Originally, buyers and sellers would negotiate the price of goods and services via email or phone call. Today, technological advancements in the form of online software applications have changed the procurement process of price negotiation via e-Auction, or electronic auction.
Just like the standard auction process, e-Auction also involves buyers soliciting bids for goods or services from a seller. The only difference here is that it is done over the internet eliminating the need for multiple phone calls and emails.
Multiple vendors can compete in offering their goods and services by engaging in a reverse auction. The advantage here is that the vendors strive to offer their best to win the company’s interest.
There are several types of reverse auction software available that makes the e-auction process relatively more straightforward. They can automate and streamline the auction process thereby providing businesses with impacting benefits. It is necessary to consider reverse auction software as an essential part of your procurement process.
How Does e-Auction Work?
In a typical e-auction process, the first step is shortlisting vendors from whom you wish to purchase the goods or services. Companies send vendors a sourcing questionnaire to collect some information. Vendors access the questionnaire (usually with a given password), supply all required details and then submit it. The company procurement department will then review and compare the questionnaire responses from the various vendors and shortlist acceptable vendors to participate.
The auction, of course, will take place online and can last up to 30 minutes. A vendor places a price bid and another counters with a better and likely lower price. At the end of the e-Auction, the contract is generally awarded to the vendor with the lowest price. A late price bid might see the time extended to 3 or 5 minutes so vendors a chance to respond to the last minute bid
Benefits of e-Auction In Procurement
The benefit of e-auction in procurement is two-sided. However, while both the company and vendors benefit from it, ultimately the majority goes to you as the company.
E-auction is healthier business-wise than the standard auction process. As mentioned earlier, companies can benefit by getting quality goods and services when they use e-auction for procurement. In a very competitive auction transaction, the sellers will present their best options to outbid the others. The company gets various options to choose from, so they have a better opportunity for high quality at a lower price.
Reducing procurement cost is a necessity, but businesses find it very difficult. E-auctions can help with this aspect. In a bid to win the company’s business, buyers tend to lower prices of goods and services, which is another significant benefit. Without online auction, companies will procure goods at any amount offered to them by a vendor.
Another significant benefit of e-auction to both companies and vendors is the swiftness which it brings to the procurement process. Reverse auction tools make it easier for auctions to be conducted, thereby speeding up the procurement cycle. No need to wait for days to request bids from vendors when the e-auction process can complete the task within hours. Procurement data is securely stored online thereby facilitating easier access than the manual procurement process.
For vendors, e-auction provides open doors. Whether their business is big or small, anyone can participate and try to win the company’s business. With such opportunities, any vendor can land a big procurement deal and move to another business level.
E-auction eliminates the geographical barriers. Vendors do not have to be in the same country or city as the company before they can offer their goods or services for sale. They can join the auction from anywhere and at any time so long as they have internet access. E-auctions also provide opportunities for vendors to learn from whatever makes them win or lose the auction bid.
The importance of e-auction in the procurement process cannot be underrated. The principal aim is usually optimizing price, but there are other benefits to gain. Apart from streamlining procurement, it can also improve relationships between vendors and companies. Procureport offers an efficient reverse auction platform for companies to streamline their entire e-auction process in procurement.