Reverse Auctions can be a powerful tool if used in the right manner. They can add a lot of value to the sourcing organisation, without being detrimental to the interests of the vendors. Let’s look at some of the ways in which Reverse Auction can be made successful.
1.List down the Spend Categories and check if this category is suitable for Reverse Auction
The most critical step before going down the Reverse Auction route is to ensure that the particular category is suitable for reverse auction bidding. Reverse auctions are best suited for categories where the material is fairly standardized without any ambiguity. It is also important that there are a number of vendors available in the market who are able to provide a particular product or service. Procuring materials or services which are fairly non-standard and/or provided by a very specific set of vendors CANNOT be procured through reverse auctions.
2. Create a large base of pre-approved Vendors who have been pre-qualified
A reverse auction is the second step in a multi-round sourcing strategy. The first step is always to pre-qualify vendors through an RFI process. It is important to have pre-approved suppliers who have who can provide reliable quotes during the auction process.
3. Use Reverse Auction software that is easy and intuitive to use
Reverse auctions occur in a time constrained environment. Hence it is important that the Reverse auction software being used is intuitive and easy to use. Suppliers should be able to easily enter bids, get information about bidding status and rank and be able to send messages to the organizing company in case of any issues. Notifications inside the app are needed to keep the suppliers updated about the status of the auction.
4. Time Management during the Reverse Auctions
Ensure that auction timelines are clearly articulated and vendors are well aware of the auction start date/time, auction extension functionality and other relevant settings.
5. Accurate and Detailed Product Specifications
Accurate specifications of the goods/services are critical for a well run reverse auction. Vendors need to know the exact product they need to price for. In most cases, it is best to get product specification detailed out in the pre-bid stage i.e. before the reverse auction has started out.
6. Supplier Training and familiarity with software
Suppliers should be able to easily log in to the system with as little friction as possible. Suppliers should familiarise themselves with the reverse auction software and key settings before the start of the auction. All questions should be handled prior to the auction. This preparation ensures that an adequate number of suppliers are participating in the auction thus increasing competition.
7. Conduct a mock auction
Reverse auctions come with various settings and options in terms of time extensions, view competitor bids, etc. Conduct a mock auction so that vendors understand the settings in place. This will allow suppliers to get an opportunity to familiarise themselves with the reverse auction software and iron out any potential issues. It also gives a prior indication if the vendor is serious about participating in the auction.
8. Live auction and Live Chat Support
Conduct the auction on a convenient date. To iron out possible issues, put in place Live Chat and Phone Support in place to help vendors with any possible issues.
9. Thank all participants
Vendors have taken the time to participate on your reverse auction, thus saving your company valuable time and cost. Send a thank you note to all suppliers for their time and keep them informed about the expected timeline of for awarding the contract.
Reverse auctions can be a powerful way of saving cost and time on critical goods and services. With the right reverse auction software, it is easy to conduct a well run reverse auction. Contact us for a free demo of Proctrix Reverse Auctions module.