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. 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 and services via reverse auctions.
Many organizations choose to cut costs by automating/computerizing 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 reduce 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 (RFP) to existing suppliers and possibly a few other new candidates. Most RFPs, however, omit some extremely important data such as complete specifications, delivery schedules, payment terms, inventory requirements, etc. These omissions can have an enormous impact on bidder competition and the total cost of acquisition. In this scenario, bids received may not be comparable on an “apples-to-apples” basis and it becomes extremely difficult to pick the best deal. To make matters worse, suppliers are often deterred from participating because the bids are sealed and usually go just one round--meaning they have no idea what prices their competitors are offering and must blindly guess how low they must go to win.
In the end, most companies choose the path of least resistance. They know precisely what the current supplier's business 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 either for the buyer or the efficient and competitive supplier. Since the problem often lies in a sub-optimal RFP process, Purchasing Auctions believes that by standardizing absolutely everything in the RFP, fair and open competition may then be introduced via the medium of an auction. A properly managed RFP process may then conclude with a reverse auction, where 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 supplier bids relatively simple and all that remains is to find the lowest price.
However, this apparent panacea to procurement woes introduces another dimension: auctions need thorough & detailed preparation
Purchasing Auctions can provide additional services to assist with all these tasks, but the related additional costs might better be targeted at training 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...
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