement costs and save time without sacrificing quality.