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Electronic reverse auctions are well embedded as key supply management tools in today's competitive buying environment. From their origins of delivering savings on commodity items, e-auctions have matured to the point where the vast majority of goods and services can now be sourced faster and at better value with an auction than without an auction. However, in order to take advantage of the increased sophistication of electronic reverse auctions, buyers must pay special attention to auction design. Getting it wrong can mean an ineffective auction and upset suppliers. Getting it right, on the other hand, almost certainly guarantees lower prices and the possibility that optimal results can be achieved without disruption to supplier relationships.
So how do you get it right? To begin with, it helps to know what type of auction would best fit your needs. There are four main types of auctions used in procurement:
• Descending bid auction
• Descending clock auction
• Ascending clock auction
Choosing and designing the appropriate type of auction for the negotiation is critical. You need to know the key differences before you can decide which auction is right for your situation.
Source: Inside Supply Management, http://www.ism.ws
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